Apple, Amazon, Facebook and Google might post huge profits, but many of their staff see little financial benefit
Need a crash course in digital capitalism? Easy: you just need to understand four concepts – margins, volume, inequality and employment. And if you need more detail, just add the following adjectives: thin, vast, huge and poor.
First, margins. Once upon a time, there was a great company called Kodak. It dominated its industry, which happened to be chemistry-based photography. And in its dominance, it enjoyed very fat profit margins – up to 70% in some cases. But somewhere in the depths of Kodak’s R&D labs, a few researchers invented digital photography. When they put it to their bosses, the conversation went something like this. Boss: “What are the margins likely to be on this stuff?” Engineers: “Well, it’s digital technology so maybe 5% at best.” Boss: “Thank you and goodbye.”
Actually, it turned out to be goodbye Kodak: those fat margins on an obsolete technology blindsided the company’s leaders. Kodak’s engineers were right, of course. Anything that involves computers and mass production is destined to be commoditised. My first mobile phone (purchased in the 1980s) cost nearly £1,000. I’ve just seen a handset for sale in Tesco for £9.95. (And, yes, I know that Apple currently earns fat margins on its hardware, but that’s because it’s usually ahead of the competition and it won’t last. What’s happening in the much bigger Android market is a better guide.) And, if anything, the trend towards thin margins in non-hardware businesses is even more pronounced because online markets are relatively frictionless. Just ask anyone who’s trying to compete with Amazon.
Then there’s volume, which in the online world is astronomical. For example: 72 hours of video uploaded to YouTube every minute; more than 100bn photographs have been uploaded to Facebook; during the Christmas period, Amazon.co.uk dispatched a truck filled with parcels every three minutes; to date, more than 40bn apps have been downloaded from Apple’s iTunes store. And so on. Margins may be thin, but when you multiply them by these kinds of numbers you get staggering amounts of revenue.
These vast revenues, however, are not being widely shared. Instead, they are mostly enriching the founders and shareholders of Apple, Amazon, Google, Facebook et al. Of course, those who work at the heart of these organisations – the engineers, developers and the executives who manage them, for example – are richly rewarded in salaries, stock options and lavish perks. But these gilded employees constitute only a minority of the workforces of the big tech companies and most of their colleagues have decidedly more mundane terms of employment – and remuneration.
Take Apple, for example. It makes grandiose claims about the number of jobs that it “directly or indirectly” creates or supports. But about two-thirds of the company’s 50,000 American employees work in the US Apple stores, where many of them were earning about $25,000 a year in 2012 – when the mean annual personal income in the US was $38,337 (2010 figure).
Then there’s the question of employment, a topic on which the big technology companies seem exceedingly sensitive. Facebook, for example, is given to engaging fancy consultants to produce preposterous claims about the number of jobs it creates. One such “report” claimed that the company, which at the time had a global workforce of about 3,000, indirectly helped create 232,000 jobs in Europe in 2011 and enabled more than $32bn in revenues. And Apple, stung by criticism about all the work it has outsourced to Foxconn in China, is now driven to claiming it has “created or supported” nearly 600,000 jobs in the US.
The really tough question that none of these companies really wants to answer is: what kinds of jobs exactly? Anyone seeking an insight into this would do well to consult a terrific report by Sarah O’Connor, the Financial Times‘s economics correspondent. She visited Amazon’s vast distribution centre at Rugeley in Staffordshire and her account of what she found there makes sobering reading.
She saw hundreds of people in orange vests pushing trolleys around a space the size of nine football pitches, glancing down at the screens of their handheld satnav computers for directions on where to walk next and what to pick up when they get there. They do not dawdle because “the devices in their hands are also measuring their productivity in real time”. They walk between seven and 15 miles a day and everything they do is determined by Amazon’s software. “You’re sort of like a robot, but in human form,” one manager told Ms O’Connor. “It’s human automation, if you like.”
Still, it’s a job. Until it’s replaced by a robot.
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See also Amazon Unpacked
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Upon graduation from college, I worked four months for Cheerful Greeting Card Company in White Plains NY where we filled orders for cartons of greeting cards from individuals who would then sell them door to door in their local neighborhoods. We had a conveyor belt that passed between vast piles of different Xmas or birthday cards while low-paid help filled the orders. Surely Amazon is just a post stone-age leap away from mechanical arms seizing books whose titles they need not bother to read and stuffing them blindly into shipping boxes.. Sarah O’Connor’s description from the financial Times made me feel we had not actually made much progress from the Cheerful Greeting Card plant way back in 1955.
Can’t remember if it was the Cheerful Greeting Card Company specifically, but I was an 11-year-old door to door salesman for some card company around that same time. I lasted long enough to get myself a super deluxe Xacto set, complete with a handsome wood chest.
Ever since we left the early hunter-gather period with it’s paltry requirement of two or three hours a day of survival work, it appears that mindless drudgery has usually been the cursed fate of the great bulk of ‘civilized’ populations everywhere. It’s in the nature of a hierarchy that there is very little room at the top. Although we moderns try hard, no amount of TV or mood-altering substances is able to make up for the essential hollowness of a life so lived.
This is what the system of slavery looks like in our time. If, in fact, there are future historians, something that seems less likely by the day as the Anthropocene climate crushes down on us, little distinction will be made between wage work and the chattel slavery of the past. If you have no choice but to take a job that provides a subsistence, or less, wage, if you fear changing jobs for fear of loosing medical benefits, if you find that your investment in post secondary education only gets you a minimum wage job where you can not defend yourself against wage theft, if as a professional you find that you must abandon professional integrity to keep your job, if you are forced into substandard jobs in order to qualify for social benefits, if you find that you are burdened with nondischargeable student debt that you have no reasonable expectation of paying off and any number of similar situations that we find ourselves in today, then you are functionally a slave, someone who can not control the circumstances of their employment. When trade unionism had the power to represent their workers forcefully there was reason to call the system a more benign form of slavery, but now chattel slavery begins to look like a better deal. At least your employer saw to getting you fed. Now however, the surplus worker/slave can expect to be tossed on the trash heap and can look forward to only an early death.
If you can not quit your job if you wanted to, you are a slave.
It is reality. As they say, get over it. And start organizing to win back your freedom and your self respect, two things that are inseparable.
ybera
All you techies believe that the internet is forever. Nope! It’s a child of the cheap, plentiful energy age. That age has ended and with it will go all of the electronics eventually.
The internet may be a big profitable business at the moment, but there is no way a declining world economy can support it forever. In fact, it will be one of the first things to go if there is another world war.
Don’t panic! We did fine without it for thousands of years, and we will survive it’s demise. But, if you have any pictures parked in that piece of plastic, you better print them out on some good old Kodak paper now, before they are lost forever. I can open my old paper and cardboard photo album and see 100+ year old pics of my family, but when I look at my PC, all I see is obsolescence.