Wall Street's internet darlings require an
endless supply of idiots
The Register
(http://www.theregister.co.uk/2014/08/23/internet_economy_needs_infinite_supply_of_idiot
s/)
Dinner Party Punchup The following stories have one thing in common. Can
you guess what it is around the dinner table this evening with your friends?
Last week Samsung announced the acquisition of a crowd-funded startup called
SmartThings for $200m. USA Today wrote
(http://www.usatoday.com/story/tech/2014/08/14/samsung-smartthings-
smart-home/14092865/) that the deal “has also once again validated the power
of crowdsourcing platform Kickstarter, which helped bring SmartThings to
market back in 2012. The startup originally sought $250,000 in funding to
produce its smart hub, eventually raising more than $1.2 million from individual
backers.”
SmartThing’s individual backers, who in conventional language are called
“investors”, received nothing from the windfall. Nor did Kickstarter backers of
the brilliant Oculus Rift VR headset, after Facebook acquired the team for $2bn.
WiReD magazine glossed over this (http://www.wired.com/2014/05/oculus-
rift-4), mentioning “people who had ponied up to support the original
Kickstarter campaign, only to see their investments made irrelevant by a deep-
pocketed corporation.”
“Irrelevant” is beside the point. The conventional investment logic is that risk is
rewarded when success arrives. Most startups fail, while a handful accrue
enormous value. Yet Kickstarter investors receive no such reward: although they
backed “the next big thing” in SmartThings and Oculus, they don’t get the
payout.
Here’s another example. Cabaret performer and former living statue (and Mrs
Neil Gaiman) Amanda Palmer bypassed the music industry to fund an album
and a tour, again using the pan-handling site Kickstarter. She was lauded
(http://splicetoday.com/digital/amanda-palmer-pioneer-of-the-digital-diy-
revolution) on tech blogs and beyond for pioneering a new economy of music
production. Having raised $1.2m on Kickstarter, however, Palmer decided she
could only pay her tour musicians in “hugs
(http://www.theregister.co.uk/2012/09/14/amanda_palmer_play_for_beer/)
” After unfavourable press coverage, Palmer was shamed into grudgingly
remunerating them with a currency a little more convertible in the real world.
Did her Kickstarter “investors” revolt? No, and they couldn’t; it took hugely
unfavourable press coverage to change Palmer’s mind.
Last week the New York Times reported
(http://www.nytimes.com/2014/08/17/technology/in-the-sharing-economy-
workers-find-both-freedom-and-uncertainty.html) how the euphemistically
named “sharing economy” – which encompasses piecemeal labour - is creating
its own “precariat”. The freelance workers who provide the drivers for Uber or
the accommodation for AirBnB pay a hefty chunk to the new intermediaries,
must accept ever changing rates, and further accept that they’ll not see a penny
of the payouts when value is accrued – when the company floats or is acquired.
It’s a strange sort of “sharing”.
Similarly the latest Wikipedia schism
(http://www.theregister.co.uk/2014/08/18/class_war_wikipedias_workers_re
volt_after_bourgeois_papershufflers_suspend_democracy/) reveals a huge gulf
between the moneyed wikiclass – the Foundation employees and other
recipients of the charity’s $50m warchest – and the people who create and
maintain the content for what is the world’s sixth largest website. The former
want to increase control over the latter, and have given themselves new powers.
Wikipedia is described as a “community”, but this is a strange sort of
community, in which the devoted contributors are ‘taxed’ without being
represented. Needless to say, writing and maintaining Wikipedia entries is
laborious unpaid work. To devote oneself to contributing to Wikipedia thus
requires a huge sacrifice – a significant personal opportunity cost. Yet as with the
examples above, everyone profits from your work, except you. If you’ve
contributed for years to Wikipedia you must now accept a new political
economy: you have permanent lower-caste status, and have simply been
working hard for other people to get rich. The list of profiteers from Wikipedia is
a long one: from little scrapers to massive search engines to the Foundation’s
lucky elite. (Now you can begin to see why Jimmy Wales espouses his medieval
views on copyright – weakening property rights means everyone profits from the
work except the person who creates it).
In short, you’ve been a mug.
And this seems to be the common thread. Strip away the language of “sharing”
and “community” and you’ve got an economy that requires an endless supply of
mug punters.
Now I’m pragmatic about “sharing economy” services, I don’t share the furious
ideological objection (sharing economy = neoliberalism) that writers like Tom
Slee and Evgeny Morozov advance. (Possibly because they have an academics’
fear of liberalism, hence the conspiratorial language.) Freeing up unused
resources adds value to the economy and generally benefits both parties. I know
people who’ve supplied rooms via AirBnB and really appreciated the money, as
it’s earnings – real folding money - they wouldn’t otherwise have, for a resource
that previously went untapped. Electronic networks are good at this: at finding
this sort of resource, and bringing it into the real economy.
But I’m choosy about which services I use. I’ve used AirBnB for ages, but when it
comes to taxis, however, I stick to my favoured private firms and licensed Black
Cabs – confident they’ll adapt to the technology. With hire transport, I want an
accountable system, not so much for me, but for teens and drunken clubbers.
Need more examples? When Apple bought Beats Music for $3bn, Vivendi
Universal (the world’s biggest record company) saw a windfall of $404m. The
musicians and songwriters? You hardly need to ask – they got nothing. Spotify’s
IPO will see a similar wealth transfer that sees the people who create the wealth
go penniless.
So shit happens. But what’s the real problem here?
The Register
(http://www.theregister.co.uk/2014/08/23/internet_economy_needs_infinite_supply_of_
idiots/)
