The Information Economy is Primarily Based on Attention, Not Data

I think a lot of current conversations regarding the information economy are too focused on data, and not focused enough on attention.

Don’t get me wrong; data is extremely valuable. And we are recording, storing, and exchanging data in larger volumes than ever before. But data does not make a great commodity.

For a commodity to have a price in the marketplace it must be scarce. To ensure your data is unique and therefore scarce, you must fight two uphill battles.

First, you must possess data no one else has. Unfortunately, the tools for creating, collecting, and storing data keep getting cheaper and more accessible. And since data is not rivalrous, there is no reason why data on your computer can’t just as easily exist on someone else’s.

Second, you need to ensure the data is not copied without your consent. Unfortunately, it is increasingly difficult to limit copying in today’s environment.

This does not mean that proprietary pockets of data won’t periodically exist. But it does mean that those pockets are extremely vulnerable to the ongoing process of technological disruption.

So if your proposed business or utopian vision is based on buying and selling data, you might pause and consider the inherent difficulties of such a model.

Attention, on the other hand, is irreducibly scarce. Attention is constrained by the physical property of time, as well as by the limits of the human mind. People only have so much attention to give. And attention, unlike data, is rivalrous. Paying attention to one thing most likely means not paying attention to another. Attention, because of its scarcity, makes a great natural commodity.

Attention is most often monetized through advertising. Businesses routinely take the attention of consumers, repackage it, and sell it to advertisers.

When analyzing new business models, such as those employed by companies like Google or Facebook, what is important is not so much the data, but the attention. The attention is what is generating the revenue.

Yes, Google and Facebook collect our data. And that data is valuable to them, just as it is valuable to our friends. But what Google and Facebook really want—what they really need—is our attention. They are in the attention business.

Consider how data plays a supporting role to attention. Data helps businesses determine our preferences, so they can more effectively sell our attention to advertisers. Alternately, data powers algorithms whose goal is to attract our attention in the first place.

The fundamental transaction is people trading their attention for services. True, data is thrown in on the deal. But this should be no surprise. All of life is just a continuous data exchange, between you and your environment and you and other people.

Over time the supply of recorded data will continue to grow, which should create downward pressure on the price. Meanwhile, wiith so much access to data and so little time, people could have an increasingly difficult time answering the question, “What do I pay attention to?” Competition for people’s attention could become increasingly fierce, implying that attention may actually go up in price as data proliferates.

However, some words of caution: Much of the attention market now is based upon a type of speculation, where the advertiser speculates that your attention today will lead to a consumer purchase tomorrow. If the link between attention and spending grows weak, which could happen for a variety of reasons, then the bottom might fall out of the attention market. In this way, the health of the attention market, in its current form, is very much tied to the health of the consumer market. A problem with the latter may lead to trouble with the former.

Why the Market and Technology Aren’t Playing Well Together (and Five Possible Solutions to Fix the Problem)

A SYLLOGISM TO EXPLAIN THE PROBLEM IN THE ECONOMY

The impact of new technologies on the economy is a hot topic right now. Just a few years ago, the idea of machines replacing human labor was widely dismissed, but now a growing number of pundits and economists are expressing concerns about the impact of automation technologies and the possibility of technological unemployment.

People tend to approach this complex issue in different ways. It can be a difficult topic to think about, so for the purpose of discussion, I’d like to present a simple syllogism as a possible framework for understanding what is happening.

MAJOR PREMISE: Economic opportunities arise from the monetization of scarce commodities.

This is Economics 101. For a good to have a price on the market, it must be scarce. That is, the good must be in demand and exist in limited supply. If you have only one of these two elements, the good will not be worth anything.

For example, breathable air is in high demand but it does not exist in limited supply. Good luck putting air in a bag and trying to sell it. Conversely, your old dirty socks might exist in limited supply, but since no one demands them, they are probably unsellable.

The market rewards people who are able to take a scarce commodity—whether a physical good like a chair or a service like massage therapy—and monetize it. In this way, scarce commodities are the source of all economic opportunities.

MINOR PREMISE: Technological progress reduces the number of scarce commodities by creating abundance.

Technology is a tool that humans use to get more of what they want. So it shouldn’t be a surprise that over the years technological progress has made a wide variety of goods—from food to music—less scarce and more abundant.

Today in the economy, a few trends in particular are having a big impact:

  • Goods are being digitized. Example. Mp3s have digitized music.
  • Services are being automated. Example: Self driving cars will automate driving.
  • Processes are being disintermediated (cutting out the middle man). Example: The web has made travel agencies unnecessary.
  • Markets are being globalized, allowing superstars to crowd out competitors. Example: MOOCS might enable a few top-tier professors to lecture to world-sized classrooms.

