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Investment and Employment in the Internet Age?

by Metatone Sun Aug 18th, 2013 at 05:44:49 PM EST

Jarod Lanier has taken a lot of (largely deserved) flak for his clumsy statement comparing Kodak and Instagram in employment terms - and using that as a "proof" that the Internet age is undermining employment.

Including in gmoke's review of his book here.

And yet... many people wonder if there is something going on...

So I thought it would be interesting to apply some more figures from the Industrial and Internet sectors and see what we can see.

I used Enterprise Value (which tries to correct Market Cap with data on borrowing and cash reserves) as some measure of the investment by the financial system in the companies. I didn't include any banks because the metric doesn't compute properly for them. EV figures from Yahoo, except for the Twitter estimate, which is from Forbes (Twitter is not yet a public company.)

Employment figures are from news articles around the internet, mostly reputable. Amazon's highlights a calculation problem - it's not clear how various corrections are made for full time vs part time. At least half of the 88,000 are part time.


CompanyEnterprise Value (bn $)Employment (est)
   
Ford146.71171,000
GM50.14217,000
IBM226.77450,000
Apple430.6573,000
Oracle136.36120,000
Microsoft204.9793,000
Google239.1454,000
Facebook82.224,500
Twitter11.00 (est)150
LinkedIn24.574,500
Amazon125.7188,000


So what does it all mean?

I'm not sure, but contact with the physical still produces jobs, as can be seen from Amazon's warehouse and delivery - or even Google's 16,000 employees in the Motorola phone subsidiary. But if you can keep away from the physical, it seems that a lot of money produces much less employment in the software business.

Display:
I give up on getting the table straight, <code>, etc. isn't co-operating today.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Aug 18th, 2013 at 05:45:39 PM EST
My sympathies! I can never get those tables to reproduce perfectly.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 19th, 2013 at 12:07:51 AM EST
[ Parent ]
Cleaned it up with a table.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Aug 19th, 2013 at 02:15:17 AM EST
[ Parent ]
Thankyou!

I tried a table, but I'm out of practice with the HTML and it didn't help.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 19th, 2013 at 05:12:39 AM EST
[ Parent ]
Software/online companies that benefit from the size of their userbase who then end up with near monopolies (positive feedback) in their space (ebay, craigslist, facebook to a temporary degree) probably produce much less employment per dollar of enterprise value.

The online companies are still part of a deep chain that connects directly to the physical, given that their operations run on servers and their users access their sites through hardware. That chain is still going to be a lot less robust than it is for companies like Ford or GM (I don't know what the term is - one job at Ford produces X jobs elsewhere in the economy, etc). As a wild guess I'll bet a company like Apple is close to on par with Ford in that regard.

Mostly my blood boils fiercely at the idea that the economy is a natural force instead of the collection of choices that it is in reality. And you only have to go about two questions deep down the rabbit hole before you ask why the purpose of humanity is to make and consume widgets...

you are the media you consume.

by MillMan (millguy at gmail) on Mon Aug 19th, 2013 at 03:04:44 AM EST
<blockquote>Mostly my blood boils fiercely at the idea that the economy is a natural force instead of the collection of choices that it is in reality.</blockquote>

I've had to give up writing about that, because the frustration really felt like it was going to harm my health.

Completely agree that it is the root issue.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 19th, 2013 at 05:14:32 AM EST
[ Parent ]
MillMan:
(I don't know what the term is - one job at Ford produces X jobs elsewhere in the economy, etc)

I think you are looking for the multiplier effect.

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by A swedish kind of death on Mon Aug 19th, 2013 at 05:49:47 AM EST
[ Parent ]
I like it when terms are straightforward.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Aug 19th, 2013 at 02:37:11 PM EST
[ Parent ]
IBM and Oracle are neither internet nor industrial, but service companies. Oracle shares with Microsoft and the "internet" outfits a pseudo-monopoly on their sector; but O and M are rapidly ageing, and will go the way of IBM (and Ford and GM) : they are lumbering on, overweight and not specially innovative, their pseudo-monopoly arriving at its expiry date.

At first glance, the pseudo-monopoly influences the "enterprise value" thing very strongly.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Mon Aug 19th, 2013 at 04:06:29 AM EST
One thing to think about in terms of the internet companies is how much they sell things to consumers, or sell consumers to various corporate buyers.

