
The Data Factory – How Your Free Labor Lets Tech Giants Grow The Wealth Gap - ghosh
http://m.techcrunch.com/2013/09/09/the-data-factory/
======
rndmize
> It’s not all bad, though. The tools and platforms listed above have given
> way to a “personal revolution” that’s delivered unprecedented productivity
> and reach to small businesses and entrepreneurs. You don’t need nearly as
> much money to start a business anymore. Moritz gave a slew of examples of
> people who made small fortunes selling sleds on Amazon, becoming makeup
> spokeswomen on YouTube, becoming best-selling authors via Kindle, or earning
> huge real estate commissions through Trulia.

Its really too bad that this article lets slip a critical point here. Yes, you
don't really need much money to start doing something these days; it doesn't
take more than a computer and an internet connection to start making music, or
writing books, or getting a youtube channel going, or selling stuff on eBay or
Amazon or Etsy or whatever.

But in all of these things, the wealth distribution is crap. I've heard the
stories about the spectacular success of this writer or that one that sold an
ebook on Amazon after being rejected by publishers and made millions of
dollars, and its naturally never mentioned how many thousands or tens of
thousands of people have tried doing exactly that and walked away with a
pittance or nothing. It's no different from the millions of people that want
to become actors, or singers, or whatever; most of them fail. A 1% or 5% or
10% chance at a big success is not a replacement for a stable, decently paying
job for the vast majority of people.

And things are only going to go farther in this direction. I honestly don't
see a solution to this aside from basic income. More/free/better educational
resources aren't going to change this problem. Teaching everyone programming
(insert other currently stable/growing industry here) isn't going to change
this problem. Heck, programmers already deal with this on the app markets;
what percentage of apps/developers walk away with 90%/99%/99.9% of the
revenue?

~~~
AsymetricCom
The key though is that faster and cheaper tools for trying allows someone to
fail faster, thus mitigating the impact of their failed potential career and
allowing them to try or evolve faster.

A lot of these tools are built on open source frameworks, but rely on the
network effect for their staying power and financial momentum. You could do
the distribution yourself, but you'll have to do it on the open internet, not
on a "Internet of Things" that is supported by the walled garden purveyors.
This isn't too difficult to do, but is obviously out of the scope of something
a musician might attempt.

What I'm getting at is that if they do charge too much, they'll end up
undercut by some other media, unless they gain a "standard for enterprise"
market saturation, then they can charge what they want since they own all the
customers capable of buying your product. Since as soon as someone becomes
"standard for anything", the NSA soon comes knocking at your door for a piece
of your data pie, thus fueling the creation of yet more "gardens" until what
end, I don't know.

------
snowwrestler
Facebook gets some of my data, but in return I get a free software platform
that makes it easier than before to keep in touch with my friends and family.

Like most of the U.S. economhy, it works because it is a free exchange in
which both parties gain something. I could easily keep my data away from
Facebook. But then I would not benefit from their services.

I think the real issue is hidden in the article--opportunity today is
incredibly rich for those who have the right education...which not everyone
has.

There are two issues here, actually. The first is whether our public education
system is preparing youth to seize future opportunities. On the whole, I think
the answer is at best mixed--but it seems solvable. We can improve our schools
and make the students next year smarter than the year before. At least we have
the concept of free public education as a platform.

The second is what happens to adults who lost their industries? Can a
40-something factory worker or lumberjack learn how to create Android apps
that generate revenue? The answer here seems a lot worse. Not only does it
seem harder for middle aged folks to radically change their professions, there
are no free, and few low-cost institutions helping them do it. Online schools
like Khan Academy seem exciting, but are very far from being proven answers to
this problem.

There do seem to be openings in the middle--providing services to the educated
people who can build moneymaking technologies. For example, I believe there
continues to be a shortage in nurses nationwide. It's not easy to become a
nurse or PA, but at least there are a lot of good community college programs
for it.

~~~
wffurr
Whenever you hear there's a "shortage" of a particular job, that usually just
means wages are higher than the employers would like them to be. You can
really think of that relationship either way around. e.g. – there's a huge
shortage of butlers because they're just way too expensive.

One way to compensate for the suffering caused by economic dislocation is to
reduce the hardship of not having a job. More unemployment and welfare aid,
with less degrading means testing would help. Better would be a basic income,
with income earned from working always a bonus on top.

~~~
yummyfajitas
A shortage also often refers to an inability for employers to find someone
they wish to hire, regardless of what the price is.

I.e. I've interviewed a number of people in the past year or so. I only
recommended hiring one of them.

~~~
rayiner
I'm sure there are some brilliant people working on Wall Street right now
who'd be happy to come work for you at the right price.

------
dirtyaura
I watched Moritz's presentation yesterday, and I got a feeling that he has
been actively thinking about the idea of data factories but he couldn't yet
effectively convey the key insights. As a side note, this is very interesting
that a VC that probably listens hundreds of pitches a year, is basically
struggling with same issues that most of the founders: conveying your thinking
in a crystallized form.