All of which are part of the same bigger trend: technology is making all manner of goods and services—music, driving, travel planning, education—less scarce, more abundant, and therefore lower price in the marketplace.

It should be acknowledged that abundance in one area often gives rise to new scarcities in another. An abundance of fatty foods gives rise to a scarcity of healthy choices. An abundance of entertainment options gives rise to a scarcity of time to enjoy them all.

That being said, I still believe we are making progress towards a more abundant world. I think it would be wrong to suggest we are just treading water. Like a mathematical limit that approaches zero but never quite gets there, we are getting incrementally closer to the post-scarcity ideal with each passing year, even if such an ideal is fundamentally unreachable. The result is that progressively fewer scarce commodities exist as technology moves forward.

CONCLUSION: Therefore technological progress reduces economic opportunity.

I believe this is the simplest way to understand what is happening. Our technology and our market system, once comfortable collaborators, are increasingly on a collision course. This is because these two institutions have fundamentally opposing goals. The goal of the marketplace is to find and exploit scarcity. The goal of technology is to find and eliminate scarcity. The second goal undermines the first.

If true, this conclusion would partially explain both the unemployment and the inequality we see. Unemployment could arise from the fact that it is increasingly difficult to find a scarce resource to exploit. More and more people find themselves without a scarce service to offer or a scarce good to sell.

Inequality arises from the fact that the few remaining scarce resources are increasingly concentrated in the hands of the few. We can think of the economy as like a game of musical chairs where the chairs are scarce resources. As the chairs get removed, fewer and fewer people have a place to sit.

In the past it has been possible to find new chairs to replace those that have been taken away. It might still be possible to do so. But it increasingly feels like the game is being played faster and faster—that the chairs are being removed much quicker than we can replace them.

CATEGORIZING POSSIBLE SOLUTIONS

Actually developing a detailed solution for this problem is a complex policy question that I do not hope to answer in this article. However, I think the above framing makes it possible to categorize broad types of solutions.

SOLUTION ONE: Freeze Progress

If technological progress is undermining our market system, one option is to try to stop technological progress. This could take the form of government bans on automation technologies that displace human workers.

However, this hardly seems like a good choice. Aside from the fact that technological progress is generally desirable and gives us lots of nice things we want, such an initiative is probably infeasible given that it would require muzzling scientists and inventors the world over. In addition, without avenues for continued growth, the market might stagnate or collapse.

SOLUTION TWO: Artificial Scarcity

If we are running out of scarce commodities for ordinary people to exploit, then one response is to create new scarcity by artificial means.

Our society creates artificial scarcity all the time. We create artificial scarcity when we grant an author exclusive copyright over a book he’s written or an engineer exclusive patent on an invention he’s developed. We create artificial scarcity with licenses that make it illegal to practice law, drive a cab, or sell alcohol without permission from the government.

It might be possible to greatly expand our current system of artificial scarcity and thereby create more economic opportunities for ordinary people. With regards to the musical chairs analogy mentioned above, you might view this as one way of creating more places for people to sit. Less favorably, you might look upon this solution as counterproductive: essentially encouraging people to put air in bags and charge each other to breathe.

(In his new book, Jaron Lanier argues that "in a world of digital dignity, each individual will be the commercial owner of any data that can be measured from that person's state or behavior.")

One possible artificial scarcity scheme is to treat all data like property. Ordinarily, data is not scarce. Just as their is no limit to the number of times you can tell a joke, there is no limit to the number of times you can use a piece of data. However, in the future it might be possible to turn every idea, photo, or bit of text you generate into an artificially scarce commodity to be monetized. Enforcing such a system would require either a universal operating system or an overarching surveillance system to strictly monitor and regulate all instances of copying.

I view this solution as less extreme than solution one, but still counterproductive to technological progress. A growing body of evidence suggests that artificial scarcity in the form of intellectual property hinders rather than helps innovation. In addition, by creating artificial scarcity and erecting walls around various goods, we are working at cross purposes to what one might consider the primary goal of technology: to have more access to the things we want.

Still this is a solution which might gain some traction since it could be seen as one way to empower ordinary people. At the same time, elites might like this system because it would afford them numerous levers of control in the form of legal bureaucracy. However even with broad support, it is questionable whether a full-fledged artificial scarcity regime would actually be enforceable. History suggests that decentralized technologies are hard to contain. Our failed wars on drugs and piracy are prime examples.

