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The Internet's Network Efficiencies Are Destroying the Middle Class
Hugh Pickens DOT Com writes "Joe Nocera writes in an op-ed piece in the NYT that the same network efficiencies that have given companies their great advantages are becoming the instrument of our ruin. In the financial services industry, it led to the financial crisis. In the case of a company like Wal-Mart, the adoption of technology to manage its supply chain at first reaped great benefits, but over time it cost competitors and suppliers hundreds of thousands of jobs, thus gradually impoverishing its own customer base. Jaron Lanier says that the digital economy has done as much as any single thing to hollow out the middle class. Take Kodak and Instagram. At its height, 'Kodak employed more than 140,000 people.' Kodak made plenty of mistakes, but look at what is replacing it: 'When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people.' Networks need a great number of people to participate in them to generate significant value says Lanier but when they have them, only a small number of people get paid. This has the net effect of centralizing wealth and limiting overall economic growth. It is Lanier's radical idea that people should get paid whenever their information is used. He envisions a different kind of digital economy, in which creators of content — whether a blog post or a Facebook photograph — would receive micropayments whenever that content was used. 'If Google and Facebook were smart,' says Lanier, 'they would want to enrich their own customers.' So far, he adds, Silicon Valley has made 'the stupid choice' — to grow their businesses at the expense of their own customers. Lanier's message is that it can't last. And it won't."
The micropayments for content idea sounds familiar.
...do we throw our wooden shoes into the Internet?
This guy is a moron.
He's completely ignoring all the new jobs in the last 10-15 years that have been created over the years:
- Build and maintain networks
- Building data centres (construction)
- Network management and services (ISPs, etc...)
- IT support (hundreds of thousands of jobs and probably millions, small consultant companies and mom and pop shops)
- Research has tremendously increase
Seriously, his story is almost the same as "Robotics and Automation" is stealing all our jobs. But then they forgot the support industry for these new technologies.
Things change, its the way of things, people need to adapt and go back to school... or become salesmen :)
Here I thought the financial crisis was caused by lenders approving loans they knew people wouldn't be able to pay off and then packaging those loans together and pawning them off on other people and so on through the pyramid until the entire scheme inevitably collapsed. Nope. It wasn't greed on the part of the bankers and lenders. It was the Internet! Technology is to blame. And do you know who's behind technology? Scientists! Yup, if we'd all go back to being completely ignorant and subservient to the rich folks who tell us what to think then everything would go back to those wonderful days when everyone was happy.
[/sarcasm]
Wait... who put these extra-strength rose colored glasses on my face?
My sci-fi novel, Ghost Thief, is now available from Amazon.com.
I stopped reading the summary right there - that was one of the dumbest things I've seen claimed in a long, long time.
Maybe network efficiencies caused Hurricane Sandy to hit New York, too...
#DeleteChrome
The billionaires are destroying the middle class, by extracting their wealth; Internet efficiencies are just one means they use to do that. This is, simply put, not inevitable, and if the power structures were different, the Internet would be enriching, not destroying, the middle class.
How to change that, and the end game if it is not changed, are left as exercises for the reader.
I think you might be missing the point. He's saying that the new information/digital economy requires less people to run it and is therefore reducing the overall number of jobs.
Whether he chose Instagram/Kodak as an example or any of a variety others doesn't really matter. His point isn't wrong. Though I think the micro-payments that he's pushing sound like permanent DRM and something out of Stallman's "Right to Read" story.
Because "divert blame from the upper class" has become a lucrative job with lots of cash coming in.
That just says there are sectors that are booming. This shift has left a lot of people behind. what you are ignoring is all the lower skill jobs. Now when I say lower skill, I don't mean McDonalds; I mean any job you could do with a 2-4 year non-technical degree and on the job training.
It used to be, you go to college, prove you can read, write, and take training, and you were almost garaunteed a middle class lifestyle supporting job. The entire economy was based around the plethora of these jobs.
My favorite example is the paralegal. They still exist, yes. However, it used to be a single lawyer with a big case would hire an auditorium full of paralegals just to study case law and review documents. Those days are gone, that job is done by a small handful of people. An entire auditorium reduced to maybe 2-4 people.
