Start Here

Ever since the so-called „financial crisis“ of 2008, many people have been wondering why the recovery has been so slow, lethargic or even non-existent. Of course the answer to such a huge problem is complex, but I have recently discovered one issue that seems to have gone overlooked for the past 8 years: It’s the Internet, stupid!

Granted: The Internet was not invented just 8 years ago. But there are some developments that have only recently taken hold on the Internet – and perhaps the poor condition of the economy also played a role in this (in other words: there may be a little bit of a „is it the chicken or the egg?“ situation going on).

Let me explain by first reminding you (in case you might have forgotten) „what’s going on“: Many people lost their jobs. Few people got new jobs. Economic growth rates have remained near zero (if not even less than that).

It has often been argued that a lack of private-sector investment has failed to create jobs. Or that a lack of government spending has failed to create jobs in the public sector. While I do not doubt that these – and perhaps also other – arguments have some validity, I want to focus your attention on something different: The Internet.

Before I do that, though, I want to also mention something I myself have also mentioned time and again over the intervening years: Perhaps employment is simply no longer a successful business model. Yet let’s now consider the role the Internet has played in leading up to the present state of so many economies across the globe (and in particular the economies of the so-called „developed“ world).

If we go back far enough in time, we will see that the most successful Internet companies of today started as „startup“ companies, garage businesses, and the like. Google, Ebay and Amazon are the prize horses that were successful throughout the bust… and which became vast powerhouses of the „online“ economy. Yet these early starters are no longer upstart startups. Indeed, in a recent editorial in The New York Times, Robert Reich argued that many, most or perhaps even all of these companies are now too big to hail as the web 2.0 heroes of today.

Today, there is a new and improved breed of upstarts disrupting the world (as we used to know it). While some of these new companies might have started out as „home based businesses“, many of the most successful online businesses now do something crucially different: They help enable their customers to become entrepreneurs themselves.

Whether as taxi businesses, as air mattress providers, as task rabbits or as workers in a wide range of service industries, starting up your own job has become not only economically viable at all – it has become increasingly widespread. „Well,“ you may ask, „… – so what?“

Good question! So: The growth of this new breed of „Internet companies“ do not normally show up in the growth statistics and similar economic indicators that are commonly reported on in the mainstream media news. In other words: Even despite very healthy or even breakneck growth occurring in this sector of the actual economy, this growth remains – by and large – hidden from public view.

The main reason why that is: These services now function as „cottage industries“ themselves… and they are not regulated by the many regulations that are so widespread in the industries where such service providers might have worked before (e.g. as employees). As cost-cutting entrepreneurs are prone to do, many service providers are sourcing solutions in-house. In other words: cottage industries are sprouting like weeds left and right – and they are not increasing employment, because they are simply not employing anyone. Normally, these entrepreneurs do everything themselves. Therefore: There is very little or perhaps even virtually no information whatsoever about anything that happens behind most entrepreneurs’ closed doors.

In many – if not even most – cases, these entrepreneurs are taking on quite substantial risks themselves, too. Every now and then some shocking horror story appears about how someone got burnt… – but now I have also come across an even more egregious case of how increasingly, „normal“ companies are also unloading significant amounts of risk onto the backs such „online“ entrepreneurs working in the „online“ cottage industry.

Last week, I became aware of a new promotion started by GoPro cameras – in which the GoPro company asks people to create award-winning photos and videos for a chance to win some prize money. I expect that if anyone is hurt or killed in an attempt to create such a winning photo or video for the GoPro company, the company will not be held liable for the injury or death. To put it simply: GoPro is outsourcing a quite substantial amount of risk for very little reward.

I think I can detect a trend going on here: I have a very strong hunch that more and more businesses are externalizing risk. Years ago, it was the financial industry selling portfolios of bad debt to unsuspecting investors – mortgages that weren’t worth the paper they were printed on. The banking industry could rather easily get up, dust themselves off and start all over again – because somehow some people were convinced that taxpayers should simply pay the bill.

Today, the situation is primarily different in one significant way: Pretty much no one believes that the people who ought to be held responsible will be brought to justice. People today are much more likely to believe in injustice than they might still have faith in the so-called judicial system.

Instead, people are increasing placing trust on the individuals they interact with directly… and faceless companies are beginning to see the risk that their customer base is slowly but surely migrating off of their so-called platforms. More and more stalwart companies are increasingly grasping for straws and trying any kind of incentive to keep their customers loyal. Many are offering cash.

And many such incentives will probably be deemed successful – insofar as they will succeed in retaining relatively illiterate, naive, inexperienced and trusting users who have been trained to trust brand names based on little more than „brand allegiance“. Some of these people consuming inordinate amounts of risk for little reward will probably be ruined in events that will later be referred to as catastrophic mishaps, accidents, and similar surprises… – but perhaps none of these events will be associated with the brand names (because of course none of these brand name companies will have forced anyone to participate in such risky business).

One way to see this is simply that it is the „invisible hand“ of free-market capitalism allocating resources – and in particular: human resources. Another way to look at it is that people are now beginning to increasingly trust visible friends over faceless office buildings… and the present state of transition is simply a small blip that will, sometime in the distant future, seem insignificant.

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One Response to Start Here

  1. Pingback: It’s the Internet, Stupid! | Non Anon Network

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