Of Digital Billionaires and Analog Beggars—Entering the Age of Disruption

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We are entering a new age of robber barons who wish to disrupt our old economic and social ways. Who are these new robber barons? Mark Zuckerberg of Facebook fame; Michael and Xochi Birch of Bebo fame (which was sold to AOL for $850 million in 2008); Peter Thiel, an American entrepreneur, venture capitalist, hedge fund manager, and co-founder of PayPal; Sergey Brin, an American computer scientist and Internet entrepreneur who, together with Larry Page, co-founded Google; to name just a few. Where am I getting this information from? I recently read two books that largely talk about the rise of these robber barons. The two books are:

The Internet Is Not the Answer by Andrew Keen (2015)

Rise of the Robots—Technology and the Threat of a Jobless Future by Martin Ford (2015)

In this post I’d like to present a few bullet points from each book that highlight the rise of this new era of robber barons. The term “robber baron” was a “derogatory term applied to some wealthy and powerful 19th-century American businessmen” (thank you Wikipedia).

Now, you may be asking what all of this has to do with Bowlbian attachment. Well, according to Keen and Ford, these robber barons wish to disrupt not only our economic fabric but also our social fabric, the same fabric that wraps and holds our attachment relationships. As Bowlby wrote back in 1956: “Probably in all normal people [attachment] continues in one form or another throughout life and, although in many ways transformed, underlies many of our attachments to country, sovereign, or church.” This second coming of robber barons seeks to radically change our attachments to such things as country, careers, communities, and, yes, church. Suffice it to say that this new age of robber barons has taken on the look and feel of religious zealot-ism.

• The overall economic message in Ford’s Rise of the Robots is fairly straightforward: Robots do not buy goods and services. Ford tells the following anecdote (which, according to Ford, probably did not happen) to illustrate this point:

There is an often told story about Henry Ford II and Walter Reuther, the legendary head of the United Auto Workers union, jointly touring a recently automated car manufacturing plant. The Ford Motor Company CEO taunts Reuther by asking, “Walter, how are you going to get these robots to pay union dues?” Reuther comes right back at Ford, asking, “Henry, how are you going to get them to buy cars?”

Ford (the author) throughout his book makes the point that a human laborer earns wages and then uses those wages to purchase goods and services. In contrast, a machine laborer just works. Ford asks a question over and over in Rise of the Robots along the lines of, “If human labor is replaced with machine labor, who will be left to buy the goods and services made possible by machine labor?” Ford suggests that the rise of machine labor is principally responsible for our current income inequality: the rich are getting much richer and the poor much poorer. In The Internet Is Not the Answer, Keen delivers a similar message. As Keen puts it, “Rather than generating more jobs, this digital disruption is a principal cause of our structural unemployment crisis. Rather than creating more competition, it has created immensely powerful new monopolies like Google and Amazon.”

• Quoting John Doerr (co-founder of the venture capital firm Kleiner Perkins Caufield & Byers), here’s Keen’s central message: “[The Internet represents] the largest creation of legal wealth in the history of the planet.” How was this wealth created? As Keen tells us, starting in the early nineties, the US government “handed over the running of the Internet backbone to commercial Internet service providers.” Keen tells the story of how the US government started the Internet (using millions of taxpayer dollars) as a way of protecting against widespread disruption of communication channels in the event of a nuclear attack. Once the Internet was up and running, the US government essentially gave it away to commercial interests with no real expectation of a return on investment (ROI). You can find similar “giving away the farm” stories in the areas of public education, public airwaves, and space exploration. Apparently the US government has a history of simply giving away the farm to commercial interests in several areas, farms started with taxpayer dollars that ultimately yielded very little in terms of ROI. The Internet is just one such example.

• How does the Internet create wealth? Keen answers simply: “data exhaust.” What is data exhaust? Every time you do anything on the Internet—send an email, visit a web site, update a Facebook page, run a Google search, etc.—you create data exhaust. Collect enough data exhaust and you have the potential for big money from big data (more on big data below). “By successfully monetizing the data exhaust from our friendships, family [attachment] relations, and love affairs,” writes Keen, “Facebook reached a July 2014 market cap of 190 billion, making it more valuable than either Coca-Cola, Disney, or AT&T.” Both Ford and Keen point out that while huge Internet monopolies are being created, very few jobs are being created in the process. This is a trend that economist Jeremy Rifkin pointed to in his prophetic 1995 book entitled The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-market Era (executive summary available).

• Ford’s answer to all of this: “a basic, or guaranteed minimum, income.” Essentially Ford does not see any easy way the average person will be able to profit from rise of the digital economy. Here’s how Ford describes his plan:

A basic, or guaranteed minimum, income is far from a new idea. In the context of the contemporary American political landscape, a guaranteed income is likely to be disparaged as “socialism” and a massive expansion of the welfare state. The idea’s historical origins, however, suggest something quite different. While a basic income has been embraced by economists and intellectuals on both sides of the political spectrum, the idea has been advocated especially forcefully by conservatives and libertarians.

Ford suggests that the minimum income be set at about $10,000 a year. Every man, woman, and child would get this amount whether they engage in any other income producing venture. Of course Ford would then do away with social safety net programs like Social Security and Medicare.

