Ezra Klein‘s eloquent polemic against income inequality looks a lot to me like a case study on the economic consequences of being a superstar, coupled with the notion that superstar economics are taking hold in ever more fields due to communication technology. And it is frightening, as he suggests.
But it also offers a hint of its own way out — Bono is going to spend his $1 billion in Africa fighting AIDS. Because of technological advances, that amount of money may win against AIDS (for the record, I think not at this time, but perhaps as few as 10 years in the future that starts to sound plausible). It is well known that the Bill and Melinda Gates Foundation looks for challenges based on the estimated dollar amount to solve a global problem like Malaria, and they seem poised to take on more ambitious challenges as technology allows.
Can impossibly satisfied superstars like Bono and Gates be expected to make up in philanthropy what used to happen by workers spending wages? Is that realistic? Should charity simply be enforced through taxes or another measure?
Here’s a great post on the Atlantic Cities blog on Rashid Temuri, the ingenious Chicago cabbie who has used Twitter to improve taxi service in Chitown and in the process become a kind of one-man taxi service himself. This is supposed to be a heart-warming story and it is, showing how superstar economics now apply to everyone with an internet connected clientele (which is to say, virtually everyone in a major metro and many others too). In the short term, Temuri is publicly outperforming his competitors and as a result he’s taking their market share. Of course, none of this is going to help in a few years when driverless cabs provide an even better service than Temuri can, and cheaper.
Much has been made recently of how the App Economy is a “job leader.” People are saying that the App Economy has “managed to create jobs during the worst recession since the Great Depression,” and has created 466,000 jobs since 2007. This is clearly good news, but I’m skeptical of the future of this App Economy to continue creating jobs. Here are some random thoughts:
Current App Economy growth is probably driven in large part by the the adoption of new mobile operating systems. Once the mobile market is saturated, App Economy growth may level off.
In an open app marketplace, apps compete against all other apps. This inevitably leads to the superstar effect.
As with other software, for every paid app there is likely to be a free ad-driven alternative, and for every ad-driven alternative, there is likely to be an ad-free alternative developed by amateurs. Digital abundance tends to drive prices down toward zero.
As computers increase in power, it will become easy to absorb many app features into other apps, or even into the operating systems themselves, possibly creating convergence towards just a few “everything” apps.
New creation tools will make it easy for ordinary people to quickly create custom apps and thereby lower the market rate of app developers. As an analogy, consider the plethora of easy-to-use blogging tools that exist today. Not long ago, building a robust blog would have required hiring a web developer, or at least learning a bit of programming. Building a simple app may soon be as easy as starting a blog.
Improved device and network speeds will allow the remote execution of app-style programs through your web browser, effectively bypassing the App Economy entirely.
I saw this graph on the Economist via Ezra Klein, who remarked that Facebook has one-tenth the number of employees of Google. I’m less interested in that than that all four of the most far-reaching modern companies, Apple and Amazon included, are tiny compared to McDonald’s, Toyota, and Boeing. Technology increasingly means a “superstar” effect propels successful firms ahead, allowing them to reach larger audiences and markets than ever before, with fewer human workers. One commenter on Wonkblog asked whether these are the relevant comparisons, as Google and Facebook are fundamentally advertising companies and therefore should be compared to radio, tv, and other advertising media where the users are the product and the advertisers are the customers. I would love to see numbers on that, but my guess is that there are fewer employees relative to both advertising dollars and number of advertisers at FB and the Goog than for traditional media. Facebook is about 6 years younger than Google; I wonder if there are significant differences between the two on that front.