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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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  • by little1973 ( 467075 ) on Tuesday January 07, 2014 @10:34AM (#45887151)

    limited resources divided by more people = people are poorer

    More efficient use of resources can somewhat mitigate this process but see Jevos paradox: []

  • Rand warning (Score:2, Interesting)

    by Chrisq ( 894406 ) on Tuesday January 07, 2014 @10:35AM (#45887157)
    In the UK at least the middle class is the hardest hit by taxes, increasing prices, increased transport costs - everything. Those on low wages get generous benefits while the middle class get taxed. The conservatives give the truly wealthy tax breaks that others cannot take advantage of. If this will help people move out of the middle class to either of the opposite ends its doing them a favour. I'm sick of explaining to the kids that I cannot afford a PS4 for their Christmas because travel costs to work are going up and tax allowances being reduced, at the same time that kids of a single mother who works in Tesco's part time can easily afford it - and then tell us how a charity is giving them a holiday in Benidorm in the summer. I'll be lucky if we can afford a week in Southend-on-sea.
  • Once upon a time (Score:4, Interesting)

    by Anonymous Coward on Tuesday January 07, 2014 @10:38AM (#45887185)

    Once upon a time 100% percent of GDP was produced by farmers but rising farming efficiency rendered many farmers unnecessary. Once upon a time the vast majority of the middle classes worked in factories but rising efficiency from automation made many redundant. Once upon a time all administrative tasks where written and calculated by hand by vast numbers of office workers. New forms of economy rise whenever efficiency pushes people out of work. But I can't pretend that I'm not a little worried. Any such new form of economic activity will need time and stability to form.

  • by mbone ( 558574 ) on Tuesday January 07, 2014 @10:39AM (#45887199)

    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.

  • by evilRhino ( 638506 ) on Tuesday January 07, 2014 @10:56AM (#45887365)
    It's not as though this is a new problem, wealth concentrated in few hands. It can be solved the same way it was in the past. Increase the income tax at the highest levels to 75% for incomes over $1 million and use the revenue gains for public works projects. Make University level education free. Invest in research like the human genome project. Rebuild all the countries bridges and highways. Demolish ruined buildings and create public parks. The money is there and the manpower is here.
  • by Mashdar ( 876825 ) on Tuesday January 07, 2014 @11:07AM (#45887495)

    The quality of that comparison is rather like how a peanut compares to a car.

    There are a whole lot of peanuts out there. The complexity of products is growing swiftly, and engineering hours are reasonably well paid hours. Complete vertical integration is pretty much dead, so comparing any empire of the past to any consumer front-end today is disingenuous.

    As for whether or not overall worker pay is lower, nearly all free and competitive markets are a "race to the bottom" because consumers are rarely informed enough to purchase anything other than the least expensive (or most hyped) product. If this affects the job market. the consumers get the jobs they deserve. (Shit jobs for shit products and shit pay, because they wanted those shit products.)

    The Internet doesn't kill jobs, people kill jobs. (TM)

  • by hubie ( 108345 ) on Tuesday January 07, 2014 @11:28AM (#45887743)

    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.

  • not the goal (Score:4, Interesting)

    by Torvac ( 691504 ) on Tuesday January 07, 2014 @11:31AM (#45887785)
    the fruits of modern technology abused for corporate interests. that is a big part of what is killing classes. instead of making life better and easier for everyone its all about profits for a few lazy thiefs. ofc those in power have an interest in destroying the lower classes, else their system cant work - be it technology, silly laws, propaganda and religion.
  • by unixcorn ( 120825 ) on Tuesday January 07, 2014 @11:44AM (#45887893)

    I'm sorry but you are not exactly correct. In 1975, Kodak invented the device that utilized the CCD chip to ultimately cause its own demise. That device is the digital camera. Kodak was the market leader in digital imaging technology and their position was enhanced by both Apple and Adobe. However, as devices became more prolific and other manufacturer's quality and usability increased, Kodak was unable to capitalize on its own technology. Without a successful next generation product, the decline in the use of film which was their high margin bread and butter is what caused them to seek bankruptcy protection.

  • by nimbius ( 983462 ) on Tuesday January 07, 2014 @11:45AM (#45887903) Homepage
    im pretty sure the death of the middle class was ushered in by a combination of wanton and reckless deregulation which encouraged predatory and fraudulent lending markets leading to a subprime lending crisis that precipitated massive foreclosures which in turn plunged major economic sectors into default requiring trillions of dollars of subsidies be paid to a concentrated minority of powerful multinational companies. historical analysis confirms this sharp decline was predicated by liberal trade deregulation and labor union suppression in the form of the north american free trade act and the reagan PATCO strikebusting event of 1981 as well as various lesser publicized pension reforms and right to work legislative endeavors which relegated blue collar jobs once responsible for middle class lifestyles to the working poor.

    but yeah, i can see how billionaires could mistake that complex chain of events for the turbo button on their linksys
  • by Joe_Dragon ( 2206452 ) on Tuesday January 07, 2014 @11:54AM (#45887973)

    May it's time to change full time to 20-32 hours a week with an say min level of say 100K+COL to have someone on NO OT salary.