• What’s Keen’s answer: stop producing so much data exhaust. Both Keen and Ford point out the obvious: very few are being paid to create data exhaust. And when they are paid, it’s often a paltry sum. “[W]e are all working for Facebook and Google for free,” writes Keen, “manufacturing the very personal data that makes their companies so valuable.” So, in effect, stop working for free. Keen points to William Powers’ 2011 book Hamlet’s Blackberry: A Practical Philosophy for Building a Good Life in the Digital Age as a good prescription for how to use the Internet efficiently: you still get to use the Internet but you leave a very small digital footprint. Powers’ book allows you to travel the Internet in a Prius as opposed to a Hummer. I wrote a multi-part post summarizing Powers’ book.

• Both Keen and Ford suggest that these new Internet robber barons are greatly influenced by the writings of radical libertarian Ayn Rand. As Keen writes,

Tap your smartphone and these companies [i.e., Uber, Airbnb, and TaskRabbit] deliver whatever you want: an instant limousine, an instant worker, an instant teacher, even an instant currency like Bitcoin. They represent Ayn Rand’s free-market fantasy of radical privatization: everybody’s private doctor, everybody’s private employee, everybody’s private charity, everybody’s private economy. In short, everybody’s private society.

The second coming of robber barons and their embrace of radical privatization is at the heart of all the disruption that is now pulling many of our social fabrics asunder. So goes our social fabrics, so too our attachments.

• Let me end by talking about a topic that is hot now in philanthropy: big data. Both Keen and Ford talk about big data, but I learned the most by reading Ford’s Rise of the Robots. Here’s how Ford describes big data:

[O]rganizations are collecting incomprehensible amounts of information about nearly every aspect of their operations, and a great many jobs and tasks are likely to be encapsulated in that data—waiting for the day when a smart machine learning algorithm comes along and begins schooling itself by delving into the record left by its human predecessors.

What turns a big collection of data exhaust into big data: correlation. A huge collection of data exhaust does not do much in and of itself. It’s hard to monetize a huge pile of data exhaust. But run an algorithm on a huge collection of data exhaust that can provide you with correlations between the data, and now you have a gold mine. Call this digital alchemy. Here’s how Ford describes finding correlations within big data:

The insights gleaned from big data typically arise entirely from correlations and say nothing about the causes of the phenomenon being studied. And algorithm may find that if A is true, B is likely also true. But it cannot say whether A causes B or vice versa—or if perhaps both A and B are caused by some external factor. In many cases, however, and especially in the realm of business where the ultimate measure of success is profitability and efficiency rather than deep understanding, correlation alone can have extraordinary value.

So, big data exhaust is mined for big correlations that can be monetized. And according to Ford, big data cares little for big understanding or big wisdom. In a digital world, there’s little value in understanding and wisdom. Elvis Costello may ask, “What’s so funny ’bout peace love and understanding?” There’s nothing funny about it; there’s just no money in it. What I find amusing is philanthropy’s attempts to sell big data as a way of solving social problems. In what can only be called an ironic twist, philanthropy’s use of big data may be making social problems worse, not better. How’s that for a little piece of understanding.

• I’ll give Keen the last word: “[R]ather than democracy and diversity, all we’ve got from the digital revolution so far is fewer jobs, an overabundance of content, an infestation of piracy, a coterie of Internet monopolists, and a radical narrowing of our economic and cultural [and attachment] life.”

Welcome to the age of digital billionaires, analog beggars, and radical disruption.

Further Reading:

Between Keen and Ford, they mention the following books, books that I have blogged about in these posts. Along with Keen’s The Internet Is Not the Answer (2015) and Ford’s Rise of the Robots—Technology and the Threat of a Jobless Future (2015), the following books should get you along the road to understanding the social, economic, and psychological implications of the rise of the digital age. For the best book I know of that talks specifically about how the rise of the digital age will affect our attachment relationships, I’d point to Turkle’s Alone Together.

Nicolas Carr: The Shallows— What the Internet is Doing to Our Brains (2010)†

Nicholas Carr: The Glass Cage—Automation and Us (2014)

Sherry Turkle: Alone Together—Why We Expect More from Technology and Less from Each Other (2012)

Eli Pariser: The Filter Bubble—What the Internet Is Hiding from You (2011)

James Barrat: Our Final Invention: Artificial Intelligence and the End of the Human Era (2013)

William Powers: Hamlet’s Blackberry: A Practical Philosophy for Building a Good Life in the Digital Age (2011)†

Although not mentioned by either Ford or Keen, here’s a book that takes a look at the rise of social media from an academic viewpoint:

Jose van Dijck: The Culture of Connectivity: A Critical History of Social Media (2012)

And I cannot emphasize enough the importance of Jeremy Rifkin’s 1995 book entitled The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-market Era. † I wrote an executive summary of Rifkin’s book (contact the Foundation for a copy). Rifkin recognized that the rise of automation would spell the end of human labor way back in the mid-1990s, way before any of the authors mentioned above. Sadly, most of Rifkin’s predictions have come true.

† – These authors spoke on these books as a part of our RYOL Lecture Series.