Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity (4 page)

Removing the human hand from industry has its obvious advantages, some of which benefit everyone in the long run. We should be grateful for the printed book for easing the spread of knowledge and ideas, even if its happy invention was part of a larger, less beneficent drive toward mechanization. Industrial processes often let us reap more, produce faster, and distribute more widely. But they do all this from a rather flawed starting place, which is why they are now reaching a point of diminishing returns.

Our measures of economic success, from corporate profits to gross national product (GNP), specifically ignore the human component of the economy. That’s how an environmental disaster and its resulting cancer rates can still be considered a net positive to the economy. They require more spending on cleanup and chemo, so it’s good for business as we currently define it. In less morbid examples, from corporate layoffs to tax law, we have set in place an economic system whose growth works against our own prosperity. We have lost track of the purpose of the economy.

To whose benefit? Certainly not the workers being paid less, the craftspeople whose skills are devalued, the consumers whose social ties are degraded, or the communities to whom costs are externalized. Yet we
continue to optimize our businesses and our economy for growth, even as we transition toward an entirely different technological and social landscape—one with very different potentials.

This is why the leading voices today are those that still treat the emerging digital economy as Industrialism 2.0 or, as Massachusetts Institute of Technology professors Erik Brynjolfsson and Andrew McAfee put it in the title of their respected business book,
The Second Machine Age
. It’s no wonder such ideas captivate the business community: for all their revolutionary bravado they are actually promising business as usual. Workers will continue to be displaced by automation, corporations will remain the major players in the economic landscape, and it’s up to people to keep up with the pace of technological change if they want to survive. This is not a revolutionary vision but a reactionary one. Everything is supposed to change except the economic platform and its bias toward growth—which is probably the most arbitrary piece in the whole puzzle.
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Digital media and technology, more than simply giving us the means to build new machines for old purposes, offer us new outlooks on sacred truths. We gain the opportunity to reboot our economies along fundamentally different premises. Yes, we have an important new set of tools, but we are also living in what we may call a new media environment in which to make decisions about their use. As members of a newly digital society, we are learning to think about things in terms of programs and programming. Everything from the U.S. Constitution to religion to the banking apps on our iPhones can be understood as lists of commands—programs with functionality and intent.

When it comes to digital business, so far most efforts lack this depth of vision. We still tend to see digital technology as a new tool through which to scale up industrialism. So instead of mechanical looms replacing humans, it’s robots and algorithms. Instead of creating distributed mechanisms to enhance the emergent peer-to-peer marketplace, we create platforms to extract value from its participants and deliver it upward. We’re in a new environment but remaining true to the old growth agenda.

That’s only natural. We tend to use new media in old ways, at least
until we discover their innate possibilities. The first television shows were simply stage plays with a camera in the audience. The first graphical computer interfaces imitated the real-world office desktops they replaced. Likewise, our digital economy is still more in its “horseless carriage” phase than in that of the automobile—more “moving pictures” than full-fledged cinema. That is, we conceive of the digital in terms of the limits of the previous landscape rather than the potentials of the new one.

It’s time to understand these potentials not as threats to business as usual but as the true promise of digital economics.

Those of us who thought the digital marketplace was going to look something like a Burning Man festival got it wrong—at least in the short term. The distributed nature of the net, with its decentralized connectivity and ad hoc social activity, appeared to augur an equally distributed marketplace. Instead of buying everything at Walmart and watching our personal and community wealth extracted by a highly centralized corporation, we would now enter a new phase of peer-to-peer commerce. The values of the bazaar would be revived by the Internet. A new, digitally enabled, people-driven economy would dominate as industrialism’s extractive growth mandate receded.

So what went wrong?

In a nutshell, we went and implemented our digital business plans without any real awareness of the deeper principles we were espousing, much less the ones we were challenging. For too many—and there’s no point in name-calling here—the Internet was supposed to take care of all this. If we just built the platforms for Internet commerce, they would be inherently decentralizing, empowering, and good for mankind, as if by their very nature. We made the same old mistake of underestimating the importance of our roles as purposeful human programmers in determining how these platforms would impact the existing marketplace.

In the earliest days of networking, most of us couldn’t even imagine
commerce occurring on the Internet. Back in the early 1990s, the Internet was still more like a public utility than a commercial platform. Government and schools paid for it and maintained strict rules on how it could be used. It was treated much like a commons: People who wanted access to the net had to digitally sign an agreement attesting to their intentions to do nonprofit research and promising not to try to sell anything. Sending an advertisement through e-mail or posting an offer of commercial services on a Usenet group would get you kicked off the net.
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Those of us who were interested in digital networks and personal computing were considered freaks by the yuppies who had taken real jobs after college. Computing was seen as a West Coast phenomenon, a tool for creating graphics for Grateful Dead shows when it wasn’t outputting payroll ledgers or guiding antiballistic missiles. My first book on cyberculture (originally canceled by an editor who thought the net would be “over” by my 1993 publication date) put me in contact with former 1960s celebrities such as Timothy Leary, as well as present-day counterculture enthusiasts.