    Maybe also have forced comp time / any use it or lose it use it or lose vacation policy must pay out the lost time as some people can't get the time off and or comp time goes to vacation but the work load is to high to use it all.

  • by Anonymous Coward on Tuesday January 07, 2014 @12:33PM (#45888327)

    When people say "fair share" what they tend to mean is "I get free stuff from rich people." Obviously, the rich will resist.

    What will actually happen: Poverty will increase, and desperation will drive more people to crime. Then, they will get arrested. In jail, they will receive their "fair share." which is to say, free food, clothing, shelter, and medical. All of that will be paid for by the tax dollars on the incomes of the rich, and will be delivered to the poor free of charge.

    I am not saying this is good, I am just saying this is how humans do things. The greedy will always feel justified in saying that they have earned their keep, and that they owe nothing to those who cannot or will not earn their keep. The poor will always feel justified in saying that economic barriers prevent them from earning their keep, and therefore it is ok for them to steal. And to jail they will go.

  • by erp_consultant ( 2614861 ) on Tuesday January 07, 2014 @12:52PM (#45888537)

    The Kodak reference really hit home for me. My father was an immigrant and came to America with little in the way of marketable skills or education. But he worked at Kodak his whole career and made a good salary. They treated him well and even gave him a pension for all his years of hard work. My aunt - his sister - also worked there. You know what her job was? She stuffed little tins of film into little boxes on an assembly line. Not a very exciting job I'm sure but it afforded her a decent middle class lifestyle.

    Those jobs are largely gone today, and with it, the opportunity for many people to reach up and join the middle class. Those of us in IT are fortunate to be on the right side of the digital divide. Not everyone is cut out to be a software engineer or a doctor or a Silicon Valley entrepreneur. Who speaks for them?

    It used to be only assembly line jobs that were being replaced by cheap overseas labor. Now it's moving up the chain and we're seeing IT jobs being moved to cheaper markets. We've seen it disrupt the careers of Travel Agents, Real Estate Agents and people that sell cars. I think the medical field is next. It won't be long before your annual checkup is done by a Doctor in India via Skype. All in the name of progress....and profits.

    I'm closer to retirement than college now so I don't worry about me. I worry about the younger generation and what kind of world we are leaving for them.

  • by Hulfs ( 588819 ) on Tuesday January 07, 2014 @01:06PM (#45888663)

    As someone who has worked in the logistics industry now for about 10 years, currently pretty much everything about your post is factually incorrect.

    iPhones are shipped via ocean cargoships, they are domestically warehoused, and domestically shipped primarily via truck. I know this because my previous employer handled the supply chain logistics and domestic warehousing/staffing for the iPhone.

    Also, look to the trade consortiums and trade lobbies for why there are fewer customs inspectors - not electronic/mechanical efficiencies.

    Until planes can carry hundreds of shipping containers worth of goods or the number of air routes is vastly increased ocean shipments are going to be vastly less expensive for all but niche markets - .ie seafood is one current market where a majority of product is air shipped.

  • by globaljustin ( 574257 ) on Tuesday January 07, 2014 @01:11PM (#45888713) Journal

    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.

    Yes. It was a **management** mistake based on decisions made by stock-price obsessed MBA-type leaders who were absolutely, completely disconnected from their users.

    Kodak had a 'cult' favorite in the Polaroid. They discontinued it, citing the 'digital revolution', right exactly at the time when people were backlashing against digital photos and **wanted** and old-school, nostalgic analog product like the Polaroid.

    Everything about Kodak's decisions was exactly backwards and wrong, and it was **MANAGEMENT** who is to blame, not some dumb notion of the internet this guy is pimping.

    Article author is an idiot.

  • by Solandri ( 704621 ) on Tuesday January 07, 2014 @01:13PM (#45888731)
    Kodak died because film is a consumable - you have to continuously buy more as you use it. They weren't late to digital - they invented digital photography with the first working digital camera in the 1970s, and the first digital SLRs [] in the 1990s when a consumer digital camera had 0.25 MP and cost over $1000. But the digital sensor means you can take almost infinite pictures with a single purchase. Furthermore, the rapid advancements in electronic tech meant that the cost of the sensor quickly plummeted to almost nothing.

