Some people say things there others don't like!

It’s entirely true that Facebook and Google are worth large amounts of money. It’s also true that some goodly portion of this comes from their aggregation of the data we so freely give them. That isn’t though, the same statement as that the data itself has value. Sure, that could be true but it could also be true that it’s the aggregation which produces the value, the data itself being worth near nothing.

And, you know, that probably is the truth, it’s the information which is valuable, not the data.

Whenever a technological revolution brings upheaval to the world, it initially benefits the small number of people at its forefront to the detriment of others.

When the industrial revolution brought about the birth of mass production, it led to thousands of skilled, independent workers losing their trades and much of their livelihoods, facing either unemployment or less-skilled work in the new factories, with the loss of autonomy that entailed.

In time, as the law and society caught up with the pace of change, people started achieving protections: workers’ rights, limits to the number of hours that could be worked, improved safety in the workplace and more.

It might now be clear to all of us that the industrial revolution was overwhelmingly a good thing for the world and for our standard of living – but it took decades of pressure and action for government to make sure those benefits were widely – if not evenly – shared.

All of which is entire bollocks to start with. Who, for example, were the people who benefited from the early days of the Industrial Revolution?

Moreover, there is another very important group who benefited
mightily from North American slavery: consumers of machine
made cotton textiles, from peasants in Belgium able for the first
time to buy a rug to London carters to Midwestern pioneers who
found basic clothing the only cheap part of equipping a covered
wagon. Slave-grown cotton could be produced cheaply, yes, but
the cotton-growers did not collude and so sold their cotton at prices
that incorporated only a normal rate of profit. Cotton could be spun
and woven by machines at amazingly low prices, yes, but British
factories did not collude and sold their garments at prices that
incorporated only a normal rate of profit.

It’s the consumers who benefit that is. No government intervention required to make this happen either, rather, the absence of government imposed monopolies is what makes it happen. Who benefits from Facebook and Google? Us, we consumers.

There is, of course, more:

It is clear that in the aggregate, our personal information – even relatively innocuous details such as our browser search history – is worth a vast amount of money. Alphabet, the parent company of Google, has come to be valued at more than $720bn in the space of 20 years, with most of that derived from its advertising and information efforts. Facebook, which has just celebrated its 14th birthday, is still worth more than $475bn, even after taking a pummelling all week.

Super. So, what is it that is valuable? The data of our browsing habits? Or the aggregation and processing of it? Clearly, it’s not actually the data is it? We give it away in return for the services. We thus don’t value the data at all that much. After aggregation and processing it creates those large sums of value. It’s thus the aggregation and processing creating the value. At which point we’d probably think that it should be the people doing the aggregating and processing who get that value. Which they do so all is copacetic.

Despite the huge value created by our data, we have handed it over in exchange for little more than the services these companies provide.

And what do we value those services at? More or less than the data we don’t value? Who is gaining from this, we or they?

So, for example, Facebook is worth some $500 billion. There are 2 billion users, close enough. Note that value is the capitalisation, not the annual income. Do we value the very existence, as users, of Facebook at $250 each? I’m absolutely certain that I save more than that in a year through the use of IP phone calls over the system.

As Jason Furman has pointed out, sure the Walton family has some $100 billion as a result of Walmart. And US families save $250 billion a year as a result of the existence of Walmart. Who is winning here?

That is, our correspondent has entirely misunderstood who it is that benefits from this technological progress stuff, this capitalism and markets even. It’s we consumers who do. As with those Satanic mills providing stockings for the working girl, today’s rapacious capitalism gives us the knowledge of the globe plus the ability to speak to it. This is “little more”?

Jeez, can’t these people get with the program? Even understand who gets rich off this capitalist hunt for gelt and pilf? Us? It’s all there in Adam Smith after all, the benevolence of the baker etc.

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13 COMMENTS

  1. Further, what if the Industrial Revolution had been deferred until a hyperactive government could ensure that all its “victims” would be compensated? What if we had the Precautionary Principle and you couldn’t harness water power without first proving a negative? What if there were a law that you could not crawl before you walk?

    I don’t trust Big Data with identifiable personal information at all – but I profit enormously by being able to cite correct data, names, and year numbers when I write. Google has a much better product than Bing or volunteer services like DuckDuckGo. Yes, the exchange is voluntary.

  2. “Clearly, it’s not actually the data is it? We give it away in return for the services. We thus don’t value the data at all that much”
    “Despite the huge value created by our data, we have handed it over in exchange for little more than the services these companies provide.”

    Aren’t both you & the writer you’re quoting undervaluing the services providing? Because they’re “free” & the way the business models have developed, they’re regarded as “free”. To value them you really need a control. What the market value of the services would be in paid for money. And I’m quite happy to be your control, in this. I refuse, point blank, to use freemail services. Don’t regard them as secure. Don’t want my mail patterns analysed. Want to able to do what I did this week. Rang my e-mail provider & sorted out a glitch within half hour of it appearing. My various e-mail addresses & their related domains cost me north of £500 a year. My text messaging via mobile no doubt runs up quite a bill. If there was a paid for version of Farcebook & I found a use for it, I’d pay similar money. My annual advertising bill’s healthy enough.
    Sufficient to say, Farcebook’s harvested data is valued at less than people value their data & more than it costs for Farcebook to operate Farcebook. But only a competitive market could indicate a true figure.

