REINVENTING CAPITALISM IN THE AGE OF BIG DATA BY VIKTOR MAYER-SCHÖNBERGER AND THOMAS RAMGE
BOOK REVIEWS BY BINOD
BINOD’S RATING: 7/10
A provocative look at how data is reinventing the market, where big firms will no longer be dominant. Will it lead to prosperity or calamity?
The Thesis
The main ideas in the book are as follows.
This is the dawn of the era of data capitalism.
Data-rich markets are sweeping across the global economy. Until recently, communicating such rich information in markets was difficult and costly. So, we used a workaround and condensed all of this information into a single metric: price.
The story of capitalism has been a story of firms and financiers. That's all going to change thanks to the Big Data revolution. Data is replacing money as the driver of market behavior. Big finance and big companies will be replaced by small groups and individual actors who make markets instead of making things: think Uber instead of Ford, or Airbnb instead of Hyatt.
The idea is that data will become the most valuable asset and the inherent value of money will be reduced and this move will have profound effects on markets. With price no longer the chief focus (machines will negotiate with sellers), there will be less need for money and banks (many will be gone by the late 2020s), and firms will have to reinvent the way they do business.
The book champions governance over government. Indeed, the authors celebrate markets. “Eliminate the decentralized market and the empowering quality of data vanishes,” they declare. “That is why we call the shift from money to data a revival of the market instead of the rise of artificial intelligence or the advent of Big Data.”
Examples?
Amazon, with its many product specifications and customer reviews, is often a data-rich market. So are Spotify, Netflix, Lyft, Tinder and Airbnb. In the South Indian state of Kerala (where I come from), a data-rich market has transformed the fishing business. Fishermen no longer have to guess which seaside market needs their catch. They can use their mobile phones to tell them which markets have a gap between supply and demand. All in all, the move to data-rich markets seems to be for the good.
Or is it?
For all their differences, the firm and the market do share a central flaw. They often are not self-correcting. Early winners can use their strength to beat back competition, amassing yet more strength — and ultimately hurting the public interest. It happened with the railroad trusts, Standard Oil and AT&T, and it is beginning to happen with the big winners in today’s data-rich, market-oriented economy. Giants like Amazon, Apple, Facebook and Google earn enormous profits, while employing a surprisingly small work force relative to their scale. They are adept at avoiding taxes. And they continue to amass data about human behavior that will help them grow even stronger.
The book offers several intriguing ideas for limiting the excesses of data-rich capitalism. One idea is a “robo tax” as a partial replacement for the payroll tax — machines would be taxed more and human employment less. Another idea is mandated data sharing — an echo of the patent system, which also depends on disclosure, the authors note — to allow new entrants a fair chance to compete. Universal Basic Income, a favorite of authors these days ranging from Ian Bremmer to Yuval Harari, makes an appearance.
The book doesn't actually focus on Big Data and Machine Learning advancements. It focuses on the roles of the firm, markets and labor in the future economy now that the use of data analytic techniques is increasingly used to automate decision processes.
“Finance capitalism will be as old-fashioned as Flower Power”
What I liked
Thoughtful, provocative account of the coming impact of big data on human transactions
A much-needed discussion on the economic ramifications of Big Data.
Written in a way that it is easy for everyone to read and understand.
To their huge credit, though, the authors are not blind cheerleaders as I initially suspected and feared. They spend more time in their book on the downsides of data-rich markets. These include the potential to put people out of work and to concentrate corporate power among a small number of firms that control the most valuable data.
Read this book as a brainstorming exercise as it gives good framework to think about current issues
Anyone interested in the future of markets and business should read this fascinating book.
“In God we trust—all others bring data”
What I didn’t like
For some reason, the book is remarkably unappealing at first glance. Perhaps it’s the lack of charts, images or tables. It is surely text heavy and written in a thoughtful, non-dramatic fashion. Once you get past the initial optics you will discover that each page is filled with insights.
Towards the end, when they talk about solutions, there is some vague and lofty theorizing and speculation about economic interventions, some of which may never fly in the realm of real-world politics.
I would have expected the authors to go much further in analyzing supporting evidence regarding future human resource impacts, real ramifications for banking sectors, merchandise and advertising, or especially software development. Instead, they touch briefly on these and other areas but rarely focus and never go in-depth.
Conclusion
Big data will transform the way firms operate but this book makes a compelling case that it will change the nature of the market itself. With brilliant insights, it explains how the shift from simple price signaling to data-rich preference matching will determine the winners and losers of the 21st century economy.
Data capitalism can deliver phenomenal services, as Amazon has shown. But it may also undermine some of the foundations on which our societies have been built. If this overall analysis is right, then we may have to start thinking more about the radical ideas presented in the book.
Viktor Mayer-Schönberger is the Professor of Internet Governance and Regulation at the Oxford Internet Institute. He is an interesting guy, having had two careers in the past. A bit of a serial entrepreneur on the software side. And then at the same time got involved in law and public policy, spent 10 years at the faculty at Harvard doing public policy in the hi-tech sector. And since 2010 at the faculty of Oxford University doing the same thing. Viktor says he has always been really interested in data and information and how we use data and how it changes our society, changes the economy and changes the institutions that are so central to what we are as a society.