    This shifted the economic emphasis away from the film/sensor which was Kodak's specialty, and to the camera/optics. Whereas before a casual photographer might spend 50% of his lifetime equipment costs on the camera/lenses and 50% film, he will now spend 100% of his costs on the camera/lenses about 1% of which is the sensor cost. Consequently, companies which specialized in making cameras (Canon, Nikon, Olympus, Sony, etc) or lenses (Canon, Nikon, Zeiss, Tamron, Tokina, etc) are doing fine. Companies which specialized in making film (Kodak, Polaroid, Fuji) suffered greatly. Fuji only managed to survive because they branched out into making point and shoot cameras in the closing days of film - they now have a line of half-decent digital cameras. Kodak used to make cameras but pretty much gave up after the disc camera. Their most successful camera in the last half century was the disposable camera - not much need for that in the digital age. Polaroid's camera was entirely a delivery system for their instant film.

    For a while Kodak was hanging on with sales of movie film. But their number was up when movies finally made the transition to digital.
  • OT: Taxation (Score:3, Interesting)

    by davidwr ( 791652 ) on Tuesday January 07, 2014 @01:18PM (#45888781) Homepage Journal

    Taxation also depends on what is being taxed.

    Are you taxing assets (e.g. real estate tax, Florida's intangible property tax, etc.)?

    Are you taxing wages aka "earned income?"

    Are you taxing unearned income, including realized net capital gains?

    Are you taxing "wealth transfers" like gifts and inheritances?

    As long as you aren't taxing assets, someone with more money than he can spend in a lifetime will pay essentially the same taxes as someone else with the same lifestyle but fewer assets, provided his assets are all non-earning and non-growth (e.g. "cash") Both pay sales taxes, auto taxes, etc. Is that fair? Some would say yes, some would say no. It's a matter of opinion/viewpoint.

    If you don't tax wealth transfers, when the rich man dies, his heirs will get it all tax-free.

    In theory, taxation is in large part about society deciding what the "best" way (which may or may not be the "most equitable" way) to divvy up the cost of running a government among the people.

    In practice, it's frequently about those in power protecting their own interests while not seeming to be so unfair that they ruin their reputation and/or cause a rebellion from the masses. But that's a topic for another day.

  • by ErichTheRed ( 39327 ) on Tuesday January 07, 2014 @01:23PM (#45888823)

    "What are you worried about? The changes in technology mean that we can make the same stuff with much less work. In principle, that means either that people can do other, more interesting and productive work, or that they are going to have more leisure time."

    Just because you can do more interesting work, or have more leisure time, doesn't mean everyone in the economy can. I grew up in the Rust Belt in the early 80s, when the big domestic manufacturers were moving to unregulated Southern states or overseas. Large steel mills and factories in Cleveland, Buffalo, central PA, etc. provided stable jobs at good wages for tons and tons of people. One plant would employ 10,000 people on a shift doing basic work that didn't require a degree, or even much training. Those same people pumped millions of dollars into the local economy. They bought and fixed up houses. They bought cars when they could. They went down to the local bar at the end of their shift. They had kids and bought stuff for them. Now, most of that is gone and these former members of the middle class are unable to find replacement work at suitable levels.

    I understand what you're saying, and it's what everyone says, but that thinking is only applicable to the high end of the middle class. Now with automation in office work and IT, a lot of the former knowledge work is going the same way as the factory work did. Not everyone is going to benefit the same way they did when agriculture was mechanized or during the industrial revolution. The reality is that there is going to be massive structural unemployment that our current society and economic system isn't equipped to handle.

    What new, exciting innovative high-skill job would you give a factory worker who was putting the same rivet in the same hole on the same product for the last 10 years? There's a lot more of these types than you think....

  • by alexander_686 ( 957440 ) on Tuesday January 07, 2014 @01:33PM (#45888951)

    I think he is trying to make a different point, but maybe not very well articulated.

    In this case there was a slow decline from traditional photography to digital photography. Kodak and 1 hour photomarts steady lost ground while makes of chip makers and “photo quality” printers gained ground. So some workers lost their jobs while others gained. Maybe not the same people nor the same region, but the decline was steady. (Except for the very end but everybody knew it was coming).

    Overall a modest loss of middle income jobs spread over 20 years. Society can handle that. The trickery question is where will the new jobs come from.

    I think a better compassion is between Ford and Istagram. Ford (and Kodak) needed thousands of moderately trained (and hence middle class) employees to execute their brilliant transformative ideas. Instagram (or Facebook, or whatever) only had to hire 10s or 100s of people. Technology let a few people leverage their abilities. When there are brilliant new companies, they are not minting thousands of middle class ideas like the days of old.

    So maybe the new jobs won’t be coming down the same route as before, which is a uncertain thing which creates anxiety.

  • by jedidiah ( 1196 ) on Tuesday January 07, 2014 @01:38PM (#45889013) Homepage

    > Same way Henry Ford paid for his stubborn "You can have any color you want as long as it is black" mentality

    That's just urban legend.

    Model-T's came in a variety of colors.

Our business in life is not to succeed but to continue to fail in high spirits. -- Robert Louis Stevenson