I was actually in the greenroom of a CNN bureau, about to go on TV to explain “cyberspace” to Larry King, when I met Matthew Nelson, the unassuming boyfriend of my publicist. He had assembled a presentation on his laptop, with pictures, of his vision of a new way of using the Internet as a marketplace. It was a simple window, with little square icons, each containing a picture of a record album. The idea was that you’d be able to click on one of those icons, which would then fill the window with a new set of text and images. These might let you play selections from the record and ultimately click on a button that let you buy the record or CD, which could then be mailed to your home. Someday, maybe connection speeds would be fast enough for the music to be downloaded electronically to your computer. Later that afternoon, he had an appointment with an executive at AT&T, whom he hoped to convince of the promise of this new technology.

Matthew’s demo helped me make my case on TV: No, Larry, the net isn’t just for
Star Trek
geeks. It has a legitimate application in the
marketplace. With everyone treating Internet users as if we were crazy people, getting acceptance from major corporations felt less like selling out than winning converts in powerful places. Before too long, Matthew and his brother Jonathan’s company, Organic, Inc., became one of the first publicly traded Internet giants, responsible (or to blame) for not only the first e-commerce Web sites but also the first banner ad.
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Matthew was likely just as surprised by where this all went as I was. The information superhighway morphed into an interactive strip mall; digital technology’s ability to connect people to products, facilitate payments, and track behaviors led to all sorts of new marketing and sales innovations. “Buy” buttons triggered the impulse for instant gratification, while recommendation engines personalized marketing pitches. It was commerce on crack.

With a few notable exceptions—such as eBay and Etsy—we didn’t really get a return of the many-to-many marketplace or digital bazaar. No, in online commerce it’s mostly a few companies selling to many, and many people selling to the very few—if anyone at all.

Take music. The best part of an online music catalogue is that it is unlimited in size. The local record store can hold only so many items in its bins. A Web site can list everything and anything, however obscure, at virtually no additional cost. A surfer in New Zealand can purchase a recording by a lute player in Norway.
Wired
editor and economist Chris Anderson called this the “long tail” of widespread digital access, which would support many more times the artists, writers, and innovators than could be supported through traditional distribution channels. His theory was that the low cost of reaching customers online would enable thousands of hitherto unpopular titles to become popular. Since the marginal cost of selling different music files was negligible, Anderson argued, the online merchants would now make a profit by “selling less of more.”
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The marketplace would become more diverse and support more creators as the long tail of former losers fattened.

Yet it turns out that’s not what’s happening. Instead, according to Nielsen SoundScan, a few blockbuster hits make up a greater percentage
of all the music sold than ever before. In the days of physical albums and CDs, the industry rule was that about 80 percent of sales came from the top 20 percent of products on offer at that moment. That means that the bottom 80 percent still accounted for 20 percent of all sales. On iTunes today, the bottom 94 percent sell
fewer than one hundred copies each
. Just 0.00001 percent of tracks sold accounted for a sixth of all sales.
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And these figures are roughly the same for every creative industry, from books to smartphone apps.

However we slice it, digital selling platforms exacerbate the extremes between superstars and those who sell nothing. This is because of a phenomenon called power-law dynamics
.
Normally, the popularity of everything from people to products is fairly evenly distributed along a bell curve (shaped like an upside-down U). That means just a few members of the population are extremely popular, most are moderately popular, and a few are utterly unpopular. Just like high school or a bookstore, most kids and books are in the hump in the middle of the bell curve.

Internet business experts expected digital platforms to flatten out that curve, giving less popular members the opportunity to connect with new friends, audiences, or consumers while also taking away some of the advantages enjoyed by the entrenched stars of radio and television. But instead of a new fatter, longer tail for formerly obscure products to thrive, we got an extraordinarily “hit heavy, skinny tail.”
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Instead of a flatter bell curve with a big “middle class” of participants, it maps out like a steep slope upward, from losers with nothing at the bottom to winners with everything at the top. This is what’s meant by a power-law distribution
—
basically, a winner-takes-all disparity, like the infamous 1 percent.

For some reason, the original industrial-age mandate for extractive, monopolized growth was not only still in force but getting worse. Net economists were quick to defend these market dynamics as natural phenomena. “This has nothing to do with moral weakness, selling out, or any other psychological explanation,” explained Clay Shirky in 2003. “The very act of choosing, spread widely enough and freely enough, creates a power-law distribution.”
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Others went on to use these naturally occurring
power-law dynamics to rationalize the injustices of capitalism and increasing wealth inequality. It’s just a function of increased choice—a product of human freedom itself.