The latter, I suspect, will pretty much always need far fewer employees than the former.  Media content producers are fairly similar in that regard - a few writers can generate quite a bit of traffic, which can then be collated and sold.  Without having to worry about distribution of physical product, you just don't need that many people.

by Zwackus on Tue Aug 20th, 2013 at 10:55:25 AM EST
In the software industry a small number of workers can produce an immense IIR.  Three people wrote the iMac operating system and (literally) saved Apple from bankruptcy.  Now the company has something like $100 billion in cash.  No way three automotive engineers could duplicate that 15 year trajectory.

How this happens is complicated.  The quickest example is it comes down to duplication cost of the end-user product or service and the total potential market for the good or service.  Duplicating a piece of software costs around $20 (total) and has a total potential market of hundreds of millions.  Duplicating a car costs thousands of dollars and has a total potential market of several million.  

A further complication is a software company doesn't need all that many people to write a successful program.  In fact, too many people are a hindrance to a successful productization cycle.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Aug 20th, 2013 at 12:16:43 PM EST
Three people wrote the iMac operating system and (literally) saved Apple from bankruptcy.

Wot?

by Colman (colman at eurotrib.com) on Tue Aug 20th, 2013 at 12:23:20 PM EST
[ Parent ]
Yup.  Did it back in '98.

Apple under Jobs routinely assigned hardly anybody to "major" projects.  Example, two (!) people implemented Safari on the iPad.

Jobs was an narcissistic, design obsessed, idea-thief, and control freak but he was a competent, narcissistic, design obsessed, idea-thief, and control freak putting him light years ahead of 99% of the upper management dickweeds infesting Silicon Valley.  And part of his competence was understanding how to motivate engineers.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Aug 20th, 2013 at 12:45:55 PM EST
[ Parent ]
Which operating system are you talking about?
by Colman (colman at eurotrib.com) on Tue Aug 20th, 2013 at 01:13:13 PM EST
[ Parent ]
Don't remember the name.  Ran across the factoid in a book on Apple and it stuck in my head.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Wed Aug 21st, 2013 at 10:04:55 AM EST
[ Parent ]
May I submit that he chose the wrong two to implement iTunes?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Aug 22nd, 2013 at 08:23:58 PM EST
[ Parent ]
Another interesting post, Metatone.

The question I've been tussling with a few years has been somewhat related, but deals with the role of the digital age and the automation of work processes.

While this is a decades (century?) old debate, I'd be interested to learn whether (and if so, how) the process of job creation has been able to keep up with the automation in the digital age, particularly now automation is increasingly extending into the services sector (financials, banking, accounting).

That question popped up reading this and this.

by Bjinse on Wed Aug 21st, 2013 at 05:06:58 AM EST
And why we want it to.
by Colman (colman at eurotrib.com) on Wed Aug 21st, 2013 at 05:17:36 AM EST
[ Parent ]
I think you have to compare (and I hate this word...) ecosystems to get an accurate picture.

The Internet doesn't create jobs in the traditional sense, with full-time pay and benefits. What's happening instead - and what Lanier's book is about - is that content companies like Apple, Google and Amazon can crowd-source temporary and part-time pseudo entrepreneurs by grabbing huge tracts of content space and collecting tolls for content sold there.

So suddenly Apple has a legion of app developers and musicians, Google has video makers and bloggers, Amazon has writers (and video makers soon) who are effectively on the content production lines but have none of the security of a traditional job.

And there are hordes of support workers - designers, editors, marketers, and so on - who are either employed or hired by the content people.

Some of the content people are creating real jobs. Some are doing very well, financially. But a lot aren't.

For a fair comparison with e.g. GM you'd have to include all the support workers - mechanics, spares companies, petrol stations, cabbies, other professional drivers - who work(ed) in the space created by the car industry.

I think it's clear the Internet has been worse at creating both kinds of jobs than the old industrial economy. But I also think the biggest change has been a new emphasis on turning everyone into an heroic Galtian entrepreneur with a strong personal brand, etc, etc, and a brutal indifference to those who don't do well in that kind of environment.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Aug 21st, 2013 at 06:50:19 AM EST
I would not say the Internet creates unsure jobs per se, rather that a lot of unsure jobs are created now. Telephone sales operators often get payed per sale, giving low average salaries (though some can net high sales), previously secure jobs are being privatised and unpaid internships being introduced as stepping-stones in more careers.

In a way there is a similarity with how industrial jobs got started with unsafe working conditions and low payment. It also went hand in hand with enclosure and population increase that undermined the position of the peasants.

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by A swedish kind of death on Wed Aug 21st, 2013 at 09:08:45 AM EST
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