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371: Corralling the Opt-outs


C-Realm_371KMO welcomes knowledge management expert and 3 Quarks Daily contributor, Misha Lepetic, to the C-Realm to talk about how technology is disrupting the business of journalism, hollowing out the middle class and fostering increased inequality. They review the literature of dissent to the general atmosphere of techno-triumphalism in places like San Francisco and draw from the work of George Packer, Evegeny Morozov, Jaron Lanier, Albert Hirschman, and Robert Neuwirth.  The conversation turns to the growth of the informal economy and how services like AirBnB, which purport to serve the “sharing economy,” may actually be creating an electronic paper trail to make activity in the informal economy visible enough to be effectively regulated and taxed. Misha uses the example of the Boston bombing to consider the consequences of social media-enabled vigilantism.

Music by Shanimal.

Folks interested in attending the "Consciousness in the Cloud" trialogue in Los Gatos, CA on August 19th can sign up via the MeetUp listing for the event.



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7 comments to 371: Corralling the Opt-outs

  • Sam

    I don’t see how things like AirBnB or Lyft or the like are in any sense part of the “informal economy”. Sure, they enable small scale commerce, but there are explicitly-defined prices and a formal dispute-resolution process (“formal” as in it works in the context of the political / judicial system). I think those two features are the key features of the formal economy.

    I think there’s an important distinction to be made between the economy that lacks explicitly-defined prices (I’d call that the “informal economy”) and the economy that’s disconnected from the formal dispute-resolution process (I’d call that the “underground economy”). Since authorities may require certain sorts of transactions to be formalized so they can be regulated or taxed, there’s some overlap between the two. But a lot of the underground economy is based around very explicit reciprocity and clearly-defined prices, it’s not like the “sharing economy” at all.
    I think the conflating of the “informal economy” and the “underground economy” is part of why people get confused by things like AirBnB. They see it skirting some regulations, so assume it’s more “informal” than the hotel business, in the same way that friends crashing on one another’s couches is more “informal” than the hotel business. The two both differ from the hotel business, but in different directions.

    Now that I think about it, AirBnB is really a classic example of economic formalization, making a transaction that could be done between friends based on vague reciprocal norms into one that can be done between strangers based on clearly defined prices and explicit reciprocity. (Not that you can’t use similar technology to extend the informal economy.)

    Also, about the introduction to the episode, I agree that the idea of social media offsetting the collapse of the formal economy is pretty ridiculous. It’s not like the main function of the formal economy is the production and consumption of entertainment. Social capital can substitute for financial capital in some cases, but in many cases this only works if your friends have financial capital.

    • KMO

      Yes, some clearer definition of terms at the outset would be helpful. I think the idea the AirBnB facilitates the “sharing economy” is laughable. I think it could be seen as bringing some of the underground economy above ground to make it quantifiable, regulateable, and, above all, taxable.

      As for cyberdelic social capital being a fair trade for the benefits of traditional employment, I would be more favorably inclined to consider the merits of that statement if it were coming from someone who was doing their best to make a go of it with some sort of “without a net” creative career path than I am when it comes from a Facebook executive who is making a fortune selling the content that millions of unpaid volunteers are generating in the process of enjoying the social capital that Facebook helps them create.

      As for your final sentence, all I can say is, “I resemble that remark!”

      • Sam

        I think it could be seen as bringing some of the underground economy above ground to make it quantifiable, regulateable, and, above all, taxable.

        I agree with that as well.

        I also do want to emphasize that there are upsides to “formalizing” an underground market in this way. For one thing, it’s much easier for buyers and sellers to match up when they can advertise openly. For another, there can be some serious disadvantages to conducting business (especially with strangers) without access to formal mechanisms of dispute resolution. That ranges from not having access to any method of dispute resolution (“this person cheated me but if I tell the authorities I’ll be in trouble”) to having methods of dispute resolution significantly less pleasant and fair than the formal one forced upon you (“pay up by tomorrow or we break your kneecaps”).

        I would be more favorably inclined to consider the merits of that statement if it were coming from someone who was doing their best to make a go of it… [than] when it comes from a Facebook executive…

        Especially since the Facebook executive no doubt understands the benefits of traditional employment really well.

    • Escapefromwisconsin

      I used AirBnB on my trip to Europe specifically because it had the formality of a cash transaction. There are times when you do want that level of formality for whatever reason, be it to prevent disputes or to provide legalities or to delineate mutual responsibilities, or simple convenience. After all, I was dealing with strangers. A certain level of trust is required, yes, but the monetary transaction gives both parties a degree of protection. AirBnB acts as a convenient go-between, and for that role, they provide a useful service. It saves money, takes advantage of empty rooms, reduces waste, lets people make extra cash, and I got to meet locals that I would not have been able to to otherwise.

      Airbnb, Lyft, and Zipcar are more the sharing economy than the informal economy, which is something different. An example of the informal economy would be staying at someone’s house in return for their being able to stay at yours, or doing repairs for someone in exchange for beer. This happens all the time with no money exchanged. Neighbors carpooling downtown and pitching in for gas is another example. As Dmitry Orlov points out, this is done when people know each other, because trust and reputation are essential parts of the informal economy. The sharing economy to some extent is coming in and formalizing it and making it more convenient for times when you need that additional formality or have no other reciprocal sources.

