Blogger and journalist Nick Carr, in his new book “The Big Switch,” describes the move to utility computing and argues that it will shrink the workforce, lead to increasing income inequality, and destroy the middle class. But this big switch can also be seen as a good thing, in that the many will benefit by gaining access to opportunities previously reserved for a privileged few.

In his new book “The Big Switch,” blogger and journalist Nick Carr says, “In the YouTube economy, everyone is free to play, but only a few reap the rewards.” But the reason so many people play in the new economy is because the many can reap rewards, even if those rewards don’t come in a monetary form.

While Carr spends most of the book describing the move to utility computing and comparing that transition to the earlier switch to utility-based electrical power, he makes an important social argument as well: He suggests that the switch to utility computing — also sometimes known as grid-based or cloud computing — will shrink the workforce, lead to increasing income inequality, and destroy the middle class.

But Carr’s arguments left me unconvinced that the big switch is a bad thing. Instead of considering the job market as a whole, he focuses narrowly on the publishing and broadcasting industry. And he doesn’t offer backup to the assertion that income inequality is always and obviously bad. Increasing income inequality can mask gains in well-being from factors other than money, and the social, participatory web arriving as part of the switch to utility computing offers great riches to the masses.

A shrinking workforce, a dwindling middle class?

Carr largely bases his argument that utility computing will lead to a shrinking workforce on the example of the publishing and broadcasting industry:

Early last year, the US Department of Labor released a revealing set of statistics on the publishing and broadcasting business. Employment in the industry had fallen by 13% in the six years since 2001, with nearly 150,000 jobs lost. These were years when many media companies had been shifting from physical media to online. Yet the report revealed that there had been no growth in internet publishing and broadcasting jobs. In fact, online employment had actually dropped 29%.

On the other hand, we’re seeing vast growth in information technology jobs, due at least in part to the big switch to web-based computing. The Labor Department is forecasting employment in “network systems and data communications” to grow by 53.4 percent between 2006 and 2016, while employment in the category of “computer software engineers, applications” is projected to grow by 48.7 percent.

Carr asserts that computerization is “extending the replacement of workers by machines from the blue-collar to the white-collar world, but it shows no sign of creating broad new categories of employment.” But don’t “network systems and data communications” and “computer software engineers, applications” represent broad new categories of employment? Granted, a laid-off print media journalist is unlikely to be able to take on such a job, but that doesn’t mean the jobs don’t exist.

Carr argues that the middle class will shrink even as a small class of super-wealthy benefit from the uncompensated labor of the many (what he has previously called sharecropping the long tail):

The arrival of the universal computing grid portends a very different kind of economic realignment. Rather than concentrating wealth in the hands of a small number of companies, it may concentrate wealth in the hands of a small number of individuals, eroding the middle class and widening the divide between haves and have-nots.

While there is research that suggests that higher economic inequality leads to more distrust, decreased social capital and higher levels of crime, not everyone agrees that more income inequality necessarily indicates a problem. Also, the presence of a few wildly rich people doesn’t inevitably mean the disappearance of the middle class.

It’s natural to feel annoyed when some people get really rich; we seem hard-wired to pay attention to our relative status. But I’d like to see some discussion of whether the income inequality Carr describes is bad, or merely bothersome and envy-making.

Wealth for all

Focusing too much on income can make us blind to decreasing inequality in other aspects of life. In an essay in its special holiday edition, The Economist reports that quality of life across different income strata may be becoming more similar, as even those with little money can afford what used to be reserved for the very rich:

You can see this levelling at work in markets for transport and appliances. You no longer need be a Vanderbilt to own a refrigerator or a car. Refrigerators are now all but universal in America, even though refrigerator inequality continues to grow. The Sub-Zero PRO 48, which the manufacturer calls “a monument to food preservation”, costs about $11,000, compared with a paltry $350 for the IKEA Energisk B18 W. The lived difference, however, is rather smaller than that between having fresh meat and milk and having none. Similarly, more than 70% of Americans under the official poverty line own at least one car. And the distance between driving a used Hyundai Elantra and a new Jaguar XJ is well nigh undetectable compared with the difference between motoring and hiking through the muck. The vast spread of prices often distracts from a narrowing range of experience.

This same effect is why some web optimists see the opportunities brought by the social, participatory web as mainly a good thing. It used to be that if you wanted to have your writing published, you’d need to have a job with a newspaper or magazine. Now anyone can publish their writing on blogs. It used to be if you wanted to have thousands of people watch your films, you’d have to get lucky in Hollywood. Now you can upload your video to YouTube. It used to be if you wanted to become a radio talkshow host, you had to convince a radio station to give you airtime. Now you can record your own podcast.

So even as some startup founders get wildly rich, the many benefit by gaining access to opportunities previously reserved for a privileged few. That other people are making tons of money shouldn’t distract from the very real nonmonetary benefits that people enjoy online.

In a recent interview, Wired called Carr “Captain Buzzkill.” But Carr’s book didn’t kill my techno-utopian buzz, and it made for an enjoyable and thought-provoking read. I came away with two ideas: first, the book “The Big Switch” is — as I expected from having read Carr’s blog — well-researched, well-written, and well-filled with ideas designed to annoy. Second, the big switch to a global web computer that Carr identifies is a good thing — at least insofar as it brings to the many the numerous experiences and opportunities previously only reserved for the few.

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  1. Wonderful post Anne! Your interpretation of these changes taking place is much more realistic and less attention grabbing as the ‘it’s all going to hell’ editorials we typically read across the web. It takes a real journalist to be realistic – exciting the imagination and pushing people’s buttons is easy to do.

