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Posted May 29, 2013
*A full executive summary of this book will be available at newb
*A full executive summary of this book will be available at newbooksinbrief dot com, on or before Tuesday, June 4, 2013
Not so long ago the Internet was seen as the next great economic engine. The optimism was never higher than at the peak of the dot-com boom in the late 1990s, of course; but even after the dot-com bust in the early 2000s, many believed that this was but the growing pains of an emerging industry, and that in the long run the Internet would yet provide the foundation for a new and improved information economy.
Since that time, it is certainly the case that the Internet has spawned a few major successes, as well as a host of hopefuls. However, it cannot be said that the economy has enjoyed a great boost since the Internet exploded. On the contrary, the economy has, at best, stagnated--and it currently shows no signs of escaping its slump. So what went wrong?
According to Silicon Valley luminary Jarion Lanier, the problem is not so much with the Internet per se, but with how it has been set up, and how the major Internet companies themselves are organized. To begin with, major Internet companies tend to form monopolies, or near-monopolies, and on a global scale (mainly because Internet networks are able to reach a global audience and undercut local players, but also because these networks are more valuable to their users as they grow larger). The formation of monopolies and near monopolies destroys competition, of course, which compromises economic growth.
Even more important than this, though, is that Internet megaliths employ relatively few people, and have very little overhead (thus they simply don't contribute much back to the economy). You see, the business plan of most successful Internet companies is to offer a particular service for free (such as Internet search efficiency with Google, or social connecting with Facebook, or business connecting with LinkedIn, or an auction platform with eBay, or music and video files on a sharing site etc). The framework of the platform is provided by the company, but the content of the service is provided by the users. The site attracts users with the prospect of a free and useful service, and the site itself makes revenue through selling advertising space. Oftentimes, the company collects information from its users through its activities on the platform, and uses this information to help target them with ads and/or sells this information to third parties so these third parties can use it themselves.
Lanier's book is a sprawling affair occasioned with numerous fairly bizarre flights of fancy (I didn't mind this so much since Lanier is fairly interesting, and has a unique perspective), but the core ideas here are very intriguing and worthy of serious consideration. The problem with Lanier's solution at this point is that the economy has not yet slumped enough in order to convince us that Lanier's theory must be true, and that radical solutions are needed (and Lanier's solution is radical). Nevertheless, should events continue to play out as Lanier foresees, his solution may well become attractive at some point. A full executive summary of the book will be available at newbooksinbrief dot com on or before Tuesday, June 4; a podcast discussion of the book will be available shortly thereafter.
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