SOLUTION THREE: New Platforms

There are some commodities that will always remain scarce. These include intangible goods such as authenticity, status, good will, and belonging. Is it possible to carve up these remaining scarce resources in such a way that we can continue to create economic opportunities for ordinary people?

For example, could we have an attention market that allows broad participation? Right now the attention market is dominated by a few advertising middle men like Google. Perhaps with further disintermediation, we could all become our own localized advertising platforms—the digital equivalent of wearing your friend’s band t-shirt and getting paid for it. Alternately the advertising giants might find it worth their while to start paying users for their continued attention/loyalty. These are just a couple (not very imaginative) ideas.

(In Race Against the Machine, McAfee and Brynjolfsson discuss how "new platforms leverage technology to create marketplaces that address the employment crisis by bringing together machines and human skills in new and unexpected ways.")

In addition, there are bound to be temporary pockets of human ability that cannot yet be duplicated by machines and are therefore still scarce. Although these pockets will shrink and vanish with time, if we can find and exploit them quickly enough via some sort of crowd-sourcing scheme we might be able to ease unemployment in the short term.

Effectively monetizing the remaining scarce resources may require the creation of new economic platforms, along the lines of current platforms like Kickstarter, Flattr, HumbleBundle, and Mechanical Turk, but on a much larger scale. We can think of these platforms as being like “apps” that run on top of the market “operating system.” They do not rely on artificial scarcity; instead they find novel ways to facilitate the exchange of existing scarce resources.

It remains to be seen, of course, whether it is possible to develop a platform or platforms that can actually come close to replacing more traditional forms of employment. I think there is great reason to be skeptical such an outcome is possible. However, we cannot entirely rule it out. This solution is highly desirable because it would cause the least disruption to our current system.

SOLUTION FOUR: Expanded Welfare

(An expanded social safety net could take the form of a universal basic income. In his essay Robotic Freedom, Marshall Brain asks "What if we, as a society, simply give consumers money to spend in the economy?")

If ordinary people are being crowded out of the market, then one solution is to reduce our dependence on the market as a means of providing for people. We already have a variety of social safety nets that seek to accomplish exactly this goal. So we might extend these safety nets to ensure that people who are no longer economically viable still have access to food, housing, and essential services. This could get expensive, but advanced technologies might help make up the difference by lowering cost of living.

This solution would not require getting rid of the market entirely. Under such a scenario, the market could continue to do the important job of distributing those commodities which still remain scarce. However, over time fewer and fewer people might be active market participants. This could be a smooth transition or a disastrous one, depending on how things play out. To prevent market collapse and maintain the cycle of consumer spending we may need to ensure that people not only have money, but continue to routinely purchase products from the marketplace. Like shaking any addiction, weaning ourselves off the market could be a slow and painful process.

SOLUTION FIVE: Automation Socialism

(Futurist Jacques Fresco has long advocated abandoning money and markets in favor of what he calls a "resource based economy.")

We could decide that since the market is no longer working well with our technology, we ought to just get rid of the market system entirely. A central government body would then have to take over the distribution of resources. Ideally wealth would be shared equally amongst all people.

Obviously a socialist system would have many detractors. However, some of the traditional problems of socialism—lack of motivation on the part of workers, inefficiency of central planning—could perhaps be mitigated through aggressive use of new automation technologies. It would be incumbent upon the government to aggressively invest in the sorts of technological breakthroughs that would make a fully automated society feasible.

In a best case scenario, automation socialism could speed us on the way towards a utopian society. In a worst case scenario, automation socialism could lead to tyranny and stagnation.

CONCLUSION

The above solutions can be placed on a loose spectrum that runs from those which prioritize the market over technology (freeze progress) to those which prioritize technology over the market (automation socialism). My personal opinion is that the best path is somewhere in the middle, utilizing a combination of artificial scarcity, new platforms, and expanded welfare.

Specifically, I favor new platforms if they can be made to work. Barring that, I would vastly prefer to move in the direction of expanded welfare rather than artificial scarcity. My intuition is that scarce resources are best handled by markets, care of people is best left to governments, and abundance is best left unfettered by artificial scarcity.

What do you think?

The Intensifying Battle Over Public Goods vs. Club Goods

I believe there is a growing battle between those who would like to see many goods become public, and those who would like to keep them locked up. I think this battle will only intensify in the coming years as technology continues to accelerate. To explain what I mean, I’d like to go over a few quick terms from economics.

Economists often classify goods according to two major criteria: how rivalrous they are, and how excludable they are.

A good is rivalrous when consumption by one person excludes simultaneous consumption by another person. An example is a painting. If I have an original painting in my house, you cannot also have that same painting in your house.