That is why you are seeing people with college degrees working at McDonalds and those with less education struggle to get even the shit jobs that they used to be considered "stuck with". We have seen the huge rise of part time, low wage employment.
But yes, our sector is booming and it is great. That is partially because we empower everyone else to hire less people, and use the ones they do hire more efficiently.
"I opened my eyes, and everything went dark again"
Also because "blame technology for its inherent evil" is the default reaction to technological change of the academic handwringer class from which our journalists and columnists are drawn.
This smells distinctly like someone had an idea ("The internet is destroying the middle class!") and then busily started beavering away trying to jam every square peg into that round-hole of conclusion.
Kodak was absolutely NOT destroyed by the internet, not by any way. It was annihilated by digital CAMERAS. It's only with a staggering misunderstanding of recent history and a stunning lack of historical memory that someone could assert that something released in 2010 destroyed a company that was shedding jobs a half-decade before. (15000 jobs cut in 2004 alone).
To suggest that "the internet" led to the financial crisis is simply ignorant; the (most recent) financial crisis had its roots in the subprime-mortgage industry, which (depending on whom you believe, and probably your politics) was a failure of collusive non-regulation, unbridled mercenary greed, the Democrats, the Republicans, or the Illuminati. Only by a complete misunderstanding of the circumstances could one believe that electronic trading (I guess?) might have had something to do with it, but EVEN THEN fund traders don't use the interwebs, they have dedicated lines because even a 0.5 second delay would mean a massive competitive disadvantage.
NETWORKS are allowing companies of any size to compete successfully around firms like Wal-Mart and Target (who themselves destroyed small-town businesses). Networks mean everyone's competing in a flatter environment, informationally - that's a good thing, pretty much per economics 101. (Well, it's not good for the non-competitive; are they a 'protected class' now?)
Joe Nocera, by the way, is a "business" columnist/commentator who has a penchant for taking a reasonable position to silly extremes, so I guess this isn't such a surprise.
-Styopa
I decided to log-in and repost my answer as non-AC:
In both cases (digital economy/Internet and robotization) the net result is increased productivity and a smaller workforce. It is true that some new jobs are created, but they are fewer than the ones replaced.
The only solution, really, is some sort of socialist system, with higher taxes for the high-earners so that everyone has a fair share of the increased productivity. And with bigger strides in robotization, this will be mandatory, or else we'll have revolts and heads will literally roll, which would be unpleasant.
Eh, the 'real reason' for Kodak's demise had little to do with Apple or consumer products in general. Kodak was killed by corporate raiding, a corrupt CEO got stock payoffs for short term gains due to selling off one profitable division after another, leading to long term failure of the company. We tend to focus on Kodak's consumer products on sites like this because, well, we are average consumers and our world revolves around us, but we are not the only market and the lion's share of Kodak's revenue did NOT come from retail products.
I think you might be missing the point. He's saying that the new information/digital economy requires less people to run it and is therefore reducing the overall number of jobs.
Whether he chose Instagram/Kodak as an example or any of a variety others doesn't really matter. His point isn't wrong. Though I think the micro-payments that he's pushing sound like permanent DRM and something out of Stallman's "Right to Read" story.
The counterpoint is that the cost/ease of photography has dropped almost to zero (it was also an incredibly polluting industry that we're better off without...)
Yes, 140,000 people had to find a different job but the overall productivity and cost of living improved for the other 7 billion living on the planet.
Mr. Joe Nocera should be made to walk everywhere and not use any electricity for month or two before he's allowed anywhere near a modern word processor again.
No sig today...
Actually I think if you look at the number of jobs created in those industries, and a realistic picture of the number of jobs they replaced in other industries the numbers are still significantly negative.
Let me use one simple example of the old way, compared to the new way, looking only at jobs in America. 20 years ago a product built in China would be shipped here on a boat. A team of 20 or so long shore man would unload the boat. 200 truck drivers would take the goods to an importers warehouse, employing another 200 to sort them. 5 customs inspectors would go over everything on the boat and make sure it passed muster. Another 200 drivers would set out across America to middle man warehouses. Each of those 200 warehouses would employ another 200 people to unload the trucks, break down boxes, sort, pick, and build new bundles, and send them to mom and pop stores in their area. Each mom and pop store would then employ 10-20 people to stay operating.
