Let’s say you post a picture of your summer vacation to Facebook. A dozen of your friends stop by to comment on it, and a few more “like” it. We know what’s going on here socially. But in economic terms, what sort of transaction is this? Who is benefiting?
Facebook certainly is. They make money by observing the patterns of our activity and learning how best to target us with ads. It’s not a bad business model, either: Facebook’s revenues were about $5-billion last year, no small feat in an economy that has been shaky for the last few years.
Is it fair that they make money off your social activity? For some years, pundits have criticized what Nicholas Carr first called “digital sharecropping”: You do all the work and these companies reap the benefits. We’re handing them the raw material they use to make money.
And, as Jaron Lanier argues in his new book Who Owns the Future?, the economic ramifications of this are widespread and crippling. If we’re seeing persistent unemployment, he says, it’s because every time we give away our data we remove value from the economy. It is “de-monetizing” the economy, and is thus a key driver of our economic malaise. How do we fix such a huge problem?
Simple: Make these companies pay for your information.
Lanier is a longtime technologist; back in the eighties, he invented virtual reality, but he has since become a harsh critic of our modern digital lives. His book fits into a recent wave of thinkers worried about how technology is altering the fabric of our world. Douglas Rushkoff’s excellent Present Shock explores the way digital tools encourage us to focus narrowly on the present, ignoring the past and the future. The New Digital Age by Google’s Eric Schmidt and Jared Cohen analyzes how the future of civic life is being unsettled by everything from freelance online agitators to undeletable records of our utterances. Evgeny Morozov’s To Save Everything, Click Here decries the outsourcing of moral judgements to algorithms and gadgets.
In this context, though, Lanier stands out – because for him, the primary and scary effect of our increasingly digital lives is economic.
At the centre of his argument is the idea of the “siren servers.” These are firms that set up shop, offer a service, then hoover up all the data people create to make money off it. Siren servers aren’t merely in social media: He includes banks and insurance companies, and music sites like Spotify that serve music.
Each does a particular type of economic damage, as he sees it. Banks issue securities that intentionally hide risk, so they can push it off to other investors – such that it eventually crashes the economy.
Music-sharing sites encourage the idea that culture ought to be “free,” pushing the risk off onto musicians, who stop making money. And sites like Facebook encourage more free work yet.
It all adds up, in Lanier’s mind, to an explanation for today’s economic sinkhole. If we’re seeing persistent unemployment, it’s because siren servers systematically remove value from the economy. Musicians, he says, are the canary in the mine shaft. “There used to be a substantial middle-class population supported by the recording industry,” he says, “but no more.” As the economy robotizes ever more, humans will lose ever more value, and we will all share in the musicians’ fates.
The solution, Lanier argues, is nothing less than to re-engineer the entire Internet. In his plan, everything you do online – every tweet, every photo, every “like” – would have a stamp permanently showing that it came from you. If anyone wants to see something you’ve put online and make money off it, he would have to give you a nanopayment. Here’s a concrete example: Say you meet your spouse on a dating site. If knowing that your date led to a wedding helps the service optimize its date-sorting algorithm, you get paid for that. And you, too, would be issuing nanopayments constantly as you surfed information all day long. There’s no free lunch for anyone.
The upshot, he predicts, would be an explosion of new economic activity, as individuals begin maximizing the value of their utterances and data. This would eventually, he argues, recreate the middle class as the economy virtualizes. Better yet, it would curtail siren servers, because they can’t become as big – and spy so much – if they need to pay for your data.
I’ll give Lanier one thing: This is the most derangedly ambitious economic proposal I’ve encountered in years. We could use more blue-sky thinking like this, because our debates about the economy have become sclerotic. My hat is off.
Unfortunately, the flaws in Lanier’s concept are so numerous I can’t even begin to list them. To pick just one, consider the question of price. If our information gets too expensive, nobody can afford to view anything; too low, and we get no value from it. To avoid this dilemma, Lanier suggests a regulator could “set a principle for tweaking policies” to establish a middle range. He similarly notes that a “central bank of the ‘net” would be needed for the issuing of credit. These would pose a crazily enormous risk of regulatory capture: I can already hear the lobbyists licking their chops.
Worse, he never really convinces you that his original conceit is correct – that our personal information is being horribly undervalued. I’d like to believe him; the idea is very pleasing. But he offers no evidence or numbers or models to suggest how much we’d actually make off it. His book is full of oracular assertions (including passages so turgid they’re difficult to decode), but almost no data or evidence to back up anything he says.
As a reality check, let’s do our own extremely crude, back-of-the-napkin calculation. Imagine that today’s siren servers gave every penny of their revenues back to their users. Facebook took in $5-billion last year and has about 1 billion active users – so they would each get $5 a year. Google’s revenues were $50-billion, and their user base is most of the online planet, or about two billion. So you’d get $25 a head. (These figures are unweighted for the value each user might be contributing, so they’re very rough, but let’s stick with them for now.) This is revenues, mind you; if we handed over just the profits, the slices become tinier. You would pocket a mere 3.2 cents from Facebook and $5 from Google.
When you look at it that way, you could argue this free-work complaint has things completely backward. Maybe we’re getting an insanely good deal from these services. I’m almost certain the value I get from Google exceeds $5 a year.
Indeed, the “sharecropping” argument makes sense only if you assume that nothing anyone does on these services could be any of possible value to them. This is Lanier’s stance. He regards social media services as offering mere “trinkets” and “ego boosts”; he doesn’t use them, and seems baffled by anyone who would. “Why do so many people use Pinterest?” he asks.
Coincidentally, I wondered the same thing last year, and while writing a column for Wired, I interviewed several users. They said they liked Pinterest because it helps them organize visual concepts, stimulates new ideas for art or home design, and gives them bursts of aesthetic pleasure. Now, you can say these users are deluding themselves, that they’re giving away their photo-organizing work for free, and that one shouldn’t commercialize one’s leisure. But economics being economics, value is subjective: They may regard themselves as getting more out of Pinterest than Pinterest is getting from them, which is roughly $1 per user in revenues a year by some estimates. Just because value isn’t remunerated in cash doesn’t mean it doesn’t exist. Economists constantly struggle to measure non-monetary value.
To be clear, I’m not defending everything siren servers do, nor do I think it’s healthy for us to rely on them so much. Conducting our personal lives in private-sector spaces has many freaky effects, though they’re probably less economic than civic, social and moral – precisely the ones identified by authors like Rushkoff, Morozov and Google’s Schmidt and Cohen.
Indeed, the trouble with Lanier’s vision is that it’s a curiously apolitical proposal. Considering this is a book about kick-starting the economy, he spends essentially no time scrutinizing the non-digital reasons why the middle class is vanishing, and incomes are growing so unequal. As writers such as Timothy Noah have pointed out (in The Great Divergence ), there are a lot of forces at work here: Tax reform that buttresses the wealthy, the revolving door between finance and government, the erosion of funding for education, decades of anti-labour policy, the runaway cost of health insurance, and the absence of any serious industrial policy to deal with the effects of automation. I share Lanier’s deep concern for the economy, and the creepy social role of our big-data overseers. But in this case, the answer probably doesn’t lie online.
Clive Thompson is the author of the forthcoming Smarter Than You Think: How Technology is Changing Our Minds for the Better. He is a contributing writer for Wired and The New York Times Magazine.