In contrast, a non-rivalrous good is a good that multiple people can use simultaneously. An example is a recipe. If I cook using a particular recipe, that in no way prohibits you from using that same recipe in your own kitchen.

A good is excludable if it is possible to prevent people from accessing the good unless certain conditions have been met (such as payment). Again, an original painting is a convenient example. If I want to exclude you from accessing my painting, I can just keep it locked up in my private studio until someone pays me what I consider an appropriate amount.

In contrast, a non-excludable good cannot easily be withheld from other people. A classic example of a non-excludable good is a lighthouse. Any ship within sight of a lighthouse can benefit from the lighthouse’s presence. It is not easy to include some ships and exclude others.

Why does all this matter? Because I think one of the recent effects of technology has been that it is taking many types of goods and doing this with them:

The first example we are all familiar with is music. Music used to come in the form of rivalrous, excludable goods like CDs. But once music made the transition to digital form, it became both non-rivalrous, and non-excludable. Digital music is non-rivalrous because if I copy a song from my friend, neither of us has to give up anything. We now both have equal access to the same song. Likewise, digital music is non-excludable, because its distribution is very hard to control.

Non-rivalrous, non-excludable goods are called public goods. One might argue that these are the best kinds of goods since we can all enjoy them with equal opportunity and without competing with each other. Examples of other public goods include nice things like fresh air, knowledge, and national defense.

And yet, somewhat understandably, the response from the music industry (and other similarly affected industries) has been to try to do this:

In other words, affected industries have made an effort to take public goods and make them excludable. They typically strive to accomplish this using a combination of intellectual property law and digital rights management.

Goods which are excludable and yet non-rivalrous are sometimes called club goods. Club goods include golf courses, movie theaters, and cable television.

The act of turning a public good into a club good is not always easy, as the music industry has found out. There has been a great deal of natural resistance to the idea of taking something which could be publicly available, and instead locking it up so that it can only be accessed by members of a private club. And this is where the battle breaks out.

Now, as long as this only applies to a few goods like music, one might ask “Who cares?” The answer is that as technology progresses we are going to see a lot more goods get moved into the lower right corner of this chart. And consequently a lot more businesses are going to fight to move those goods back into the lower left.

For example, if household 3D printers become widely adopted, we are going to see a lot of physical objects like tools move into the lower right corner. Or imagine: if the new Watson software ends up being runnable on smart phones some day, we could see even a normally expensive good like medical diagnosis move into the lower right.

Now step back and ask yourself: do you want a critical good like medical diagnosis, something we all need, to be treated more like fresh air, or like a golf course? Which is the world you’d rather live in? One where useful goods are ubiquitous and free for all, or locked up and under elite control?

Already today we have the potential to make all of the world’s books free for everyone on the planet. Google already has the infrastructure lined up to accomplish this. And yet they are prohibited from doing so. Why? Because of the demands of a few people in the publishing industry. If enlightened aliens came to visit us, do you think they would believe we are making the correct choice in this matter?

Traditional economic theory argues that the market will under provide public goods; therefore these goods need government intervention (i.e. intellectual property) to encourage their production. As with technological unemployment, I believe this is another area where conventional economic theory has simply failed to keep up with technological change. Computers are dramatically lowering the cost of creating many goods, and as such, the additional help provided by government is less necessary. The wealth of free, useful content on the internet, most of it produced by complete amateurs, is testament to this reality.

True, there are some public goods like street lights which still require government funding or else they would not exist. But we are seeing a vast explosion of new public goods—digital music, digital video, blogs, free apps—that I do not believe are susceptible to this traditional argument. People are naturally inclined to create, and once they have powerful computers, they seem to do so, with or without a government-backed monopoly.

My biggest fear is we will continue losing key battles in the war between public goods and club goods, and that the stakes will only increase as time goes on. As I pointed out earlier, music is one thing, but as physical objects and important services begin to move into the category of digital non-rivalrous goods, this battle will only become more heated and more critical. I sincerely hope that various industries will fail in their mission to turn public goods back into club goods. While this might help profits in the short term, in the end we will all be worse off.

Can Capitalism Continue? (Part 5) “Creating Scarcity by Limiting Access”

This is part five of a multi-part series that seeks to answer the question: what resources will remain scarce in the future? Since economic activity is based on scarcity, by answering this question, we may be able to locate future areas of employment, if they exist…

SCARCE RESOURCE #4: ACCESS

In the previous article, I articulated some of the challenges involved in monetizing digital content. Technology has the capacity to create an abundance of all things digital. Thus, content creators must contend not only with piracy but with knock-offs and free competitors.

