Using Technology to Deepen Democracy, Using Democracy to Ensure Technology Benefits Us All

Friday, October 24, 2014

Tech "Disruption" Is Monopoly Money

Remember back in the fifties when intellectuals (like Herbert Marcuse) were handwaving that lowered costs and increasing efficiencies from the automation of manufacturing would afford a nearly universal leisure society in a single generation? In what should have been a surprise move to no one, the destruction of organized labor by outsourcing first to the feudal remnants of the Confederacy and then to the global South made it possible instead for plutocrats to capture all the wealth generated by the stunning gains in efficiency made possible by automation and hence this development contributed to the present crisis of anti-democratic wealth concentration.

Remember back in the naughties when intellectuals (like Yochai Benkler) were handwaving that lowered costs from the digitization of publication and distribution infrastructure would afford rapid democratizing global development on the cheap? In what should be a surprise move to no one, it has instead afforded still greater wealth concentration through the duplication and replacement of existing enterprises and then the facilitation of monopolies among the ruins.

From RJ Escow's latest piece in Salon
Our society runs on a digital myth, which says that the technology-based economy is different... not subject to the principles of mathematics and human nature that govern the rest of our lives.  This myth tells us... we use services like Google and Facebook for “free.” ... Amazon is following a decades-long model for the tech industry. It begins with the rollout of cheap or “free” services -- typically based on the efforts of others -- offered at minimal cost in order to capture a monopoly share of the market. Once that monopoly is obtained, the tech vendor uses it to extract usurious and typically unanticipated costs...
That’s the story of Microsoft’s operating system... Bill Gates... acknowledges, he and his associates built MS/DOS by “taking Digital’s manual and writing my operating system.” IBM offered other operating systems with its new PCs... to mollify the Justice Department’s antitrust division... But the Gates/IBM product was offered for only $40, while users who wanted CP/M were required to pay $240. The die was cast. In his 1999 ruling against Microsoft, Judge Thomas Penfield Jackson [found that] ... Microsoft possesses monopoly power in the market for... operating systems... protect[s] its operating system monopoly, utilizing a full array of exclusionary practices... harmful to innovation and to consumers... How do you quantify the jobs, consumer savings or new revenues... lost because of innovations that never took place? ... Then there’s the human cost of product inefficiency... protected from competitors who might design a better product...
The monopoly strategy is the tech industry’s deep, dark secret... Despite its self-promoted reputation for “disruption” and invention, Microsoft’s monopoly approach is Silicon Valley’s real business model... Although it was never distinguished by smart design or ease of use, Facebook moved aggressively to capture a monopolistic share of the social media market. Then came the ads, the interference, the invasions of privacy... YouTube, like Facebook, never generated its own content. It built its monopoly position by offering free access to the creative work of others. Once firmly established on its monopolistic throne, it began forcing viewers to watch advertisements before viewing videos.
That’s the model: First lure them in and establish your monopoly, then monetize. YouTube is now owned by Google, which also commands a monopoly share of its market... [L]ike its peers, it has relied heavily on government-funded technology (the Internet, computers, smartphones) and government-funded research to capture its monopoly share. It has used its monopoly to redirect users’ attention, and to exert frightening levels of control over users’ experience of the world... “Uber,” which recently distinguished itself by earning an “F” rating from the Better Business Bureau... is following the path laid down by its forebears: First, identify a core market. Second, establish a monopoly position. Then capitalize on that position... Amazon isn’t a monopoly or monopsony in anything except books -- yet. But it has demonstrated through its actions that it intends to become one in every market it serves.  It has used its enormous cash flow -- cash flow based on government-provided tax breaks -- in order to act proactively and ruthlessly to eliminate future competitors. While it’s far from a monopoly in diapers, for example, it used its revenue base to engage in brutal price competition with Diapers.com (which it then acquired).
This strategy could be described as “serial monopoly” and “serial monopsony.” It enters a market, leverages an economic advantage (sales tax exemptions, revenues from other product lines) and then preys on competitors until it reaches something like a monopoly position... In one way the serial monopolists are a new creature, spawned from technology that allows them to enter new markets without initially manufacturing or warehousing the merchandise themselves. In another sense theirs is an old tactic, one that would have been familiar to the railroad tycoons who were setting the price of grain in 19th century America... Silicon Valley represents a set of values that is amoral by commonly held standards. It’s rapidly taking control of the distribution systems for music, literature and arts. And it’s increasingly manipulating our access to information, even as it absorbs an ever-increasing share of our economy. Scoff at the word “monopoly” if you like. But if these developments don’t concern you, you’re not paying attention.

5 comments:

jimf said...

> From RJ Escow's latest piece in Salon. . .
>
> Bill Gates... acknowledges, he and his associates built
> MS/DOS by “taking Digital’s manual and writing my
> operating system.”

Say what? Is that "Digital" as in "Digital Research"
or "Digital Equipment Corporation"?

In either case, it's not true. Microsoft **bought**
Tim Paterson's (Seattle Computer Corporation's) QDOS
("quick and dirty operating system" for the Intel 8086/8088),
which was in turn a reimplementation of Digital Research's
CP/M (for the Z-80/8080), which was in turn based on
Digital Equipment Corporation's RT-11 (for the PDP-11).

In any case, lots of "Digitals'" manuals, mostly pre-dating
Bill Gates' ownership of the OS.

> Silicon Valley represents a set of values that is amoral
> by commonly held standards. It’s rapidly taking control of
> the distribution systems for music, literature and arts.
> And it’s increasingly manipulating our access to information,
> even as it absorbs an ever-increasing share of our economy.
> Scoff at the word “monopoly” if you like. But if these
> developments don’t concern you, you’re not paying attention.

Wot, you don't like The Future? Tough tuna fish, Charlie!
To quote somebody in Jerry Pournelle's _Oath of Fealty_,
"Consider it evolution in action."

Or go study Ayn Rand, or something. ;->

Dale Carrico said...

The confusion no doubt results from my skimming -- I thought I'd captured the main points while still inviting folks to click the link to the whole piece. It may be that Eskow is simplifying the history a wee bit around the edges as well.

Lemora said...

Interesting that just about all silicon valley execs are of the "Liberal" persuasion. Then again, money talks and ideology takes a walk regardless of your world view.

Dale Carrico said...

I don't agree with either of your observations. Neoliberlism as an advocacy either of elite-incumbent technocracy or of market fundamentalist pieties is a right-wing reactionary political position. Clintonian liberalism was about as liberal as Eisenhower Republicanism. I agree that money is corrupting, I agree that it has corrupted both political parties, but I disagree that this trumps ideology or that this makes the parties equivalent to one another. Such facile observations usually justify the usual consumer acquiescence to the status quo with the added insult of self-congratulatory pseudo-radical preening.

jimf said...

> Tech "Disruption" Is Monopoly Money

From today's Times:

http://www.nytimes.com/2014/10/26/books/review/james-risens-pay-any-price.html
---------------
$20 billion was sent to Iraq with little or no oversight and without
any clear direction on how it should be spent. Most of this money was
flown from East Rutherford, N.J., in bricks of $100 bills. Pallets of
cash were distributed at will. . .
====

Boy oh boy! That was right in my back yard. I'm surprised it didn't
warp the space-time continuum on Route 3.

"I feel a great disturbance in the force."

No, that's just $20 billion, in bricks of $100 bills, parked
in a warehouse over at Teterboro Airport.

;->