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Businesses The Almighty Buck The Internet

The Internet's Network Efficiencies Are Destroying the Middle Class 674

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.
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The Internet's Network Efficiencies Are Destroying the Middle Class

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  • Re:Rand warning (Score:4, Informative)

    by pr0nbot ( 313417 ) on Tuesday January 07, 2014 @10:46AM (#45887255)

    > Those on low wages get generous benefits

    Tune in to "Benefits Street" on Channel 4 to see what it's like on benefits.
    http://www.theguardian.com/media/2014/jan/07/tvratings-channel4 [theguardian.com]

    If that's the kind of life generous benefits get you, I'll stick to working.

  • 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.

  • by Thornburg ( 264444 ) on Tuesday January 07, 2014 @10:55AM (#45887353)

    I'd like to say "mod parent up", but it's already at 5.

    This "article" lost all credibility the moment they claimed that Kodak was replaced by Instagram. Kodak was functionally dead long before Instagram was a twinkle in someone's eye. If I was going to try to pin one company as replacing Kodak, it would have to be Apple, since more photos are taken with iPhones than with any other single manufacturer's cameras. I guess that's a less sensational claim, since Apple employs ~90,000 people and is still growing.

    As to the real reason for Kodak's demise, they waited too long to go digital, and they screwed it up when they did go mainstream digital. For example, early mainstream Kodak digital cameras used more compression on their JPGs so you could fit more into the tiny built-in memory or small Smartmedia cards. Unfortunately for Kodak, most people care more about the quality of the images than the number they can fit on a card. I'm sure that market research said people wanted to be able to take more pictures, but it didn't actually drive sales. Kodak persisted in this for long enough that the reputation for poor image quality stuck even after they stopped using excessive compression by default.

  • by Anonymous Coward on Tuesday January 07, 2014 @11:00AM (#45887399)

    Kodak was fucked over by inept management. At the beggining of the digital switchover, Kodak was actually one of the pioneers and the future was bright. But management thought this new digital thingamajiggies were a fad, so there we are. They could easily be where Canon or Nikon are now, basically owning the professional market, or Sony, owning the sensor market. But, alas, they went the way of Polaroid, instead of going the way of Canon.

    The final nail in the coffin came a few years later when their braindead CEO had the brilliant idea to gamble the company's future on... printing! On a day and age where 95% of all photographs taken were already viewed on a screen of some sort, he decided that printing was a fabulous idea. Yeah, that went well.

    Anyhoo, I miss Kodak, I still have a freezer full of film, enough to last me a good 10 years before I run out. I only shoot film recreationally now, probably less than 50 rolls a year. But I miss Kodachrome, Tech Pan and Verichrome Pan already, and will miss Portra NC, PlusX and TriX or Double X, which despite being motion picture film stock was widely used around the world by still photographers. Thankfully I have almost 500ft in deep freeze, as well as a shitload of TriX.

  • by netsavior ( 627338 ) on Tuesday January 07, 2014 @11:02AM (#45887437)
    There is a kernel of truth there. The 1990s saw a radical re-tooling of our banking infrastructure, especially in home loans (this is where I worked from 1998-2012). Internet transactions allowed banks to outsource, consolidate, and "internetize" things like credit checks (even credit disputes and recoveries), appraisals, surveys, title policies, tax settlement, flood hazard determinations, insurance policies, and even underwriting. By 2005 the large bank I worked for could literally do 100% of the paperwork in 36 seconds (that was the fastest recorded time for all 5 phases while I worked there) once data collection was done on the client side. This was an impossibility before radical adoption of the internet.

    30 days and 50 eyeballs would have caught MANY irregularities that slipped through during the subprime heyday. The re-tooling allowed executives free reign to dial in risk to whatever level they wanted, independent of all of the "people" based safety nets in the past. Real people, who are really face to face with a young family aren't going to sell them a foreclosure bomb as eagerly as a system that is told to run at 10% expected default rate will.

    So, while widespread subprime exploitation by executive mandate did cause the financial crisis, it is impossible to defeat the conscience of 200,000 employees, but internet enabled lending workflows intentionally had no such safety mechanism.
  • by argStyopa ( 232550 ) on Tuesday January 07, 2014 @11:03AM (#45887457) Journal

    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.

  • by Waffle Iron ( 339739 ) on Tuesday January 07, 2014 @11:08AM (#45887507)

    - 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

    Continued developments in server and infrastructure technology are introducing major efficiency, automation and density improvements that will significantly reduce the need for jobs in all but the last of those points. So you better start looking for the next trend now.