But even though technology enables an abundance of copies, people will not necessarily have access to those copies. If you can find a way to lock up your content, then you can charge people to access it.

This is the concept of artificial scarcity. It’s easy to imagine situations where the content in question doesn’t have to be scarce, but the creators have chosen to make it scarce in order to preserve the value. A good example is an eBook. Currently the technology exists for all of the world’s books to be scanned and available for free on the web. However, due to the demands of authors and the publishing industry, books today remain artificially scarce. This enables traditional business models (and associated jobs) to survive (at least for a bit longer than they otherwise would).

Is artificial scarcity a good idea? That is highly debatable. Making things artificially scarce seems somewhat counterproductive from the standpoint of promoting human knowledge and wellbeing. Also artificial scarcity causes a great deal of collateral damage. Our broken intellectual property system is a prime example. Exploring all of the problems with intellectual property is beyond the scope of this article, but suffice it to say that the list of gripes one might have is rather long: stifling of innovation, distorting of markets, privileging of wealthy elites who can afford to hire lawyers, and so on.

Perhaps a more relevant question to our discussion is whether artificial scarcity is even feasible over the long term. After all, content companies have been largely unsuccessful at stopping piracy. Both the legal system and digital rights management have failed to control the spread of illicit copies.

However, content creators have (slowly) begun to figure out that if they architect a friendly platform for legal content delivery and keep prices reasonable, people will still pay for digital content in relatively large numbers. The trick appears to be convenience. When the legal option is more convenient than the illegal option, many people choose the path of least resistance.

In addition, we cannot dismiss the possibility that a successful crackdown will still occur. Content creators have been putting a great deal of pressure on governments and platform developers to do something about unlicensed copying. This pressure is only going to increase as more industries become vulnerable to piracy. Who’s to say that the forces favoring artificial scarcity and IP maximalist policies won’t eventually get their way?

And so we arrive at a plausible (if perhaps undesirable) scenario for how capitalism and traditional jobs might continue. If capitalism needs scarcity to survive, then perhaps we can just continue to create that scarcity artificially. It doesn’t seem that far-fetched to imagine a future where many people are gainfully employed in the design and sale of artificially scarce information products. If anything, current social norms might lean in that direction.

In addition there are business models based around selling “access” that may be viable whether or not strong mechanisms of artificial scarcity are even in place. Up until now, I have focused on access to content. What about access to spaces (both physical and virtual)?

Let’s say instead of selling access to static information (which can be copied and distributed against my will), I am selling access to a dynamic community (which is constantly evolving and therefore cannot be easily duplicated). An easy contemporary example would be a pay dating site. You can’t pirate a dating site the same way you can pirate a television show. And yet the business model in both cases is somewhat similar, in that they both revolve around the sale of access to information. It’s possible we will see an ever increasing shift towards community-based information products. Massive multiplayer games. Collaborative storytelling projects. Virtual playgrounds. It would be impossible to list all the possibilities here.

In conclusion, as we consider the future of the economy it’s important to remember that creating new scarcities could be as easy as just deciding to lock certain things up.

Next Up: Positive Feelings

Can Capitalism Continue? (Part 4) “Placing Calculated Bets on Human Creativity”

This is part four of a multi-part series that seeks to answer the question: what resources will remain scarce in the future? Since economic activity is based on scarcity, by answering this question, we may be able to locate future areas of employment, if they exist…

SCARCE RESOURCE #3: CREATIVE POTENTIAL

Times have changed for content creators. The small size of digital files makes them easy to pirate and often hard to monetize. Once you release a product digitally, the genie is out of the bottle. You can’t control the sea of inevitable copies. You can only provide people a convenient way to support you and hope they will do so.

And this problem is only going to get worse. With the adoption of household 3D printers, more and more physical objects are going to be vulnerable to both piracy and competition from free alternatives. This is yet another case of technological abundance undermining traditional business models.

So rather than trying to sell copies of a digital file, why not time shift the digital sale to before the product release? This is essentially what Kickstarter does. The creator has a promising idea in his head that the fans want. The creator then ransoms the idea, saying “If you want to see this idea come to fruition, you will need to pay up.”

When you fund a Kickstarter you are buying the existence of something that wouldn’t otherwise exist. You are buying a potential creation rather than a finished product.

This business model allows creators to bypass the economics of digital abundance. After all, people can’t pirate something that hasn’t been made yet, or design a knock-off of something that is still locked up in someone’s mind.

Of course creators must be able to convince people that their idea is good. So persuasion skills are a requirement to make this work.