  2. ScaredOfTheMan Friday, January 11, 2008

    While I do think there will some consolidation of computing power, I do not believe it will look like Mr. Carr suggests.

    The main difference being privacy, which bank, insurance company, tobacco company, or other organization is going to trust, their internal emails, memos and documents, especially the executive and fiduciary’s communications to an outside third party? Especially in this day and age where secret subpoena(or not sometimes) enable quick access to your data (even easier when its stored at a third party).

    The Power supply transformation is one thing, the thought process and cost savings is no different than offshore call centers, but the internal files and communications are now way to valuable to be trusted to someone else.

  3. Hi Ann,

    I agree that the Big Switch is a good thing. His comparisons to Edison and the electic grid are telling. Note the dramatic growth in data and its storage.
    Content is the new electricity, and our consumption of that power is spawning information appliances and industries that are modern-day Frigidaires, General Electrics and Silvanias.

  4. Content is the new electricity « Storage Effect Friday, January 11, 2008

    [...] 11, 2008 · No Comments Ann at GigaOm reviewed “The Big Switch”, Nick Carr’s follow-on to “Does IT [...]

  5. Great post Anne!

  6. Sun Plans for its Data Centers to Set – GigaOM Friday, January 11, 2008

    [...] debut earlier this week of Nicholas Carr’s “The Big Switch.” In the book, Carr compares the current shift to utility computing to the dawn of electric power. This is an inevitable shift, [...]

  7. Frank Carmelo Friday, January 11, 2008

    There are fundamental problems with this post. It’s just naive.

    People in developing nations and in the U.S. who aren’t highly educated need to have jobs, too. Not everyone can go to college and get a 4 year degree and become a network administrator. Zelenka cavalierly dismisses the need for there to be jobs for such people.

    This reads like someone who is in the elite high paying segment of the economy and has never met or seen the world outside. And one major downside of income inequality is that a very small number of people/entitites have a disproportionate influence on public policy. That’s happening now, that’s why we are lagging on addressing global warming, for example. Unless of course you somehow take money out of politics entirely – which would be a good thing — but is not on the radar.

    I’m an optimist – but here’s a news flash: there is a lot of bad stuff happening out there that need to be fixed unless we want to risk social unrest. Take too much away from too many people and you’ll get trouble.

  8. Frank Carmelo Friday, January 11, 2008

    Also, that Economist piece is ridiculous. Who cares about being able to afford a better ‘fridge when the costs of healthcare and college and housing are out of reach for those not in the elite economic strata.

    Check out the U.S. stats on bankruptcy and healthcare costs. Oh, and have you cared for an elderly parent lately? Or tried to find a decent public school for your kid in a nice neighborhood that you can afford?

  9. Wow, a GigaOm post with links to the BLS, Becker-Posner and The Economist, wouldn’t have expected that. However, it’s wasted on the inanities of that dimwit Carr. I don’t read Carr but whenever I’m linked to his dumb pieces, I find that he’s inevitably dead wrong about whatever he’s saying (same for Clay Shirky). You don’t go far enough in countering his nonsense, Anne. You essentially say that economic inequality is not a big deal and that there are non-monetary benefits from utility computing that one has to also take into account.
    First, I argue that economic inequality will actually go down. There are two reasons why Carr sees inequality increasing. One is that the internet is completely new and a small group of smart people, financed by VCs, currently captures much of that economic benefit. He wrongly extrapolates that this early state will stay the same and carry into the future. If Nick Carr were prognosticating in the early 80s, he’d be saying that PCs would only be affordable to the elite and that the elite would get much more powerful as a result. The second reason is that there is undoubtedly a mini-trend, as Anne notes, where tech skills are much more valuable. While this trend is small and growing, it’s not important and big enough yet to make an impact on a large and diverse economy.

    As for Anne’s second argument about non-monetary benefits, she’s right that it’s important that anybody can be heard on the internet but she doesn’t go far enough. Once a working micropayment system is deployed, those people on the internet will be able to monetize their work and make a living from it. Then what will happen is that rather than one Katie Couric making $10-15 million a year reporting and reading the news, you’ll have 50-100 news anchors on the internet, each making $50-150k a year reporting the news to their own unique set of fans. Do the math and you see that people end up saving money on news that way and as a side effect, income inequality drastically decreases as one monster salary is replace by many smaller salaries. The main reason for income inequality in the current media environment is the scarcity of distribution. As the internet is built out into a vast distribution network, now becoming capable of video, the present media environment is temporarily augmented and income inequality is peaks briefly, before falling through the floor. Nick Carr is like the peak oil dimbulbs, both use evidence of a coming peak and unreasonably extrapolate it into the future.

    1. Much a belated reply but Ajay is so right and also puts it rather eloquently. What can I say this guy really gets it why the Compute Clouds will disperse across communities and re-establish the village model from where we departed.

      As more prosperity reaches the hands of many, the dramatic madrush towards metropolis too can be curbed where the enlightened ones (not the mad, evil or rich ones) will serve their own communities.

      Eventually the public markets will sort out themselves as we engage in the more of a push and pull data/energy as compared to the “only-push” datasets/energy towards us.


  10. Frank Carmelo Friday, January 11, 2008

    Technology shows no sign in the immediate future of being able to solve the need for affordable healthcare and housing and higher education. Maybe someday inexpensive robots will build cheap durable houses based on nanotechnology. Not anytime soon.

    I am very hopeful that technology will solve global warming – but we knew about global warming 10+ years ago. Because of inequality, because of a small segment of society with the resources to have an outsize influence on public policy, our government policy was denial.

    Becker Posner is thoughtful but one-sided. For an ideological
    counterpoint, try economistsview.typepad.com

    Waiting for technology to solve all of the world’s problems is like waiting for Godot.

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