Sunday, February 22, 2015

John Naughton - Google and tech’s elite are living in a parallel universe

The gap between the richly rewarded few of tech firms and banks and the rest of us is growing wider. Blame the digital revolution

Someone once observed that the difference between Tony Blair and Margaret Thatcher was that whereas Thatcher believed that she was always right, Blair believed not only that he was right but also that he was good. Visitors to the big technology companies in California come away with the feeling that they have been talking to tech-savvy analogues of Blair. They are fired with a zealous conviction that they are doing great stuff for the world, and proud of the fact that they work insanely hard in the furtherance of that goal. The fact that they are richly rewarded for their dedication is, one is given to believe, incidental.
The guys (and they are mostly guys) who manage these good folk are properly respectful of their high-IQ charges. Chief among them is Eric Schmidt, the executive chairman of Google, and a man who takes his responsibilities seriously. So seriously, in fact, that he co-authored a book with his colleague Jonathan Rosenberg on the care and maintenance of these precious beings. Dr Schmidt objects to the demeaning term – “knowledge workers” – that economists have devised for them. Google employees, he tells us, are much, much more impressive than mere knowledge workers: they are “smart creatives”.
In the opinion of their chairman, these wunderkinder are very special indeed. They are “not averse to taking risks”, for example. Nor are they “punished or held back when those risky initiatives fail”. They are “not hemmed in by role definitions or organisational structures”. And “they don’t keep quiet when they disagree with something”. And so on. Altogether, they are an admirable body of men and women – mostly men (70%), admittedly, but, hey, what’s a little gender imbalance in a brave new world.
Dr Schmidt’s smart creatives work all the hours that God sends, and then some. They are, to use his term, “overworked in a good way”. The concept of work-life balance can, he thinks, “be insulting to smart, dedicated employees”, for whom work is an important part of life, not something to be separated. The best corporate cultures, he thinks, “invite and enable people to be overworked in a good way, with too many interesting things to do both at work and at home”.
All of which no doubt makes perfect sense if you’re running an outfit like Google. But it also highlights the extent to which our world is bifurcating into parallel universes. In one – that populated by technology companies, investment banks, hedge funds and other elite institutions – people are over-stimulated, appreciated, overworked (but in a “good way”, of course) and richly rewarded. Meanwhile, in the other universe, people are under-stimulated, overworked and poorly rewarded. And the gap between the two universes appears to be widening, not narrowing every time Moore’s Law ratchets up another notch in computing power.
Which is why we need to make a connection between what those smart creatives in California and elsewhere are creating and what is happening in the real world. In that domain, the level of economic inequality has attained staggering proportions for reasons that Thomas Piketty set out in his celebrated book Capital in the 21st Century.
Although there have been lots of detailed arguments about Piketty’s work, his central proposition – that in the absence of special circumstances such as war or redistributive taxation, the rate of return to capital exceeds the rate of return to labour – is both simple and obvious. What it means is that if your wealth involves ownership of capital assets (like company shares), then you will inexorably get richer at compound rates.
One of the oddest things about the furore surrounding Piketty’s book was that almost nobody talked about the role of technology in all this. Specifically, there was little discussion of the strange coincidence that the recent catastrophic rise in levels of inequality has coincided neatly with the digital revolution.
When you think about it, it’s clear that this isn’t just a random correlation. The digital revolution is driving inequality, not reducing it. That’s because the technology has certain characteristics (zero marginal returns, network effects and technological lock-in, to name just three) which confer colossal power on corporations that have mastered the technology. In the process it confers vast wealth on those who own them.
But that wealth isn’t shared with the users of the platforms operated by those corporations: most of the work that generates revenues for Facebook or Google is done by unpaid workers – you and me. And folks who work in paid occupations powered by those platforms – Uber drivers, Amazon warehouse workers, to name just two – are not sharing in the wealth it generates for their owners either. Like Google’s smart creatives, these people are also overworked. But not in that “good way” advocated by Dr Schmidt.