The new way is that your iPhone is ordered online by a computer run by a fraction of personafter all a sysadmin these days can take care of a few thousand machines. It is made in China and put on a FedEx plane. A team of 3 pilots brings it to the US. 1 customs inspector spot checks a few things match the computer generated invoice. Perhaps a hundred folks at the FedEx shipping center help sort that package. Another 3 pilots take it to the destination city, where 1 loader puts it on a truck for 1 driver to drop off at your door.
That is supply chain efficiency. No inventory in warehouses, which means no warehouses. No middle men. No or limited retail stores. Handle the package a minimum number of times, don't let it sit around collecting dust and depreciating while tying up capital. It's all driven by computerized supply chain management.
And this doesn't even address the issue that many of our goods are so cheap now as to be disposable, eliminating whole industries of repair. Remember when their used to be TV Repair Shops? Yeah, those all went away when a new TV became $200.
So yes, there are millions of new jobs, but there's also no shortage of information suggesting that workers are more productive with technology, which means one new worker can do the job of more than one old-school worker. That's net negative for the job market. When we were at full employment that was good, freeing up some people to do new things, but now that we're at less than full employment it could quickly become a downward spiral as there are no new jobs, people go unemployed, lose skills, and stop contributing to the economy.
because consumers are rarely informed enough to purchase anything other than the least expensive (or most hyped) product.
I think they're plenty informed; I just think they don't care as long as they can get it a few pennies cheaper somewhere else and it fits in with their short-term outlook. In the 70's and 80's the autoworker unions were very militant about buying US-made cars, going so far as to ostracize their fellow workers who owned imports and made them park in lots off site of the factory. In that case you were supposed to spend more on a comparable car because they saw it as an issue that went straight to their job security. However, there was never any qualms about buying other cheaper commodities made in China and other countries. In that case you were "stretching your dollar" (those weren't their jobs) and finding great bargains and being an otherwise wise consumer.
I recall an interview with an airline executive many (20?) years ago. He said they heard and listened to customer complaints about the quality of air travel, in particular leg room. He said they tried all sorts of quality of flight improvements, including putting less seats in the plane, but in the end people made their choices largely on the price of the ticket, so they ended up going back to cramming as many seats in the plane they could.
There are many problems, and we aren't going to work them all out on Slashdot :)
One reason that people work at McDonald's with college degrees is that the traditional, elite "liberal arts" education is sold as a job-getter to non-elites. Sure, a wealthy man can find a job for his liberal-arts educated son. Good luck to the liberal-arts educated guy whose dad is a factory worker, or even in prison. For most people in the middle or lower classes, college should be used to develop an actual skill. A liberal-arts education is great, but it is a luxury unless one can be assured that they will attend graduate school.
With the disappearance of factory jobs, we really are leaving our high-school graduates hanging out to dry. Good paying jobs require more skill now, and I think if we want to maintain a non-college track, we should seriously consider extending free pubilc education through associates-level courses.
Massive numbers of factory jobs are gone. Probably forever. We can blame robots, China, or whatever but the reality is that they are gone. We need to be realistic about what the next generation of kids needs to have a shot at a middle class lifestyle.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
We're getting Wal-Marted to death, and the libertarians want to argue about Kodak.
There's no convincing them. They'll be touting the virtues of the unrestrained free market right through the next depression.
You should read up on it. Talk to some of the incredibly bitter ex-Kodak people. Here's a timeline.
1975, Kodak invents digital photography. Management does not see value in developing it to the point where it can be sold to consumers. (Why should they, film is doing multiple billions of business per year!) Patents are filed.
1980s: People decide to give digital a try. Kodak decides film is still better and pursues the medical diagnostic film market. Fujifilm eats away at their domestic consumer film sales. Kodak tries to enter the battery market and gets properly served by Duracell.