As far as I understood, the key point of data factories is that they are a new
paradigm for organizing work. Many aspects are pretty obvious to folks hanging
out in HN. A few key differences to earlier models: companies don't anymore
employ workers directly, but more and more act as mediators between consumers
and producers. Distance between consumers and data factories is shorter than
between consumers and traditional factories, which gives new, previously
unseen efficiency to the feedback loop and allows data factories to direct
their efforts (or efforts of 3rd party producers) better than - let's say - a
traditional car manufacturer.

~~~
chadwickthebold
Were you watching the same keynote?

“It’s tough if you’re poor, it’s tough if you’re middle class. It means you
have to have the right education to work at [the tech giants]. If you’re not
like us, it’s tough

The key point of data factories is that they are economically disenfranchising
the vast majority of the population. The 'new paradigm' isn't for organizing
work, its getting your consumers to do the work for you. If we weren't so
wrapped up in the VC/HN/Web Tech echo chamber it would probably be easier to
realize that this mode of economic growth is at best unsustainable and at
worst destructive to the longterm health of a modern economy.

It would be great for startups to focus less on social and ads and more on how
technology can be leveraged to raise the living standards for everyone.

~~~
lsc
>It would be great for startups to focus less on social and ads and more on
how technology can be leveraged to raise the living standards for everyone.

I agree. When we automated away agricultural work, we found new things for
workers to do. Now we're automating away the service economy, but nothing has
sprung up to take it's place.

Do you have any ideas in this direction? all the sites I know of that are
focused on finding shit work for the lower classes (taskrabbit, etc..) usually
end up being criticized for replacing full-time work with part-time work
without benefits that pays poorly and isn't stable.

Can you give an example of such a business? even a hypothetical one?

I mean, if the standard is "technology that can be leveraged to raise the
living standards for everyone" that's a little easier. there's lots of
opportunities for organization on the internet. But actually creating jobs
without destroying more jobs? that's... difficult.

~~~
VladRussian2
>Can you give an example of such a business? even a hypothetical one?

i think a lot of conclusions one can derive from pondering a situation like
this one - "there is an order backlog of 800 Boeing 787 planes" and "there are
a lot of unemployed people". Even if we suppose that these unemployed people
possess necessary skills, the situation would still be pretty much the same as
there is a lot of business/financial, technological, and societal/governmental
complexity in the situation.

To compare, the unique situation of Great Depression allowed to plow right
through the complexity and put people to work. Nobody (in wide sense, i.e nor
people nor institutions) has the guts and skills/abilities/resources to put
much more people to work on building planes in the current situation.

~~~
lsc
>i think a lot of conclusions one can derive from pondering a situation like
this one - "there is an order backlog of 800 Boeing 787 planes" and "there are
a lot of unemployed people". Even if we suppose that these unemployed people
possess necessary skills, the situation would still be pretty much the same as
there is a lot of business/financial, technological, and societal/governmental
complexity in the situation.

I... disagree. Yes, there is bullshit surrounding hiring and firing folks. But
it's not extreme bullshit. _I_ have managed to do it. It's not impossible.

If, for whatever reason, you absolutely can't hire someone to run payroll for
you and keep track of your workman's comp bills, there are plenty of companies
that do that and only that; trinet is one. The idea being that your employees
are officially employed by trinet, who handles all the HR bullshit (Not
hiring, of course, but the real bits of HR... managing benefits, taxes,
workers comp, unemployment, and all that happy horseshit.) You just pick the
folks you want and send trinet a wad of money every month.

------
crazygringo
> _" Instead, the data factories get free labor. They distribute what seem
> like useful services to the world, things like YouTube, Facebook, Twitter,
> LinkedIn, Etsy, or Kickstarter. ...earn tons of money for the tech giants
> without forcing them to do much work. That money stays concentrated around
> the data factories and their limited staff instead of distributing it like
> traditional factories."_

What? In what universe do the employees at YouTube or Facebook or Etsy "not do
much work"? How do these only "seem" like useful services -- is somebody
saying they're not? How do traditional factories "distribute money"? If
Twitter is getting "free labor" please tell me how, so I can get in on it too.

Sure, there's a shift towards concentration of wealth, but paragraphs like the
above one make zero sense.

~~~
eli_gottlieb
The idea is that YouTube doesn't do much work when compared with _the people
who actually make and upload all the videos._

Which is a perfectly valid criticism. In absolute numbers, the amount of hours
collectively put in by YouTube users to create content is much larger than the
number put in by YouTube/Google employees to serve that content.

Right now, however, there is basically very little actual negotiation between
the platform provider and the content creator. The former gets the vast
majority of all revenue; the latter mostly works for free. We consumers enjoy
our free, ad-supported video site, but YouTube might as well just be the new
record company (especially with the all the take-downs and region
restrictions!).

