04 August 2015

The Guardian: “The end of capitalism has begun”

Postcapitalism is possible because of three major changes information technology has brought about in the past 25 years. First, it has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages. The coming wave of automation, currently stalled because our social infrastructure cannot bear the consequences, will hugely diminish the amount of work needed – not just to subsist but to provide a decent life for all.

Second, information is corroding the market’s ability to form prices correctly. That is because markets are based on scarcity while information is abundant. The system’s defence mechanism is to form monopolies – the giant tech companies – on a scale not seen in the past 200 years, yet they cannot last. By building business models and share valuations based on the capture and privatisation of all socially produced information, such firms are constructing a fragile corporate edifice at odds with the most basic need of humanity, which is to use ideas freely.

Paul Mason

And here I thought the most basic need of humanity was ‘sex, drugs and rock n’ roll’!

I stopped reading this article about half of the way through (apparently there’s also a book expanding on these ideas), so I probably shouldn’t comment on it. But it’s based on such an obviously wrong premise that I can’t help pointing it out: information is not free! It might look that way to a casual user copying files between folders on his PC or to someone who spends too much time browsing Facebook, but on a larger scale the costs of the information economy become much clearer. Generating, storing and using information costs energy and requires massive amounts of storage space – it’s no coincidence tech giants like , and Amazon each maintain their own server farms. Interpreting data also requires powerful algorithms written by engineers, which need to be paid. While the cost of single pieces of information may be vanishingly small, they add up when looking at the data economy as a whole.

Even if digital information were free, there’s a little thing called the law of diminishing marginal utility. It says something among the lines that the first time we consume a good or service we get the most satisfaction out of it, while the second and subsequent units bring in diminishing utility. It applies to information quite well: when you read an article or listen to a song, you get the maximum utility the first time around. If you read it again immediately, you get almost no additional satisfaction (with few exceptions, like your favorite tracks). The same can be applied to digital files: you don’t need more than a couple of copies (and those extras are mainly for backup purposes). If you start copying a file indefinitely you will not only get no additional benefit, it will prevent you from using the hard drive to store other files that might have useful information – this shows how information has opportunity costs as well. The same can be said about research projects: even the largest corporations and governments have limited time and financial resources at their disposal, so they have to choose what to research based on expected future returns.

It doesn’t matter that information is abundant, it needs to be relevant as well. Show someone the entire feed of every user on the planet and they get instantly overwhelmed – and derive no use out of the experience. But show the same feed to a smart algorithm and you get interesting statistical results that Facebook can use to target advertising and make money. I could go on, but at this point do I really have to?

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