Silicon Valley is an American success story. At a time of supposed American decline, a gifted group of young entrepreneurs invented, merchandized, and institutionalized everything from smartphones and eBay to Google and Facebook. The collective genius within a small corridor from San Francisco to Stanford University somehow put hand-held electronics into over a billion households worldwide — and hundreds of billions of dollars in profits rolled into Northern California, and America at large.
Stranger yet, Silicon Valley excelled at 1950s-style profit-driven capitalism while projecting the image of hip and cool. The result is a bizarre 21st-century 1-percenter culture of $1,000-a-square-foot homes, $100,000 BMWs, and $500 loafers coexisting with left-wing politics and trendy pop culture. Silicon Valley valiantly tries to square the circle of driving a Mercedes or flying in a Gulfstream while lambasting those who produce its fuel.
But the paradox finally has reached its logically absurd end. In medieval times, rich sinners sought to save their souls by buying indulgences to wash away their sins. In the updated version, Silicon Valley crony capitalists and wheeler-dealers buy exemption for their conspicuous consumption with loud manifestations of cool left-wing politics.
Victor Davis Hanson, “The Valley of the Shadow: How mansion-dwelling, carbon-spewing cutthroat capitalists can still be politically correct”, National Review, 2014-07-22.
May 29, 2015
April 16, 2015
Tim Worstall on how our traditional economic measurements are less and less accurate for the modern economic picture:
… in the developed countries there’s a problem which seems to me obvious (and Brad Delong has even said that I’m right here which is nice). Which is that we’re just not measuring the output of the digital economy correctly. For much of that output is not in fact priced: what Delong has called Andreessenian goods (and Marc Andreessen himself calls Mokyrian). For example, we take Google’s addition to the economy to be the value of advertising that Google sells, not the value in use of the Google search engine. Similarly, Facebook is valued at its advertising sales, not whatever value people gain from being part of a social network of 1.3 billion people. In the traditional economy that consumer surplus can be roughly taken to be twice the sales value of the goods. For these Andreessenian goods the consumer surplus could be 20 times (Delong) or even 100 times (my own, very controversial and back of envelope calculations) that sales value.
We are therefore, in my view, grossly underestimating output. And since we measure productivity as the residual of output and resources used to create it we’re therefore also grossly underestimating productivity growth. We’re in error by using measurements of the older, physical, economy as our metric for the newer, digital, one.
In short, I simply don’t agree that growth is as slow as we are measuring it to be. Thus any predictions that rely upon taking our current “low” rate of growth as being a starting point must, logically, be wrong. And that also means that all the policy prescriptions that flow from such an analysis, that we must spend more on infrastructure, education, government support for innovation, must also be wrong.
January 4, 2015
In the Washington Post, Lindsey Kaufman recounts her experience when her workplace changed to the “open-office model”:
A year ago, my boss announced that our large New York ad agency would be moving to an open office. After nine years as a senior writer, I was forced to trade in my private office for a seat at a long, shared table. It felt like my boss had ripped off my clothes and left me standing in my skivvies.
Our new, modern Tribeca office was beautifully airy, and yet remarkably oppressive. Nothing was private. On the first day, I took my seat at the table assigned to our creative department, next to a nice woman who I suspect was an air horn in a former life. All day, there was constant shuffling, yelling, and laughing, along with loud music piped through a PA system. As an excessive water drinker, I feared my co-workers were tallying my frequent bathroom trips. At day’s end, I bid adieu to the 12 pairs of eyes I felt judging my 5:04 p.m. departure time. I beelined to the Beats store to purchase their best noise-cancelling headphones in an unmistakably visible neon blue.
Despite its obvious problems, the open-office model has continued to encroach on workers across the country. Now, about 70 percent of U.S. offices have no or low partitions, according to the International Facility Management Association. Silicon Valley has been the leader in bringing down the dividers. Google, Yahoo, eBay, Goldman Sachs and American Express are all adherents. Facebook CEO Mark Zuckerberg enlisted famed architect Frank Gehry to design the largest open floor plan in the world, housing nearly 3,000 engineers. And as a businessman, Michael Bloomberg was an early adopter of the open-space trend, saying it promoted transparency and fairness. He famously carried the model into city hall when he became mayor of New York, making “the Bullpen” a symbol of open communication and accessibility to the city’s chief.
