Technology grows the wealth gap, profits off your free labor and eliminates middle-class jobs

Sir Michael MoritzSequoia Capital’s Sir Michael Moritz gave the Tech Crunch Disrupt keynote and detailed how “data factories have spawned a golden age for entrepreneurs, but make it tough for everyone else.” While theorists like Douglas Rushkoff and Jaron Lanier have made similar arguments for some time, it’s refreshing to hear such honesty from an industry insider.

Moritz’s ideas have wider implications about where the future of funding and innovation will land as well. While Moritz doesn’t provide many answers, the fact that his ideas are even provoking questions like, “Can we keep eliminating middle-class jobs and concentrating wealth without consequence? Or will this weakening of the bottom of the pyramid lead to a global financial collapse?” is excruiatingly important, particularly because he’s in the position to fund real value instead of the next data factory. 

First, big-data factories employ many fewer people than their meatspace equivalents of yore. Ford at one point employed 700,000 people. Now Apple, at times the most valuable company in the world, employs only 80,000 people worldwide including its retail staff. Data factories don’t create nearly as many middle-class jobs.

Instead, the data factories get free labor. They distribute what seem like useful services to the world, things like YouTube, Facebook, Twitter, LinkedIn, Etsy, or Kickstarter. Those services help people share, connect, find jobs, sell their own goods, or fund a project. But in actuality, they also collect troves of data and earn tons of money for the tech giants without forcing them to do much work. That money stays concentrated around the data factories and their limited staff instead of distributing it like traditional factories.

What’s the impact? “It means that life is very tough for most everyone in America” says Moritz. That’s not just some ambiguous sense of hardship. The median American household has stagnated. The absolute minimum wage value has decreased significantly. “It’s tough if you’re poor, it’s tough if you’re middle class. It means you have to have the right education to work at [the tech giants]. If you’re not like us, it’s tough” said the highly successful venture capitalist.

the notebook is a bunch of short items on my current obsessions.