Riding the wave
Published by marco on
When we talk about getting real about the Internet economy, we talk about acknowledging that there is real value there. And when we talk about valuation, we think we are talking about some measure of that—real value. The word “value” is built right into the word, so that must be what it means, right?
But what do we mean when we say “real value”? What kind of value or values? And, more importantly, value to whom? Is there only positive value? Or is there a negative component? Which part is larger? Is one part felt more by one group than another? Is that, perhaps, what makes an idea seem attractive? That the positive value lands squarely on proponents while the overwhelmingly negative value lands on others and is, optimally, not even felt or visible to the proponents? Nary a ripple of effect arrives to disturb the blissful, warm feeling of self-satisfaction for having blessed the world with a wonderful idea that has, as a purely fortuitous and utterly unforeseen or even looked-for side-effect, made those proponents fantastically rich.
But let us talk of ripples, and waves, in a bit.
Is it lasting value that provides jobs, income, stability, happiness? Or is it some form of value that can be *converted* to real value? There are strong arguments for thinking that the second case applies in many cases.
These are bubbles. Bubbles ride a wave of hype. There are those who are part of the wave and those who are the surfers on that wave. Some of the surfers will crash into the wave and be subsumed by it. Others will ride in to the beach and walk away dry. These are they who have converted the intangible, ephemeral, hyped value into real currency that can be used in the real world.
Many, many people lost money on Groupon, for example, while a very few made a lot of money on it. For those that made money, this form of investment is a fantastic idea – mostly because the rate of return on actual work done is so high. And what kind of work was done? What was created of lasting significance? People are able to participate even more energetically in an economy that isn’t really working for them—they are able to save money on purchasing things that they don’t need.
My suspicions are that these valuations come from the surfers. They have an overarching interest in convincing us all to be part of the wave. Without a lot of deep knowledge, there is no way for the average person to know which waves are real and which are not. The majority are not real and will not be of benefit to anyone but the surfers. Our system requires that we try them all, sorting through a haystack of bad ideas to find the needle that will drag our miserable heap of humanity a little bit forward.
But we mostly don’t even know in which direction “forward” is. There are multiple levels of con game going on here. We think we know what is of value, we think we choose the right waves, but we are brainwashed into working against our own best interests. We end up being happy with our choices—and continuing to make them—but we are, in effect, not really benefiting at all. We help to further anchor a system that suppresses us all. We make it ever easier for the surfers who stayed on their boards the first time to stay on their boards the next time. We turn them into Gods, perhaps as a defense mechanism. If someone is doing so much better than you, is it not easier for your ego and conscience to think that they are doing something much better? That they are much smarter than you? That is one way to go. The other, which we employ less and less, is to excoriate the surfers for the parasitic criminals that they likely are.
When we say that something is a good idea or a bad idea, we evaluate it against a patchwork of often-vague ideas and moral convictions about how the world works. Often, the choice seems quite straightforward and easy for almost everyone to understand. For example, if you propose to handle two problems in the world by converting poor people (let’s just start with the $2/day level used by the World Bank) into food and energy for the remaining population, then most of the world is going to tell you that this is a bad idea. There are some who will tell you that you would need a pretty sexy website and dead-simple mobile app for that service in order to get past the second round of VC funding but, on the whole, your idea will be rejected. Apologies to Thomas Swift for stealing his satire.
If you, however, propose something less overtly evil, something that is still materially useless but much more aligned with the current economy/society like making it easier for people to get cars when they need them, then this idea is greeted as an overwhelmingly good idea by the majority.
Now, let’s dissect that sentence a bit. Who is the majority? Why, the majority of the people I know, right? Or are you less solipsistic, more noble? Then you’d say the majority opinion is that which one reads in the major literature, the major news sources. But which agenda are they promulgating? These sources will, of course, greet this idea with open arms because they are in exactly the class that will benefit from it. They probably have disposable income that they can invest in the idea in order to try to become expert surfers (see above). Or, at the very least, they will be able to use their phones to get cars to pick them up wherever and whenever they need them. And it will be more convenient, with a minimum of interaction with other people (especially people outside of/below their actual or perceived class).
But something like Uber is an idea that will only benefit that class. Because we have what we consider to be ethics, many of us will need the idea to do a song and dance, convincing us that the idea is good for *everyone*, not just ourselves and our friends. There are others who have transcended this requirement. They are riding waves everywhere.
The people that are actually driving will likely not benefit in any meaningful way. Instead, there will be anecdotes of drivers who make it big—similar to the bauble dangled in front of the poor and undereducated by the State in the form of the lottery—but most will just be struggling to make ends meet in a different, but still futureless job than they’d been doing the year before.