These new floor plans are ideal for maximizing a company’s space while minimizing costs. Bosses love the ability to keep a closer eye on their employees, ensuring clandestine porn-watching, constant social media-browsing and unlimited personal cellphone use isn’t occupying billing hours. But employers are getting a false sense of improved productivity. A 2013 study found that many workers in open offices are frustrated by distractions that lead to poorer work performance. Nearly half of the surveyed workers in open offices said the lack of sound privacy was a significant problem for them and more than 30 percent complained about the lack of visual privacy. Meanwhile, “ease of interaction” with colleagues — the problem that open offices profess to fix — was cited as a problem by fewer than 10 percent of workers in any type of office setting. In fact, those with private offices were least likely to identify their ability to communicate with colleagues as an issue. In a previous study, researchers concluded that “the loss of productivity due to noise distraction … was doubled in open-plan offices compared to private offices.”
I work in the software industry and it’s been nearly 20 years since I last had a private office. Every company I’ve worked for since then has either consciously been moving in the open office direction, or unwilling to spend money to partition open space in whatever office space they had. Sometimes, I even get nostalgic for cube farms…
October 28, 2014
Tim Worstall explains why it’s not a scandal that Facebook doesn’t pay more taxes in the UK:
In fact, it’s actually rather a good idea that Facebook isn’t paying UK corporation tax. For the standard economic finding (also known as optimal taxation theory) is that we shouldn’t be taxing corporations at all. Thus, as a matter of public policy we should be abolishing this tax: and also perhaps applauding those companies that take it upon themselves to do what the politicians seem not to have the courage to do, make sure that corporations aren’t paying tax.
That isn’t how most of the press sees it, of course
That’s an extremely bad piece of reporting actually, for of course Facebook UK did not have advertising revenue of £371 million last year: Facebook Ireland had advertising revenue of that amount from customers in the UK that year. And that’s something rather different: that revenue will be taxed under whatever system Ireland has in place to tax it. And this is the way that the European Union system of corporate taxation is supposed to work. Any company, based in any one of the 28 member countries, can sell entirely without hindrance into all other 27 countries. And the profits from their doing so will be taxed wherever the brass plate announcing the HQ of that company is within the EU. This really is how it was deliberately designed, how it was deliberately set up: it is public policy that it should be this way.
We could also note a few more things here. The UK company itself made a loss and that loss was because they made substantial grants of restricted stock units to the employees. And under the UK system those RSU grants are taxed as income, in full, at the moment of their being granted. Which will mean, given those average wages, at 45% or so. And we should all be able to realise that a 45% tax rate is rather higher than the 24% corporation tax rate. The total tax rate on the series of transactions is thus very much higher than if Facebook has kept its employees as paupers and just kept the profits for themselves. Further, those complaining about the tax bill tend to be those from the left side of the political aisle: which is also where we find those who insist that workers should be earning the full amount of their value to the company which is what seems to be happening here.
August 16, 2014
July 15, 2014
In Forbes, Tim Worstall ignores the slogans to follow the money in the Net Neutrality argument:
The FCC is having a busy time of it as their cogitations into the rules about net neutrality become the second most commented upon in the organisation’s history (second only to Janet Jackson’s nip-slip which gives us a good idea of the priorities of the citizenry). The various internet content giants, the Googles, Facebooks and so on of this world, are arguing very loudly that strict net neutrality should be the standard. We could, of course attribute this to all in those organisations being fully up with the hippy dippy idea that information just wants to be free. Apart from the obvious point that Zuckerberg, for one, is a little too young to have absorbed that along with the patchouli oil we’d probably do better to examine the underlying economics of what’s going on to work out why people are taking the positions they are.
Boiling “net neutrality” down to its essence the argument is about whether the people who own the connections to the customer, the broadband and mobile airtime providers, can treat different internet traffic differently. Should we force them to be neutral (thus the “neutrality” part) and treat all traffic exactly the same? Or should they be allowed to speed up some traffic, slow down other, in order to prioritise certain services over others?
We can (and many do) argue that we the consumers are paying for this bandwidth so it’s up to us to decide and we might well decide that they cannot. Others might (and they do) argue that certain services require very much more of that bandwidth than others, further, require a much higher level of service, and it would be economically efficient to charge for that greater volume and quality. For example, none of us would mind all that much if there was a random second or two delay in the arrival of a gmail message but we’d be very annoyed if there were random such delays in the arrival of a YouTube packet. Netflix would be almost unusable if streaming were subject to such delays. So it might indeed make sense to prioritise such traffic and slow down other to make room for it.