  • by DarkOx ( 621550 ) on Tuesday January 07, 2014 @11:12AM (#45887555) Journal

    Most of those jobs are white collar though and often require substantial investments in education which statistically pays off, but statistically works out and works out for an individual are not always the same.

    There are still jobs like welder, that people can still go get hired and trained to do right out of high school but these are rapidly disappearing.

    Labor saving technology created opportunities for just about everyone on; automation is creating opportunities for capital owners, and certain groups of white collar middle class workers that fall into some prerequisite conditions; but its not helping helping everyone.

    Its largely leaving the jobs that are so low skill and low wage they are not worth anyones trouble to automate ( cleaning, final assembly, landscaping ) and jobs that require (or at least appear to require) intelligence and decision making we can replicate with a machine.

  • by jythie ( 914043 ) on Tuesday January 07, 2014 @11:12AM (#45887559)
    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.
  • Shocking facts (Score:5, Informative)

    by StripedCow ( 776465 ) on Tuesday January 07, 2014 @11:15AM (#45887587)
  • by Krneki ( 1192201 ) on Tuesday January 07, 2014 @11:17AM (#45887611)

    The problem is not automation (we are doing this since the industrial revolution), but the distribution of wealth.

    Stop wasting time in the wrong direction FFS.

  • by OldeTimeGeek ( 725417 ) on Tuesday January 07, 2014 @12:47PM (#45888475)
    Yay! Someone with a good memory. For a long time, the highest quality, highest resolution digital cameras were Kodak. But they were for professionals only. Kodak's big mistake was not wanting to cannibalize their film market and for that they paid dearly.

    As the GP said, they still exist. Those of us who still use film (I have two medium format cameras) can still buy Kodak color or black and white film and motion picture film is still available.

  • by dkleinsc ( 563838 ) on Tuesday January 07, 2014 @12:48PM (#45888483) Homepage

    30 days and 50 eyeballs would have caught MANY irregularities that slipped through during the subprime heyday

    I worked for one of the companies that was handling the title policies and such for a well-known subprime lender for about 6 months back in 2005 (hey, my alternative was not paying the rent). Those kind of mortgages weren't "irregularities", they were the majority of the mortgages I saw in our database. I was not surprised when the company that was issuing those mortgages went under.

  • by djdanlib ( 732853 ) on Tuesday January 07, 2014 @01:16PM (#45888759) Homepage

    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.

  • by Penguinisto ( 415985 ) on Tuesday January 07, 2014 @02:30PM (#45889757) Journal

    Well, to be fair, Kodak screwed themselves as well... they pretty much invented digital photography, but utterly failed to capitalize on it.

  • by Animats ( 122034 ) on Tuesday January 07, 2014 @03:07PM (#45890259) Homepage

    Basic truth: it just doesn't take that many people to make all the stuff any more.

    In the US, 14% of the workforce makes all the stuff - that's manufacturing, mining, construction, and agriculture. 50 years ago, that number was around 40%. In the 19th century, around 90%. For most of history, the big problem was making enough stuff. Today, that's a solved problem. There are no significant shortages of anything in the developed world.

    So what will people do? Here's US employment by sector. [bls.gov] For a few decades, additional employment in service industries took up much of the workforce. It still does in the US. That's where computers and the Internet have made a big dent. Much of the middle class was doing some form of manual "information processing". Computers do much of that now, faster and more cheaply. Paper pushing is a dying industry. (The paper industry itself is in deep trouble. We passed "max paper" a few years ago.)

    That's only getting started. There are many legacy sectors which still employ large numbers of people, and they're being gradually knocked off by less-labor intensive approaches. Retail is the next to go - Amazon is replacing brick-and-mortar retail. No new indoor mall has been built in the US in the last ten years. Computers even sell now - that's what all the "ad targeting" and "recommendations" do.

    Employment growth is mostly in health care, leisure and hospitality, and professional services. Eventually, health care will solve its paper-pushing problem, which will downsize that sector. Most of the rest of the new jobs in those sectors are low-paying ones.

    This is a great achievement. Our society has no clue how to deal with it. Where a market-based system takes us is a world with a few winners and a huge number of losers who can't generate enough wealth through work to buy much. France, Germany, and the Scandanavian countries are trying to develop policies to deal with it. Maybe they'll find something that works.

If you think nobody cares if you're alive, try missing a couple of car payments. -- Earl Wilson