The Big Switch Is a Good Thing

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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.

36 Comments

Defining utility and cloud computing, the future via the Third Pipe |

[…] While utility computing often requires a cloud-like infrastructure, its focus is on the business model on which providing the computing services are based. Simply put, a utility computing service is one in which customers receive computing resources from a service provider (hardware and/or software) and “pay by the drink,” much as you do for your electric service at home – an analogy that Nicholas Carr discusses extensively in “The Big Switch.” […]

How Cloud & Utility Computing Are Different - GigaOM

[…] While utility computing often requires a cloud-like infrastructure, its focus is on the business model on which providing the computing services are based. Simply put, a utility computing service is one in which customers receive computing resources from a service provider (hardware and/or software) and “pay by the drink,” much as you do for your electric service at home – an analogy that Nicholas Carr discusses extensively in “The Big Switch.” […]

How Cloud & Utility Computing Are Different - GigaOM

[…] While utility computing often requires a cloud-like infrastructure, its focus is on the business model on which providing the computing services are based. Simply put, a utility computing service is one in which customers receive computing resources from a service provider (hardware and/or software) and “pay by the drink,” much as you do for your electric service at home – an analogy that Nicholas Carr discusses extensively in “The Big Switch.” […]

How Cloud & Utility Computing Are Different - GigaOM

[…] While utility computing often requires a cloud-like infrastructure, its focus is on the business model on which providing the computing services are based. Simply put, a utility computing service is one in which customers receive computing resources from a service provider (hardware and/or software) and “pay by the drink,” much as you do for your electric service at home – an analogy that Nicholas Carr discusses extensively in “The Big Switch.” […]

Venkat

Hmm… curious that you guys have picked out the workforce aspects of Carr’s book. My own take is that those ‘social impact’ aspects of the book are too weak to take seriously. My review focuses more on the technology portion of the book, which is relatively more sound. But overall I agree, a good read.

The social impact stuff was probably better (but more narrowly) covered by Dan Pink in Free Agent Nation.

Dimitrios Matsoulis

Interesting article but I think it misses completely the role of education in the determination of future equalities/inequalities and incomes. When schools catch up -something that has happened to a very small degree so far- judging standards will become different.
Currently, not everybody can write a book, but everybody can read a newspaper. In the same sense, not everybody can become a computer administrator but everybody will be able to use infotech for their work.
It is a mistake to assume that all jobs are directly linked to computer tech itself. All industry sectors use new technology or can introduce more of it but an engineer for example does not need to know how to write code… For this reason I think that transfering European and American capacity to Asia is a BIG BIG mistake the results of which will become apparent at a later point…
http://electronrun.wordpress.com/

James Urquhart

Well done, Anne. You are truly becoming one of the enlightened voices of the computing as utility debate.

I think Nick’s social predictions are in part doomed due to his dependence on a flawed assumption; that electricity is a near perfect analogy for cloud computing. He passes over key issues with regard to security and privacy (as ScaredOfTheMan also notes above), and thus fails to note how these issues change the outcome for cloud computing.

For these reason’s, I have been suggesting the best path for those with existing datacenters is to convert their own infrastructure into a utility; thus gaining much of the economic advantages, while waiting patiently for solutions that protect data integrity and ownership.

Chetan

Well IT Managers are no fools to shoot at their own feet by opting for Grid. Just like how *NIX and Windows are co-existing, the change towards GRID won’t happen anytime soon.

dreadsword

@Mikecane beat me to it. To suggest that income inequality isn’t so bad because everyone has some level of purchasing power is dissembling at best and at worst a gross misunderstanding of the social implications of unequal distribution of capital.

I think perhaps the point that carr is trying to communicate in his hyperbolic way is that entrenched wealth and concentrated ownership of infrastructure reduce mobility between classes. Indeed, wealth inequality has long been a happily accepted part of our society; that happy acceptance is predicated on the notion of mobility however. That’s the american dream: that by hard work, gumption, etc. anyone can get to any level.

Carr’s point appears to be that routes to the higher levels are being closed off.

mikecane

And he doesn’t offer backup to the assertion that income inequality is always and obviously bad.

Obviously you travel everywhere in a car. Walk the streets. You’ll learn quickly.

alan p

There are doomsayers at the emergence of every major new technology, its fun reading all the dire predictions around steam, electricity, gas, cars, radio etc etc.

Changes in comms always have big impacts on society, but I think its too early to predict what they are – but thats never stopped anyone ;).

And Nick just does it so well :)

Frank Carmelo

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.

Ajay

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.

tarrysingh

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.

Tarry

Frank Carmelo

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?

Frank Carmelo

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.

Pete Steege

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.

ScaredOfTheMan

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.

Tim

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.

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