What we were missing is that once again, and in spite of how social they may appear, these platforms remove living human beings from the process of selection. We are looking at numerical ratings, online reviews, and top sellers. We chat to customer service “bots” that are programmed to stoke our purchases, or people reading from automated scripts, who may as well be bots. Like most online platforms, selling sites remove the sort of human buffers and intervention that often slow things down and replace them with frictionless digital cycles that push toward extreme outcomes.

For instance, when a brick-and-mortar CD store plays a particular song on its audio system, the tune will sell more copies. But that’s just one store. What happens when a subtle cue takes the form of an online recommendation on a Web site? The recommendation leads to increased sales, which then becomes a new data point that is fed back into the automated system through which more recommendations of the same or a similar sort are made. This is called positive reinforcement, but in the digital realm it’s more of a feedback loop, instantaneously reinforcing itself again and again, growing and spreading. The overwhelming variety of possibilities leads us to gravitate to machine-winnowed lists, if for no other reason than to make the selection process more manageable. In turn, the more we depend on an item’s popularity for discovery and selection, the more we reinforce that item’s popularity and the more of a winner-takes-all landscape we create. As Harvard University researcher Anita Elberse observed,
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the knowledge that even a single person has streamed a movie makes it more desirable than the one nobody watched yet. Two streams makes it even more popular. The outcome is inevitably winner-takes-all.

So these extreme divides between winners and losers are not simply an expression of human nature. They are an expression of one aspect of human nature, amplified by machines at the expense of all the others. In fact, it’s by trying to
imitate
human, social reality that the biggest
distribution platforms, from Amazon to Netflix, create and promote the distortions that lead to power-law distributions.

But the biggest and most unacknowledged factor contributing to the net’s winner-takes-all effect is that these platforms are
highly centralized
. iTunes sells the music, Netflix sells the movies, and Amazon sells the books (and almost everything else). Everyone passes through the same digital turnstiles, sees the same lists and recommendations, and is subjected to the same algorithms. These monopolistic commerce platforms are not true peer-to-peer systems, and they are anything but freeing. They are growth machines—digital department stores, where the many purchase items from the few. We are all buying from the same few places and people. Continuing to do so only reinforces their position at the top, leading to more of that same centralized growth invented by the aristocracy to disempower everyone else.

Compare an Amazon, Netflix, or iTunes to a peer-to-peer platform such as eBay. Whatever one might think of eBay’s corporate ambitions, its basic business model is anti-industrial, at least in that it connects buyers directly to sellers. Most sellers are real human beings with used items to unload. Although ratings matter, they are less about driving consumers to particular product choices than reassuring them of the integrity of the amateur seller whose product they have already found. The platform does take its cut—which adds up to something tremendous—but it creates a new opportunity in return. Instead of removing humans from the marketplace, eBay enhances their capacity to create and exchange value. Instead of monopolizing value, or limiting value creation to just a few players, peer-to-peer platforms
distribute
the ability to create and exchange it.

These principles can be applied intentionally by any online marketplace. For instance, Bandcamp, a music streaming and download service much like iTunes or Spotify, distinguishes itself by intentionally working against power-law dynamics. It caters to less-established underground and alternative artists, charging less than half the sales commission of its competitors. Unlike the “Top 40” emphasis of most music sites, Bandcamp eschews download counts and leaderboards in favor of a “discover”
button. Users wade through their favorite genres the way they might have once flipped through the stacks at a record store.
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Current digital marketing dogma dictates that by promoting aimless surfing and sampling of music, a site like Bandcamp will only generate a “tyranny of choice,” overwhelming users with so many options that they won’t be able to pick anything at all.
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But were people overwhelmed back in the day when they had to walk into a big record store and browse through the bins? I’m not so sure. And even if the net has trained people to accept the two or three choices at the top of popularity lists, I’m fairly confident we can regain the ability to shop. The real panic about such sites is that they emphasize human unpredictability and work against the industrial-age logic of removing people from every link in the value chain. They distribute the ability to grow.

At the very least, Bandcamp and eBay (as well as Maker’s Row, Etsy, Indiegogo, and many other consciously programmed sites) prove that digital platforms don’t have to lead to power-law distributions. They only end up that way because we’re programming them to support our inherited strategies for mass production. We optimize for more directed consumer choice, less human intervention, volume sales, and monopoly control of a given marketplace. Moreover, we devalue the contributions of people, going so far as to ask them to spend their time and energy providing reviews, comments, and content—real value—to the corporations who own these platforms, for nothing in return.

When the expectation of free labor from consumers dovetails with the winner-takes-all lottery of the new mass marketplace, we end up with a whole lot of people working for nothing. After all, the power-law distribution writ large is really just another way of saying income disparity.