1990: Kodak introduces Photo CD because they just don't 'get it' that it's a huge waste of money when you can just exchange photographs in GIF or JPEG format. It's not very successful, and R&D costs are high.
1991, Kodak releases a 1.3 megapixel digital camera. It's not very good.
Mid 1990s: Various sub-par digital cameras are made while the bulk of their focus is still on film and paper. The film business is really, really good. New film products continue to be developed and introduced to the market.
Late 1990s: Kodak introduces APS, trying to divert consumer attention from the growing digital 'fad'.
2001: Kodak unveils the Easyshare system, which is years behind upon release. The gallery website you're supposed to use is terrible, the product is the epitome of crashy TWAIN junk. Image quality isn't comparable to film. Around this time, they have a series of market-dominating digital cameras, but that's not because they're good - that's because they're selling it so cheaply that they are taking a loss on every unit sold in the hopes that their consumables (Kodak photo paper and inks and Photo CDs and website products) will make up the difference. Maybe they're hoping enough people will have a bad experience that digital gets written off as a bad idea?
Mid 2000s: Nikon and Canon eat their lunch in digital cameras because they (and Sony, and Sigma, and Pentax, and Olympus, etc etc) saw fit to pour huge R&D into digital camera development, while Kodak was going strong after film, which made them a lot of money at the time. Epson, HP and Canon also destroy them in the inkjet printing space while Kodak attempts to enter the market with a small thermal printer, which fails because it can't compete on price and also can't be used to print the kids' homework. Profits fall because digital starts a major takeover once it reaches 3 megapixel resolution, which is about the minimum you need for a 4x6 or 5x7, and they aren't ready with good products in the consumer space. Proprietary interconnects and dodgy online galleries aren't helping. Stocks plummet. It gets so bad they are removed from Dow Jones. The death spiral begins. Shedding employees neuters digital R&D and puts them even further behind, which accelerates their decline.
Late 2000s: Cell phone companies, particularly Nokia and Apple, are now the biggest digital camera manufacturers in the world. They do it without Kodak's products. Kodak is a distant single-digit percentage of the market. They resort to lawsuits to try to sustain the business, which is barely surviving on medical imaging and cinema film at this point.
Early 2010s: After filing for bankruptcy, they have sold large portions of their patent portfolio. They have closed or sold many parts of the business. Film and paper are sold. Online galleries are sold to Shutterfly. Pension plans are outright cancelled, leaving many retirees without any options.
That isn't true at all, in fact quite the opposite. The information age has empowered customers over the last two decades, and marketing departments have to work with this fact (the exact words I've heard used are "more powerful customers," which are customers described as having easier access to competitors as well as doing research on the internet.)
With a lot of the cheap stuff I buy, I've had so many of these companies follow up and ask me to write a review of their product, because it tends to be a lot harder to sell something with few reviews (or negative reviews) and that is a direct result of customer empowerment.
And I don't know what all this talk about shit products is either - the quality of everything I buy these days is much better than before, and I pay less for it. I very rarely have to replace something because the old one broke, it's almost always because I wanted something new and improved instead. I own a lot of material goods that are very nice, ranging from my Nexus 4 to my 55" Sony TV, both of which I paid peanuts for relative to what stuff used to cost a long time ago, and it's much better than the stuff I bought back when. If this so called "race to the bottom" of yours was true, then my Nexus 4 would be something worse than the 90's brick phone, and my old big rear projection 55" HDTV that cost $3,800 back in 2001 would have better picture quality than the 55" $1,500 LED-LCD HDTV I have now - yet it doesn't, it looks like garbage in comparison.
Personally I think these changes are working out great. I know you socialist types reject anything that isn't somehow "organic" or "wholesome" but I prefer working smart over working hard, and that's exactly what these changes are. Being able to avoid using somebody's services is a good thing because it frees up that labor resource to work on something else. On the down side you get frictional unemployment, but on the up side the economy grows. This is why today's poor are wealthier than ever, and food is cheaper than ever.
In other words, who needs a middle class when the poor have a higher standard of living today than the middle class and even some of the wealthy of any period earlier than the 60's? The difference between middle class after all is just an arbitrary number on a spreadsheet that some government bureaucrat decided upon.
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