    • Valuation is properly done by the individual transactors, whose values (preferences) may vary. I have no basis for knowing that $2.50 is a proper valuation for a box of Triscuit. I do know that the house brand is $1.67 but they break when you dip ’em; also, Triscuit’s makers not only add spices but do a better job of selecting them than I would – their Intellectual Property, which I pay extra for and have no right to get for free because it is merely an idea. Also, I am confident that, if someone could deliver the goods for less, either of my two local supermarkets would race to stock the product.

      • We don’t really have analogous situation. But to create one. If the competition to your supermarket biscuits were provided free by a store, on the condition that the consumer had to climb a greasy pole to secure them, we’d be headed there. A price on greasy pole climbing.

      • Assuming the point of greasy pole climbing is to set a price that is unpleasant (vs impossible), the price I would put on greasy pole climbing varies. Am I in work clothes or business attire? Do I have aching muscles after shoveling snow? How hungry am I? Are they the cilantro-and-avocado variety? Sometimes I would; sometimes I wouldn’t.

        Your price may be different. “We” don’t have to establish a single price for everyone.

        The analogy is still not good, as the supermarket wouldn’t benefit from my discomfort. Say I helped a customer in Spanish, or participated in a charity event that made the supermarket look good in the community–The manager might give me a box of crackers for “free.” They certainly “pay” me for my willingness to buy goods that are at the edge of their date code and will be worthless to them tomorrow.

        “Money isn’t everything” but frequently we work out the monetary value of our non-monetary personal preferences.

        • The way any market works is the price is discovered when a transaction takes place. The price for that transaction. The “market price” that people use to assign “value” is the sum of the bids & offers in the market.
          The fact that different people make a different assessment of value, to them, is why there is a market in the first place

    • PS – We both must and do pay for confidentiality of email (defeated somewhat if your recipient is on a “free” service). I would and do pay more to be free of manipulated, personalized sales pitches, including time spent haranguing the car dealer for giving my data to Sirius/XM despite my explicit instructions. But the value we place on personal information also varies. I would sell information on my neighbor for half a penny a day, provided I didn’t have to collect it manually, as I am sure she profits at the General Store from whatever information she collects on my comings and goings. There is a reason we will always be forced to register cars and pets at Town Hall, and it ain’t the license fee.

      Websites that would never sell our personal information rely on Google scripting tools, and thus do so indirectly.

      I believe my neighbor is exercising her rights under the First Amendment. I believe that devising a worldwide tool that silently harvests personal information as a third-party intermediary should be a crime. But I do not know of a qualitative rule to tell the two cases apart.

  3. The suggestion that Google, Facebook and other tech companies should pay tax on their turnovers would give rise to all sorts of problems, almost certainly be regressive, and be a move in the wrong direction on corporation tax reform. I suggested an Alternative Minimum Corporation Tax as an alternative where, in effect, tax be charged at a reduced rate on the global weighted profits that would appear to arise in a country if the local tax paid appeared to be inappropriately small, probably because of the use of tax avoidance activities.

    • I commented on 11 March (Fair Tax Mark Head Has No Clue About Caffe Nero’s Tax Bill) that the US Alternative Minimum Tax (and Obama’s proposed second one) punish taxpayers who keep their tax bill down by doing what the tax code promised to reward them for doing, such as advancing the government a loan at below-market interest.

      “Inappropriately small” means the payer seems too rich, to you, not to be paying more tax. “Weighted profits that would appear to arise in a country” means you will use hypotheticals to devise a sham “basis” for a tax bill that feels more “appropriate” to you. This is lawlessness.

  4. There’s plenty of tools for those that value their privacy.

    Email can be encrypted.

    My secure information on my computer hard drives are encrypted.

    Fake online identities can be built. I have separate accounts for separate functions in my life, not all of which identify me as me.

    VPNs, TOR and the like protect browsing.

    People don’t use them much, because they actually don’t value their privacy.

  5. I don’t see a lot of free market spirit from leftist pricks running YouLube. Goolag and FaceBoot.

    Esp sickening and stupid in the case of Zuckers who is providing help for brazenly anti-Semitic scum such as now infest ZaNu. Despite the fact that marxst scumbag Mason is talking openly about confiscating FaceBoot.

    Murphy stinks.

    • YouTube and Facebook are gone. They keep stupidly surrendering to the MSM and the current political class, the MSM who are simply hell bent on destroying them.

      Zuck announced a whole load of restrictions on API users this week. That’s a load of marketing companies thinking “eh, maybe we won’t bother”. The user base don’t give a shit. It’s just your enemies, Zuck.

      YouTube is trying to become reputable, when that was never the appeal.

      They’re surrendering to the old culture. Someone will be along soon to do the job properly.