      Incidentally, there is a podcast with Robert Neuwirth on the Long Now talks podcast page called “The 21st Century Medieval City”

      • Sam

        I recently saw a NYT editorial on the subject of the “sharing economy”, they were also discussing AirBnB, using the same terminology:

        I think the whole subject is particularly interesting to those who think society is undergoing some sort of long-term economic contraction or collapse. It’s another example of markets helping people get efficient use out of their capital, which is one of the things markets are supposed to do. But extracting the maximum value-as-capital from items intended to be for personal use is not the sort of efficiency I’d expect to see people putting the most effort into pursuing in a growing economy.

        (Not to say things like AirBnB can’t lead to increased production and consumption of goods and services, it might lead people to travel more than they could afford to otherwise, for example. But it often just displaces similar goods and services, and results in an overall reduced need for capital.)

        • KMO

          Thank you for helping to corral some of the terminology around this area of investigation. As you’ll hear on tomorrow’s podcast and the one after, people are coining a lot of overlapping vocabulary as they try to find a language to describe the economic transition we need to make.

  • Escapefromwisconisn

    Your talk about Silicon Valley in the beginning really hit home for me. I even have a name for it: I call it the …but we have iPods defense. I see this a lot on (mainly Libertarian) economics blogs – the idea that we are so much better off than our parents and grandparents who had lifetime employment, affordable health care and education, excellent public services, steady incomes allowing a single wage earner to support a family, reasonably priced homes, a functioning industrial base, leisure time, guaranteed pensions and the like, because we have electronic toys at our disposal.

    The idea promoted by these economists is that the dismantling of all this leads to the sort of “innovation” that produces iPhones and iPods. There is no evidence ever presented for this of course. Does anyone think these things would somehow not have been introduced into the economy if we had higher salaries and more vacation time? It’s human ingenuity that made these possible, not mistreatment of workers. Yet the idea that there is a tradeoff between innovation and a liveable society, or that we need “cuthroat” capitalism for innovation is part and parcel of much economic thinking in libertarian/right leaning circles. I, for one, would happily trade all my electronic doodads for the security of knowing I will not end up bankrupt and homeless if I get sick, or being in debt the rest of my life to get an education. I suspect I’m not alone. Add to that the fact that the Internet was created mostly by government research and investment in the first place, without which there would be no AirBnB nor Facebook.

    It could easily be argued that what Silicon Valley has unleashed has actually made our lives worse under the current paradigm. For example, the ability to do things on the Web has led to the extinction of a lot of professions, from booksellers to travel agents, causing less jobs to be available and unemployment to go up. We could adjust to this new reality, of course, but there’s little evidence that we will. This is a complex topic, but you can see what I mean.

    And an even more subtle argument is that Silicon Valley introduced the culture of brutal overwork into the corporate sphere. My basis for this is this story which I read some time ago:

    The first is the emergence of Silicon Valley as an economic powerhouse in the late 1970s. Since WWII, the valley had attracted a unique breed of worker — scientists and technologists who carried with them a singular passion for research and innovation. Asperger’s Syndrome wasn’t named and identified until 1994, but by the 1950s, the defense industries in California’s Santa Clara Valley were already drawing in brilliant young men and women who fit the profile: single-minded, socially awkward, emotionally detached and blessed (or cursed) with a singular, unique, laser-like focus on some particular area of obsessive interest. For these people, work wasn’t just work; it was their life’s passion, and they devoted every waking hour to it, usually to the exclusion of non-work relationships, exercise, sleep, food and sometimes even personal care.

    And then, in the early ‘80s, Tom Peters came along, and promoted the Silicon Valley work ethic to the rest of the country in the name of “excellence.” He extolled tech giants like HP and Apple for the “passion” of their workers, and told old-industry employers that they could move into the new age by seeking out and rewarding that kind of passion in their employees, too. Though Peters didn’t advocate this explicitly, it was implicitly understood that to “passionate” people, 40-hour weeks were old-fashioned and boring. In the new workplace, people would find their ultimate meaning and happiness in the sheer unrivaled joy of work. They wouldn’t want to be anywhere else.

    There were two problems with this. The first is that this “passion” ideal didn’t recognize that the vast majority of people have legitimate physical, emotional and psychological needs — things like sleep, exercise, relaxation and the maintenance of strong family and social support bonds — that these engineers didn’t have to nearly the same degree. The second was that most managers, lacking windows into their workers’ souls, decided to cut corners and measure passion with one easy-to-chart metric: “willingness to spend your entire life at the office.”

    It’s also raised the costs of living in certain areas beyond what “ordinary” people can afford. I find the seperatist culture of Silicon Valley, with its hermetically sealed private buses and gated self-contained compounds incredibly dystopian and creepy. The “every-man-for-himself” libertarian ethos espoused by such people is a scary portent for humanity’s future.

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