Why Facebook Isn't Free

Jaron Lanier: Right now the advent of better and better information tools is having a contracting effect, where more and more the economy is being made efficient in this way that concentrates the wealth of those who make it efficient.  I mean, just think about the day that all those cabbies out there lose their job because the cars are driving themselves.  What are they going to do?  I don't think they'll be happy, but whoever does that will become very, very rich.  So whoever owns the top server in a big efficiency-making exercise becomes very, very rich.  So there is this huge concentration even as the overall economy is shrunk as a result.

So the valuation of Facebook is just completely normal given the way information technology is being integrated into this society, and it's not the last.  This will just keep on happening until we realize that it's not sustainable.  And there’s nothing wrong with Facebook being treated as valuable.  The only problem is that it should be increasing value for everybody.

I'm going to use a different company as an example, an old less fashionable one, which is Walmart.  So, Walmart was one of the pioneers of using computer networks to make the world efficient for -- consumers anyway.  Walmart in the 80s and 90s started to develop its own version of digital networking, especially in the 90s, to precisely calibrate who to buy from at the best price, where to ship it exactly, when and how to ship it, and how to stock it and at which store when, I mean this whole incredible system, and as a result of that it was able to look to offer lower prices to its customers.  And everybody said, “Yay, lower prices!”  But the thing is, it became so big so fast, which is what happens when you do digital networking, that it kind of took over the world and changed its own environment to make the whole environment of retailing consumer goods and creating them more efficient in this certain way that impoverished its own customer base.  So all of the sudden its very own customers have fewer job prospects.  All of the sudden its customer base gets poorer, and now it's kind of dug itself into this rut, where Walmart is no longer as exciting a retailer as it was because what's it going to do?  And it's trying to sort of climb upscale, but it can't because its customer base can't support it.  

So to me Facebook is essentially Walmart for a new generation, but Facebook is saying, “Free services, free social networking!  Free!  Free!” and everybody is saying “Yay, it's free!”  But then the problem with that is that the job prospects for the vast majority of people are actually gradually decreasing as less and less stuff is monetized.  

So what you want to do to have an information-based economy and preserve capitalism is to monetize more and more of the world instead of less and less of the world because you want the market to be growing instead of shrinking.  But the problem with the Facebook approach is it's monetizing less and less because to say, “No, all this is free.  Your reward for participating is reputation, karma, connections” -- and all those things are very real, but they're not monetized.  They're not securable.  You can't get a house mortgage based on your Facebook reputation

What I would do is I would turn it into this commerce platform so that people can send money around for things and then I'd gradually start to adjust it so people are monetizing more and more, so people can put up their art to sell to others either with a Kickstarter type of a thing or an app store kind of a thing.  It doesn't, you know, it would have to be tweaked to find exactly the right model, but I would start to turn it into real commerce so that people who were good at using Facebook start to make some money and the economy overall starts to expand instead of contract as a results of its existence.  And I think that's a happier outcome.  It would be better for Facebook.  It would create a better return for Facebook's investors in the long term -- even in the short term. 

Directed / Produced by

Jonathan Fowler & Elizabeth Rodd


Internet pioneer Jaron Lanier argues that free technologies like Facebook come with a hidden and heavy cost – the livelihoods of their consumers.

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