You can balance these arguments as you wish: there’s not really a “correct” answer to this, it’s a matter of opinion. But why are the content giants all arguing for net neutrality? What’s their reasoning?
As you’d expect, it all comes down to the money. Who pays more for what under a truly “neutral” model and who pays more under other models. The big players want to funnel off as much of the available profit to themselves as possible, while others would prefer the big players reduced to the status of regulated water company: carrying all traffic at the same rate (which then allows the profits to go to other players).
June 30, 2014
May 26, 2014
April 17, 2014
March 31, 2014
Virginia Postrel has an interesting take on the current brouhaha over Facebook’s acquistion of formerly crowdfunded Oculus:
Crowdfunding sites such as Kickstarter and Indiegogo represent a classic entrepreneurial phenomenon: Once you roll out your great idea, customers use it in ways you didn’t imagine, and you wind up in a different business than you expected.
Kickstarter’s founders wanted to help artists raise money. Indiegogo co-founder Danae Ringelmann pictured aiding capital-strapped small-businesses owners like her parents. Neither intended their site to act as a test market. But, as the rags-to-riches story of virtual-reality firm Oculus shows, that’s what they have become.
“It’s a way to access capital, but what it’s also become is a market-testing and validation platform,” Ringelmann told the Dent the Future conference on Tuesday. “What we’re doing is creating pre-markets for ideas,” she said.
Now that Facebook is buying Oculus for $2 billion, critics are reverting to the original assumption that crowdfunding is primarily about raising money. “Talking people out of $2.4 million in exchange for zero percent equity is a perfectly legal scam,” wrote my colleague Barry Ritholtz.
But it’s not a scam at all. It’s market research. In effect, customers placed pre-orders and received early products; why are they griping that they don’t own a part of the business?
The backlash is largely Kickstarter’s fault. It may not be running a scam, but it definitely sends mixed messages. Unlike Indiegogo, which prides itself on operating a neutral platform giving anybody’s idea a market test, Kickstarter hasn’t embraced its de facto transformation. It strictly curates the campaigns it hosts and, although it makes its biggest profits on technology products, it still exudes an artistic sensibility that isn’t entirely comfortable with disruptive technology or large enterprises. It still talks as though it’s PBS. “Kickstarter is not a store,” it declares.
March 26, 2014
Raph Koster reflects on the promise of Oculus:
Oh, it’s hard. But it’s rapidly becoming commodity hardware. That was in fact the basic premise of the Oculus Rift: that the mass market commodity solution for a very old dream was finally approaching a price point where it made sense. The patents were expiring; the panels were cheap and getting better by the month. The rest was plumbing. Hard plumbing, the sort that calls for a Carmack, maybe, but plumbing.
Look, there are a few big visions for the future of computing doing battle.
There’s a wearable camp, full of glasses and watches. It’s still nascent, but its doom is already waiting in the wings; biocomputing of various sorts (first contacts, then implants, nano, who knows) will unquestionably win out over time, just because glasses and watches are what tech has been removing from us, not getting us to put back on. Google has its bets down here.
There’s a beacon-y camp, one where mesh networks and constant broadcasts label and dissect everything around us, blaring ads and enticing us with sales coupons as we walk through malls. In this world, everything is annotated and shouting at a digital level, passing messages back and forth. It’s an ubicomp environment where everything is “smart.” Apple has its bets down here.
These two things are going to get married. One is the mouth, the other the ears. One is the poke, the other the skin. And then we’re in a cyberpunk dream of ads that float next to us as we walk, getting between us and the other people, our every movement mined for Big Data.
The virtue of Oculus lies in presence. A startling, unusual sort of presence. Immersion is nice, but presence is something else again. Presence is what makes Facebook feel like a conversation. Presence is what makes you hang out on World of Warcraft. Presence is what makes offices persist in the face of more than enough capability for remote work. Presence is why a video series can out-draw a text-based MOOC and presence is why live concerts can make more money than album sales.
Facebook is laying its bet on people, instead of smart objects. It’s banking on the idea that doing things with one another online — the thing that has fueled it all this time — is going to keep being important. This is a play to own walking through Machu Picchu without leaving home, a play to own every classroom and every museum. This is a play to own what you do with other people.