~~~
jmillikin

      > Right now, however, there is basically very little
      > actual negotiation between the platform provider and the
      > content creator. The former gets the vast majority of
      > all revenue; the latter mostly works for free. We
      > consumers enjoy our free, ad-supported video site
    

The uploader decides whether a particular video has ads or not. According to
[http://allthingsd.com/20130304/youtubes-show-me-the-money-
pr...](http://allthingsd.com/20130304/youtubes-show-me-the-money-problem/)
YouTube takes a 45% cut, which means the content creator ends up with the
majority of the ad revenue.

~~~
toomuchtodo
You get a better split with the mob. 45%? Wow.

~~~
vdaniuk
Every content creator is free to roll out his own architecture of streaming
video, strike ad deals and get 100% of the income.

Comparing Youtube to the mob is not a valid argument.

~~~
toomuchtodo
I'd argue Android's ecosystem and investment is enormous compared to Youtube,
and they take a smaller cut from apps/in-app purchases than Youtube.

There's just something slimy about taking that much of a cut from someone's
work. Its disgusting.

~~~
jmillikin

      > I'd argue Android's ecosystem and investment is
      > enormous compared to Youtube, and they take a smaller
      > cut from apps/in-app purchases than Youtube.
    

You can do some quick back-of-the-envelope calculations on the storage and
bandwidth requirements of video and applications. It's very expensive to
process, store, and serve video at YouTube's scale. See
[http://www.youtube.com/yt/press/statistics.html](http://www.youtube.com/yt/press/statistics.html)
for some numbers.

    
    
      > There's just something slimy about taking that much of
      > a cut from someone's work. Its disgusting.
    

When media hosting sites take half of revenue, it's not out of sheer greed.
Most of that money goes right into paying for bandwidth and compute to keep
the service running. For example, iTunes Music is believed to have profit
margins in the low single digits -- based on Apple's financial statements,
it's barely break-even. Apple's App Store is much more profitable, despite
taking only 30% of revenue.

------
wmf
This topic is explored in more detail in _Who Owns the Future?_ — it's a
fascinating (if sobering) book.
[http://www.jaronlanier.com/futurewebresources.html](http://www.jaronlanier.com/futurewebresources.html)

------
Meekro
Humans have been automating away labor in various ways for thousands of years.
At one point, everyone would've had to devote most of their time to obtaining
food -- now one guy (plus some farm equipment) can feed thousands.

There are countless other examples industry-and-job-destroying innovations,
and from a long-term historical standpoint they've always been a huge net win
for humanity. And none of them required us to convert to socialism to prevent
mass starvation.

And yet, this time around, innovation is evil somehow if it results in labor
being done by software rather than people? The essay alludes to global
financial collapse, but doesn't explain how that's supposed to happen. Are we
supposed to guess? Or, more likely, just feel general outrage at the 1% and
not think too hard?

He also claims that the minimum wage hasn't kept up with inflation. That's
totally false -- the minimum wage in the U.S. was established in 1938 at
$0.25/hr. That would be $4.14 in today's dollars, and we're at nearly double
that!

------
stox
Huh?

"A single $800 Samsung Galaxy S4 has the same power as 375 IBM 3340 computers
that cost a total of $33 million in 1973."

The 3340 is a DASD ( direct attached storage device), not a computer. The big
computer for IBM in 1973 would have been a 370/158.

~~~
greenyoda
In fact, the 3340 disk drive was famous for introducing the "Winchester"
technology:

 _" In 1973, IBM introduced the IBM 3340 'Winchester' disk drive, the first
significant commercial use of low mass and low load heads with lubricated
platters. This technology and its derivatives remained the standard through
2011. Project head Kenneth Haughton named it after the Winchester 30-30 rifle
because it was planned to have two 30 MB spindles; however, the actual product
shipped with two spindles for data modules of either 35 MB or 70 MB. The name
'Winchester' and some derivatives are still common in some non-English
speaking countries to generally refer to any hard disks (e.g. Hungary,
Russia)."_[1]

Yes, 70 _megabytes_ was the capacity of a mainframe-sized disk drive in those
days.

[1]
[https://en.wikipedia.org/wiki/History_of_hard_disk_drives#19...](https://en.wikipedia.org/wiki/History_of_hard_disk_drives#1950s.E2.80.931970s)

------
stephenaturner
There's a lot of truth to this, but it's also a massive simplification -- and
a strange effort to blame tech companies for something that started happening
decades ago.

Wage stagnation, growing unemployment and a decline in work started in the 70s
-- well before most of these tech companies came on the scene (or had that
much impact on the world). It seems to me that some people want to blame tech
companies and new technology for something that's been a much wider effect
across more platforms for a lot longer.

------
kenster07
This issue is too complex to be summed up by the wealth gap. It presumes that
wealth can be measured in money, when human happiness is increasingly becoming
cheaper to acquire, and free in many cases. I don't think the author of the
article appreciates all the economic forces at play.

One thing we do have to think about is how the economy would have to adapt if
the true cost to produce critical goods became zero. Capitalism's supply and
demand theory will become inadequate in such a case.

------
yuhong
Reminds me of an idea where a company trains people to be professional
bloggers or similar, and in exchange a fixed salary is given.