This is only one part of the human/social impact. What about the environmental impact? Is it an overall good to promote ideas that cause people to drive more? To perhaps purchase more cars in order to benefit from this ad-hoc spike of an economy engendered by the massive influx of speculative capital in Uber? Do we even care? We do not. Because we are clawing desperately at our own boards, trying to get up there, to climb to our knees and, hopefully, to stand, at first on wobbling knees like a foal newly squirted from its mare’s womb until, with practice, we stand confidently, hanging ten with the other captains of industry. That is the dream.
It’s hard to imagine why, when the current taxi industry treats its actual workers so poorly—long hours, low pay—we would imagine that a company that is on the Internet will magically be infused with more generosity to its workers, opening its arms to the common man, offering to share its limitless bounty with him. These are just the latest incarnation of schemes with which to build waves, to allow those magical captains of our industry to arrive once more dry on the beach. To walk away Gods, adored by the burbling dregs receding rapidly from the shore.
We very quickly are able to ignore the horrors done in order to support these systems, simply because we want to benefit from those systems. We ignore how the materials for our phones are collected, we ignore how those phones are put together, so that we can have that which we want. Or that which we have been trained to want. That we ignore suffering is also part of our programming, part of our training. It is the suffering of others, the unworthy, those not like us. Coltran is reaped from the Congo, millions die in the Congo, the people who live there do not benefit in any way (other than their own surfers) and that is the way our heroes, the companies and entrepreneurs we worship, like it. They keep it that way so that *they* can benefit rather than those undeserving Congolese with their appallingly low market cap and utterly unappealing marketing.
We still have a system where the biggest, baddest, *meanest* dog wins. We just dress it up to make ourselves feel better. We feel better about it when we win. We feel better about it when we lose. But we are playing a game whose rules are determined by others.
I just saw the article RadioShack continues death march, loses $98.3 million in a quarter by Megan Geuss (Ars Technica) and it got me thinking again: where do you usually find Radio Shack stores in the US? In poorer neighborhoods, where they more often than not provided a convenient place to find replacement parts for electronic goods.
Did the need for Radio Shack’s goods disappear? Or is it just that it provides value to the wrong target market? With our overemphasis on valuation, are we not also picking winners and losers? Are we not preferring the opinions of the wealthy over those of the poor? If you can vote billions, you get your way. Once again, we circle back to the question of to whom is value being provided?
These are just some notes I plucked from an interesting email conversation with a friend.
On the distribution of resources and where to invest:
I think it’s important to think about companies that provide value in the “essentials” area (bottom of the Maslow pyramid) and those that do so in the areas that clearly involve “disposable income”. While we have so many people incapable of fulfilling their most basic needs, how much resource expenditure should be tolerated/encouraged for such frivolity? Those that benefit initially convince themselves that such progress is utterly necessary in order to drive society forward for *everyone*, but that sounds very much like the underpinnings of trickle-down economics.
On the transition from brick and mortar to Internet:
I’m reminded of the article I read last year in that magazine you gave me, about the fracking boom in the States. Most of the companies listed there were values in the dozens of billions, if not more, and had dozens of thousands of employees.
That is one of the differences I see in the move to Internet value as well: these companies are valued in the billions but have hardly any employees (relatively speaking). That is, they are perfect vessels for funneling a tremendous amount of wealth to a handful of people. That’s great for those people. Not so good for all of those who are finding it harder to find jobs in an economy based more and more on this scale of company.
And, without jobs, where do people get the money to purchase Uber services? This is all kind of short term, to my way of thinking. It’s short-term gain for Uber, but they too will collapse because Uber’s very model helps create a world where there are no Uber customers anymore. There are solutions to this, but they are either not very classically capitalist or quite fascist.
On the valuation of GoDaddy at over $2 billion:
As for GoDaddy: this is one of those company whose 2.25b valuation is an utter mystery to anyone who still thinks that the company’s main service is to its supposed customers (the users). They are very good for funneling advertising and “trapping” customers. This is considered to be very valuable to those who are just interested in turning a profit and not interested in *how* that profit is turned. As long as there exists such a strong separation between ethics, *true* value and investment, we will have these dilemmas.
The stock corporation was truly both a blessing and a curse. It allows companies to grow more quickly (and to presumably provide more value to its customers), but it also allows companies that would otherwise go out of business to survive and thrive simply because they know how to turn a profit (if not actually provide a non-parasitic value). The world would be a better place without GoDaddy in it. As long as GoDaddy can figure out how to make money for its investors, we’re stuck with it. And, no, I’m not sure what to do about that either: is it good or bad? Dunno. I’m just thinking out loud.