The good news is the model is scalable. Big name creators have been able to raise millions of dollars, but small time amateurs with more modest goals have been able to reach their funding targets as well. I myself was involved in a campaign that successfully raised $9000.

But does this create jobs? Hard to quantify. Clearly it stimulates the economy. If someone raises money to make an independent movie, then they are going to take that money out into the world and spend it on costumes, props, gas, food, airline tickets, make up artists, hard drives, light rentals, camera men, etc.

More importantly, I think there is room for this model to expand in the future. Let’s forget about Kickstarter for a moment and boil this concept down to its core structure:

  • Person A claims to have a good idea in his head.
  • Person B pays Person A to execute.

Remember Person B does not have to be completely convinced. If Person A’s asking price is reasonable enough, person B may be willing to take a calculated risk.

Consider a theoretical film production model. These days it is possible to create a good (and profitable) film for as low as ten thousand dollars, and occasionally that does occur. But more often than not, a million dollars is the starting point for even a low budget art house film.

How else could you spend that million dollars? Suppose you were to hold a contest. People pitch you ideas for films, and you select the most promising ten. To each of those ten people you give a decent budget: a hundred thousand dollars. Enough to potentially cover their living expenses for the year as well as finance a micro-budget film. Granted, many of these films will turn out terrible. But out of ten? You’re bound to have a success in there somewhere. Take the best film, put a marketing push behind it, and I think you’d have a very strong chance of making your money back or at the very least making something critically acclaimed and garnering valuable attention. And don’t forget: because you are exercising a hands-off approach and utilizing amateurs you are also imbuing your film with a certain authenticity that may only make it more marketable.

What really has happened here? By not making a traditional bigger budget production we have lost a lot of film production jobs. But by taking a shotgun approach we have hired a lot more filmmakers. Yes there is waste in the system. You are paying some people that are never going to produce anything worthwhile. But ultimately the successes should justify those losses.

Remember this is just one thought experiment, and I have only chosen film production for my example because it is a topic I have thought about. You could just as easily apply this approach to designing chairs, writing jokes, or performing research.

But, you might ask at this point, won’t computer algorithms be performing all these creative tasks just as well? Perhaps eventually. But remember this model is based on persuasion. I don’t have to be better than a computer. I just have to convince you that I have some unique good idea in my head. One your computer algorithm doesn’t know about.

Interestingly this idea also bears some resemblance to Google’s “20% time.” As you may know, Google engineers are encouraged to take 20 percent of their time to work on something company-related that interests them personally. Most of the small Google projects that result from this time turn out to be inconsequential but you only need one Gmail or Gchat to make the whole system worth it.

The point is that most human beings are creative in some way. Allowing those human beings to sit around unemployed, without enough resources to even act on their ideas is incredibly wasteful. Quite possibly some new businesses are going to find a way to take this huge slack resource and turn it to their advantage. The key, I think, is accepting that most people’s ideas will fall short, but it only takes one success to justify a bunch of failures.

Next Up: Access

Can Capitalism Continue? (Part 3) “You Can’t Pay Attention to Everything”

This is part three of a multi-part series that seeks to answer the question: what resources will remain scarce in the future? Since economic activity is based on scarcity, by answering this question, we may be able to locate future areas of employment, if they exist… 

SCARCE RESOURCE #2: ATTENTION

There’s only so much time in the day, and all of us have limited attention to spend. Unless we figure out a way to freeze time, attention is going to remain a scarce resource for the foreseeable future.

A robust attention economy already exists in the form of advertising and public relations. Media outlets of all kinds harvest the attention of their audiences and then resell that attention to advertisers.

In fact a great deal of the digital abundance we enjoy is paid for by attention. Google’s suite of useful software products, from Search to Maps, is a prime example.

Naturally a lot of advertising results in a physical product or service changing hands. Suppose I search for “used cars” on Google. A sponsored link for Autotrader appears. Autotrader pays Google for that preferential listing and a bit extra when I click on the link. Once on the Autotrader website, I am shown another ad, for State Farm auto-insurance. State Farm has in turn paid Autotrader for the right to that ad space. Moreover, various local car dealers have paid Autotrader to make sure their vehicles are preferentially listed in the used car database. All of this buying and selling of my attention is justified because at some point I may purchase a scarce physical product: a car.

If you remove the car from the equation because, let’s say, I begin telecommuting to work, then suddenly the whole attention market built on top of that car collapses.

I make this point to show how attention is often coupled with other resources. However, I do think attention has value on its own, which is why it will continue to be valuable even if parts of the consumer economy vanish.