Update: Apparently some of the folks who backed the original Kickstarter campaign have their panties in a bunch now that there’s big money involved.
Attendees wear Oculus Rift HD virtual reality head-mounted displays as they play EVE: Valkyrie, a multiplayer virtual reality dogfighting shooter game, at the Intel booth at the 2014 International CES, January 9, 2014 in Las Vegas, Nevada. ROBYN BECK/AFP/Getty Images
Facebook’s purchase of virtual reality company Oculus for $2bn in stocks and shares is big news for a third company: Kickstarter, which today celebrates the first billion-dollar exit of a company formed through the crowdfunding platform.
Oculus raised $2.4m for its Rift headset in September 2012, exceeding its initial fundraising goal by 10 times. It remains one of the largest ever Kickstarter campaigns.
But as news of the acquisition broke Tuesday night, some of the 9,500 people who backed the project for sums of up to $5,000 a piece (the most popular package, containing an early prototype of the Rift, was backed by 5,600 for a more reasonable $300) were rethinking their support.
For Kickstarter itself, the purchase raises awkward questions. The company has always maintained that it should not be viewed as a storefront for pre-ordering products; instead, a backer should be aware that they are giving money to a struggling artist or designer, and view the reward as a thanks rather than a purchase.
“Kickstarter Is Not a Store” is how the New York-based company put it in 2012, shortly after the Oculus Rift campaign closed. Instead, the company explained: “It’s a new way for creators and audiences to work together to make things.”
But if Kickstarter isn’t a store, and if backers also aren’t getting equity in the company which uses their money to build a $2bn business, then what are they actually paying for?
“Structurally I have an issue with it,” explains Buckenham, “in that the backer takes on a great deal of risk for relatively little upside and that the energy towards exciting things is formalised into a necessarily cash-based relationship in a way that enforces and extends capitalism into places where it previously didn’t have total dominion.”
March 18, 2014
March 7, 2014
After an embarrassing leak, Prime Minister Erdogan has threatened to ban the services that carried the leaked voice recordings:
Turkey’s prime minister has threatened drastic steps to censor the Internet, including shutting down Facebook and YouTube, where audio recordings of his alleged conversations suggesting corruption have been leaked in the past weeks, dealing him a major blow ahead of this month’s local elections.
In a late-night interview Thursday, Recep Tayyip Erdogan told ATV station that his government is determined to stem the leaks he insists are being instigated by followers of an influential U.S.-based Muslim cleric. He has accused supporters of Fethullah Gulen of infiltrating police and the judiciary and of engaging in “espionage,” saying that the group even listened in on his encrypted telephone lines. The Gulen movement denies involvement.
“We are determined on the issue, regardless of what the world may say,” Erdogan said. “We won’t allow the people to be devoured by YouTube, Facebook or others. Whatever steps need to be taken we will take them without wavering.”
February 26, 2014
The legal recognition [in passports and other legal documents] of intersex people and others who cannot properly be said to be either male or female is probably a good idea, but this should not impact upon the vast majority of people who have no problem living in a binary-gendered world or using binary-gendered language.
History is replete with failed attempts to re-invent or modify language, from Esperanto to the feminist PC language of the Eighties. But this campaign to institute a third sex in language and law may well prove to be the most unstable project yet. The ever-changing and ever-expanding taxonomy of words and identities aimed at respecting difference among transsexuals, always seems to cause undue offence among transsexuals themselves. To use the word transsexual, for instance, as a noun (rather than as an adjective) is said, by some, to diminish a person’s identity down to a single trait. The very term transsexual has been replaced, first by transgendered (to assert that fact that it is about gender not sexuality) and now by Trans*. The capital ‘T’ is obligatory and the asterisk is meant to represent inclusivity. Apparently, to simply call someone ‘Trans’ implicitly denigrates the experiences of cross-dressers and gender-queer folk who are not intent upon making a full transition from one gender to the other.
Amid all the offence being taken over these linguistic acrobatics, the one thing trans campaigners, and now Facebook, fail to realise is that language does not respond well to being artificially manipulated. As Wittgenstein once remarked, language is like a toolbox, you use the best tool available for the job in hand. With general use, over time, words and their meanings change to reflect changing forms of social consciousness. It is not the other way around. Any attempt to force language to respond to the presumed delicate sensitivities of marginal groups not only underlines and reifies these presumed vulnerabilities, it also undermines the responsiveness of language to real experience.