The Problem With the Internet Economy

“[Web 2.0] screws the middle class. Only the aggregator (like Google, for instance) gets rich, while the actual producers of content get poor.” – Internet pioneer Jaron Lanier

Let’s say you wanted to invent a business model where the founders and bosses all get rich, the employees work like dogs for free, the products are remarkably flawed – and you wanted to do it on an enormous scale and impact about a billion people – here’s how you do it:

Create a utopian notion called Web 2.0 where free software, digital collectivism, and user-generated content rule and everyone will somehow, magically, be better off. Promote terms like the democracy of data, wisdom of crowds, power of collaboration, empowerment of entrepreneurism, transparency of information, and the fairness of inclusion to get everyone excited.

Provide free open-source programs like Linux and JavaScript so junk-food pounding geeks can sit home in their pajamas writing all sorts of buggy programs and apps that sell for less than the price of a cigarette lighter.

Launch social media companies like Facebook (NASDAQ:FB), Twitter, LinkedIn (NYSE:LNKD), Pinterest, and YouTube that make billions in profits off user-generated content they don’t have to pay a penny to develop – not surprising since the vast majority of the content is of poor quality, completely false, or the dysfunctional ravings of people craving attention.

Propagate the myth that anyone can be an entrepreneur so any loser with a computer and an Internet connection can quit his job at McDonald’s, call himself a CEO, and hang out in the bedroom he grew up in blogging and tweeting with open-source applications like WordPress and Firefox while sponging off his parents.

Found a company that conquers and dominates the entire online world without doing evil – so say    Google’s billionaire founders – by ensuring that anyone who wants to find or do anything on the Web gets blasted with ads paid for by small business owners who can’t afford to be buried beneath a thousand pages of search results.

Ensure there is no possible way to contact an actual human being for support at Internet companies. And, should a user somehow manage to unlock the magic code for customer service, base the group in India or some other country where they can’t really understand or do anything about the problem. Which, of course, leaves the user to search for help online – bombarded by Google ads.

Do all the heavy lifting – the movement and storage of billions of terabytes of data that’s emailed, posted, tweeted, and retweeted every day – in the cloud, a euphemism for enormous warehouses of rows and rows of server, network, and storage equipment that’s all made in China and requires shockingly few employees to manage.

Generate enormous wealth for founders, executives, and investors without creating any real jobs except for software developers who are under 30. Generate enormous market capitalizations while employing a fraction of the number of people of comparable companies. (Google, for example, is valued at $290 billion and employs just 44,000 people. By contrast, Wells Fargo, GE, and IBM are all worth far less but have five to ten times the number of employees.

Bring all the fabulously wealthy leaders in Silicon Valley together from time to time and work them into a groupthink frenzy over global warming and green energy. Use their political clout for environmental legislation and regulation of mainstream industries that aren’t deemed cool, resulting in a chilling affect on job growth and a higher cost of living for those who can least afford it.

Create ludicrous hype around crowdfunding as some sort of panacea for would-be entrepreneurs and investors. Create the illusion that it somehow makes sense for people to throw their money away playing venture capitalist or for entrepreneurs to take on the myriad of risks and issues associated with raising capital in this manner.

Accelerate the ever-growing gap between the haves and have-nots while fueling the misconception that tech is cool and all the big banking, energy, and pharmaceutical companies are the bad guys.

If this sounds like the rant of a reactionary technophobe, nothing could be further from the truth. I’ve had an awesome career in the high-tech industry, live and work in Silicon Valley, and love this place.

And I don’t mean to imply that any of this was premeditated with evil intent, but the reality is what it is. Speaking of which, I was inspired by Internet and virtual reality pioneer Jaron Lanier’s brilliant book, “You Are Not A Gadget.” Here’s an excerpt:

“There's a dominant dogma in the online culture of the moment that collectives make the best stuff, but it hasn't proven to be true. The most sophisticated, influential and lucrative examples of computer code -- always turn out to be the results of proprietary development.

“Actually, Silicon Valley is remarkably good at not making collectivization mistakes when our own fortunes are at stake. If you suggested that, say, Google, Apple and Microsoft should be merged so that all their engineers would be aggregated into a giant wiki-like project -- well you'd be laughed out of Silicon Valley so fast you wouldn't have time to tweet about it.

“We're well over a decade into this utopia of demonetized sharing and almost everyone who does the kind of work that has been collectivized online is getting poorer. And it's going to get worse.”