For example, the other day while using Facebook, I was shown a sponsored link, not for a product or business, but for a local punk band. (Not very punk, right?) Unless this band is delusional (okay, so that’s possible), I’m pretty sure they’re not making a business investment. Instead they are probably buying attention because they want it. Attention is nice. We all want to be paid attention to, especially if we have a project to share, be it a band or something else.

Even in a utopia where all of our basic needs were met, we would still compete for scarce attention. Attention is its own reward.

So how many participants are there in the attention economy? Possibly a huge number. As human beings, we are all potentially both advertisers and advertisements. I want people to know about this blog, which makes me a potential advertiser. If I could pay a reasonably small fee to get my link placed in a few well targeted places I might do so. And if I could make that money back by hosting an advertisement for your punk band, why not? While it needs improvement, the groundwork for a micro-scale attention economy is already being laid by Google, Facebook, Klout and others. (Of course, what would empower people the most is an open platform that cuts out the middle man.)

Interestingly, attention may be growing more scarce with time. Every day there is more entertainment and information competing for our eyes and ears. Thus we might expect the value of attention to go up accordingly, spurring new business models and innovation.

In addition, generating attention requires something worth paying attention to, such as a stylish website, a funny video, or an exciting release party. Until the day we have robot film makers and artificially intelligent party planners there should be a fair amount of action in this space. Remember, it only takes one wealthy person’s vanity project to employ a whole team of people. Though admittedly the number of humans needed on those teams may diminish over time.

Next Up: Creative Potential

Peter Diamandis Explains “Dematerialization” or Essentially The Idea That Computers Eat Everything

In this short video, Diamandis explains the word “dematerialization” which I think I am going to steal. I’ve referred to this concept in the past as “convergence”, “emphemeralization”, “digitization”, or even “computerization”, but I think I like “dematerialization” better.

“The fact of the matter is, that into your cell phone, is dematerializing a lot of the things we used to have in life. Think about it. I don’t have a GPS for my car anymore. It’s in here. Nor do I have an HD camera, my HD video camera, my music library, all of these things are literally dematerializing into your cell phone.”

In other words, all products are converging into essentially one product: the portable computer. Just last night I saw three commercials in a row, and every single one of them was for cell phones or tablets! Needless to say, a lack of diversity of products to sell probably means less economic opportunities for people over the long run. It is going to be very hard for companies to keep generating demand for things that your cell phone and some free apps aren’t already doing, or aren’t about to start doing in the near future.

Digitizing Entire Museums

Not too long ago, I wrote about how we will eventually begin digitizing whole experiences, and that these virtual experiences will increasingly compete with their real counterparts. In my original post I used two examples, a live music show and an amusement park.

“Just immersive sound and visuals have the potential to duplicate much of what is fun about a lot of experiences. Moreover, if the virtual space were shared and populated by other virtual reality users, than you could reproduce an important social component to many experiences.

There is not a lot of discussion of the fact that virtual reality might increasingly compete economically with real experiences. For example, the music industry realizes it can’t make much money off of selling records any more, so they have started focusing on other revenue streams like live shows. And this works because right now I don’t think there are many fans who watch a youtube video of a band playing live and think “Great, now I don’t need to spend $25 and go see them.” But one can imagine that if virtual reality technology made a few large (but very conceivable) leaps forward, this equation might start to shift.

Keep in mind there are two steps to any digitization process: the scan/record step and the print/playback step. Both are critical. So when I talk about better virtual reality I am not just talking about the print/playback step—things like 3D goggles, surround sound, and tactile feedback, I am also talking about big advances in the scan/record part of the process. Advances that might make it possible to say, stroll through a theme park and surreptitiously record the experience itself. And I don’t just mean record the experience in a linear manner. I mean record enough salient details about the geography that a sufficiently advanced algorithm could then use that data to create a digital model of the park’s layout. Now imagine that as other people walk through the park, some of them are also recording and uploading details to help improve the quality of your model. Pretty soon you have a digital file somewhere that in some senses is a copy of the whole theme park, ready for illegal file sharing. The virtual theme park might be missing some details, like the smell of churros, but such deficits would be only a few technology cycles and software updates away from being corrected.”

Granted, the theme park example is extreme and primarily intended as a helpful thought experiment. But I was interested to discover recently that the Smithsonian intends to digitize large amounts of their collection.

