// you’re reading...

Economy

Destructive Creation: BuzzMachine's Jeff Jarvis on Internet Disintermediation and the Rise of Efficiency

Via Jos Schuurmanns’s site comes this post by Jeff Jarvis of BuzzMachine. In it, Jarvis basically offers a précis of his book, What Would Google Do?, a manifesto for the rapidly approaching post-scarcity age. (Irony: Jarvis has authorized no preview on Google Books.) Jarvis’s thesis is that  Amazon, craigslist, eBay and Google have radically challenged the fundamental assumptions of current economic theory. Most economists cleave to the notion that resources are scarce, and that economies develop as a means of dealing with this scarcity. Economists of a free-market bent contend that the competition to which capitalism compels a population to leads to an adequate if not optimal allocation of resources via price discovery in the market, whereas economists of a more command-and-control sort claim that the contradictions and disequilibrium inherent in capitalist market relations tend toward squandering and waste of resources (one need only read news accounts of new housing developments being plowed under because developers can find no buyers to understand this). Yet either contingent agree on the basic fact that resources are indeed scarce.

According to Jarvis, however, Google et al. have, not to put too fine a point on it, put paid to these fundamental assumptions. Making good the pronouncement that the internet will prove “The Great Disintermediator,” web powerhouses have carved out substantial cyberspatial niches for themselves not by managing scarcity, but by circumventing the structures that make for scarcity. Jarvis puts it this way:

as I thought through the major innovations of the last decade, many of them have not led to economic growth; they haven’t added money to the economy but left it in the economy. Thus measuring innovation’s impact in the revenue, growth, productivity, and market cap of large companies may not be valid. Instead, we are seeing innovation take money out of their pockets, leaving it with their customers. What they, in turn, do with that extra money and what impact it has on the economy is an entirely different question – and that impact is likely seen in any case not in large companies but in individual consumers and in small businesses. But I think the proper measure of the changes in the last decade is the innovation dividend.

One notices a homology here between the way internet entities engross the economy and the way many Republicans (of all people!) propose to do the same: namely, by reducing the number of claimants on one’s bank account. For Republicans, it’s public interests, i.e., governmental bodies, that are the greedy culprits looking to beggar the citizenry. But seldom do they direct their polemic at the private interests seeking to do the same (nothing says “bloat” like an HMO bureaucracy). Into this ideological blindspot swoop online entities like Amazon, craigslist, eBay and Google, literally decimating exchange value, and in so doing, saving consumers a bundle. Jarvis offers some hard numbers drawn from craigslist’s success:

craigslist is blamed for destroying (that’s from the publishers’ perspective) $100 billion in classified ad value, replacing it with its reported $100 million revenue. Newspapers act as if that was their money — as if they had a God-given right to it — but, of course, it wasn’t. When Craig Newmark spoke with my students at CUNY, and they asked him why he didn’t maximize revenue at craigslist and sell it for billions and then use that money for philanthropy, he told them that he thought he was doing more good for the country and the economy by leaving more money in the pockets of the people who were doing the transactions he now enabled. He cut out a gross inefficiency born of the monopoly that newspapers held over the means of production and distribution. If you try to measure his innovation’s impact on the economy with old methods and metrics — built on the assumptions of the old economy— you can’t see it. He didn’t make companies grow or become more productive. He added efficiency.

Adding efficiency represents a sort of immanent growth as monolithic, revenue-hungry institutions are progressively undermined by swiftly running data-streams. And immanent growth makes sense in these times of ecological and economical poop-out — peak oil, real-estate collapse, financial meltdowns and whatnot. Verily, the Big Three automakers would do well to emulate these practices, if they are to satisfy President Obama’s demand that they become “leaner and meaner”; or even  the U. S. itself, if it is to transition to a zero-growth economy, which economic geographer David Harvey says it’s high time it did.

What, me worry?: the internets post-scarcity revolution.

"What, me worry?": the internet's post-scarcity revolution.

If nothing else, the internet and its progeny have forced folks on both the left and the right to reconsider their core ideological convictions. Hidebound notions as to whether it is the transnational corporation or the state that safeguards opportunity or prosperity slouch toward obsolescence. And it’s a good thing, too; all of Thomas Friedman’s stumping for Pax Corporaticana ultimately won him a pie in the face, and the Obama administration has shown a strong distaste for New-Deal-style dirigism, opting instead for the soft power of libertarian paternalism. Such events are to Jarvis harbingers of change — change as a force of revolutionary transformation, and not as simply a hollow slogan:

capital, once freed, may not go to building huge new ventures. It may go to building small new ventures. It may stay in the pockets of people doing transactions and now instead of spending it on Toyotas, it may go to banks. You won’t see all the impact — except negatively — on the Dow Jones Average and the Fortune 500; those were the measures of the old economy. We need new measures.

Jarvis would likely agree with the line from Fellini’s 8 ½ ,“It’s better to destroy than create what’s unnecessary.” The question becomes, then: if Google and its ilk deliver humanity to a post-scarcity paradise by supplanting costly, ponderous brick-and-mortar mediatory institutions with cheaper, more efficient virtual ones, what will humanity do with the surfeit of leisure such a transition entails? It will find itself confronted with the problem of technological unemployment. John Maynard Keynes addressed this problem back in 1930. His outlook was decidedly gloomy:

We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come — namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.

[…]

Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society. To judge from the behaviour and the achievements of the wealthy classes to-day in any quarter of the world, the outlook is very depressing! For these are, so to speak, our advance guard — those who are spying out the promised land for the rest of us and pitching their camp there. For they have most of them failed disastrously, so it seems to me — those who have an independent income but no associations or duties or ties — to solve the problem which has been set them.

Whether the proles can handle their free time is something only time will tell. We at Generation Bubble, unlike Keynes, see no reason not to let them try. Life is short, and the world is large and wonderful — not just hot and crowded, as Friedman would have it. Even an ordinary person with no special talents can be made to appreciate this!

Related Posts:

  • Delicious
  • Facebook
  • Digg
  • Reddit
  • RSS Feed
  • StumbleUpon
  • Twitter
  • Google

Discussion

Trackbacks/Pingbacks

  1. [...] Anton Steinpilz, riffing off Jarvis, suggested that the reduced capital expenditures might not reappear as increased spending anywhere, but might (essentially a two-sided coin) be pocketed by the consumer in the form of increased leisure and/or forced on the worker in the form of technological unemployment. [...]

  2. [...] Internet Disintermediation and the Rise of Efficiency – Generation Bubble "Most economists cleave to the notion that resources are scarce, and that economies develop as a means of dealing with this scarcity." (tags: internet media economics) [...]

Post a comment

Anton Steinpilz

Rob Horning

Ylajali Hansen