“With [a] high-end scanner, as well as less expensive tools that include normal digital cameras and freely available cloud-based digitization software, Metallo and his fellow 3D digitization coordinator Vince Rossi are slowly setting out to begin building a new Smithsonian digital archive. They hope this initiative will eventually lead to scores of 3D printed exhibits, as well as countless 3D models that could theoretically be used in the museums, in schools, or just about anywhere people have an interest in the Smithsonian’s vast physical holdings. They’re creating what Rossi called a “digital surrogate,” a “new form of museum collection” that could mean a wealth of information that could be available to anyone with a computer, or at the very least, to a wide variety of museums, schools, and other interested institutions.” (read more)

So it may not be too far in the future that we will at least be able to digitize the museum-going experience. I can’t imagine it would be too hard to take all of those digital models and build a multiplayer “video-game” that allows you to walk around, observe exhibits from all sides, and possibly even interact with other museum-goers. And if this technology works well, it seems reasonable to expect a lot of other “digital surrogates.”

Bauwens: “Will Capitalism Survive Abundance?”

This article written by Michel Bauwens, a founder of the P2P Foundation, asks “will capitalism survive ‘value abundance’? Open-source software, shared innovation and crowd-sourced manufacturing threaten capitalism as we know it.”

What happens if more and more of our time goes into producing use value – a fraction of which creates monetary value – but there is not a substantial return of income to the use value producers?

…Not only is the world faced with a global resource crisis, it is also facing a crisis of intensive development, because value creators are increasingly income-less. The knowledge economy turns out to be a pipe dream, because what is abundant cannot sustain market dynamics.

Thus we have an exponential rise in the creation of use value, but only a linear increase in the creation of monetary value. If workers have less and less income, who can buy the commodities that are offered for sale by companies? This, in a nutshell, is the crisis of value that we are facing as humanity…

Kickstarter, Kickstumbler, and Future-Proof Economic Platforms

In a recent post, I wrote about how Kickstarter might represent the beginning of an important new economic paradigm. Rather than selling a product directly, Kickstarter projects sell a promise to create a product in the future.

This is important because in a digitally abundant economy, monetizing individual copies can be difficult. As I explained:

“Once you release a product digitally, the genie is out of the bottle. You can’t control the sea of inevitable copies. You can still monetize the product after the fact, but not using traditional coercive means. You can only provide people a convenient way to support you and hope they will do so.

“So another strategy is to time shift the digital sale to before the product release. This is essentially what Kickstarter does. The creator has a promising idea in his head that the fans want. The creator then ransoms the idea, saying “If you want to see this idea come to fruition, you will need to pay up.”

So essentially when you fund a Kickstarter you are buying the existence of something that wouldn’t otherwise exist. On top of that you are buying karma, a good feeling that comes from supporting something or someone that you care about.

But a new site called Kickstumbler raises a third consideration:

“At some point, Kickstarter became more than just a way to fund art, music and other creative endeavors. It became entertaining content in itself. A new website called KickStumbler plays up the entertainment value of Kickstarter projects by applying a StumbleUpon concept to them. Users can hit a button on the site’s toolbar in order to see a new random project.” (link)

The idea of Kickstarter campaigns as entertainment has several interesting economic implications. For one, if enough people are interested in browsing Kickstarter campaigns, these people represent a monetizable audience who can be sold to advertisers. Second, and perhaps more importantly, members of this audience may very well turn from passive browsers into Kickstarter “shoppers.” Kickstarter could in some senses become a virtual store that helps you find projects worth paying for.

Put another way: Let’s say as a consumer you have some extra time and money to spend. By using a service like Kickstumbler you get essentially three products in one:

  1. Entertainment, in the form of project stories and campaign videos
  2. Opportunities to bring about the existence of a new product by purchasing a promise to create
  3. Opportunities to feel good about yourself by buying karma

Keep in mind that Kickstarter is just a particular brand. The same sorts of services could just as easily be provided by any number of other companies. What is interesting here is the business model. As technology marches forward, it is increasingly clear that our future economy cannot and will not be based upon either routine labor, or the discrete sale of mass market products. Kickstarter is an example of what looks like a reasonably future-proof ecosystem. One cannot easily imagine a robot formulating a compelling Kickstarter campaign. In many ways the requirement of humanness is baked into the system itself. Moreover, Kickstarter cannot be undermined by piracy or digital abundance for the reasons mentioned above. You cannot copy a product that doesn’t exist yet.

In my critique of the book Race Against the Machine, I challenged the authors on their idea that “new platforms” will create new economic opportunities for ordinary people. I felt that their listed examples—Mechanical Turk, Taskrabbit, eBay, Threadless—did not seem likely to offer a way out of our present and future unemployment concerns. However, I did not rule out the possibility that such platforms could exist.

While I wouldn’t go so far as to suggest that Kickstarter or something similar is necessarily the answer we need, it is certainly a fairly compelling example of a platform that is both resistant to automation, and potentially inclusive of a wide swath of people.