A Saturday Post: The Internet Devalues Everything It Touches, Anything That Can Be Digitized

I appreciate your attempt to summarize the macroeconomic trends -- it's good to have "big picture" views. I'm not as sanguine as you may be about this being neither bad nor good -- it's bad. The net is very good at destroying existing business models that took decades or centuries to develop -- but the result seems to be network effects gone wild and the concentration of inordinate economic power in very few entities (Google, Amazon, craigslist). It took Walmart decades to develop the kind of power that Amazon amassed in less than 10 years. I fear a lot of value will be lost in this disruption and not replaced.

Sprague: I like your example and you make an important point.

There isn't much we can do about this trend. The value will come if we can figure out how to share the wealth of value that Internet and other powerful technologies provide. It doesn't have to be a zero sum game. However, our society is not set up to deal with incredible stresses that will be placed upon it. I think we will eventually get to a better place . . . but the journey will be a rough one.

Well summarized, and I think you're right about all this.

Since I like the word value, and the classical economic distinction between "use value" and "exchange value," I wish you could find another word than value. "Reduces the price?"

I'd like to see the social, use values contrasted to the exchange vales--prices--that have declined.

In the case of Craigslist, the Net created a redistribution of wealth, from newspapers relying on classified ads to Craig Newmark. Do print newspapers even bother to run print ads anymore? I haven't read a print newspaper in print for so long that I don't even know.

Isn't this true also, regarding new wealth, Google, Facebook, etc., that has arisen as other wealth has declined?

To think about this deeply, I think one would have to question the commodification of everything, which the Net persistently resists.

Good piece Tom - I like the survey of areas where this is happening. And wasn't this always the destiny of the web? In the mid-1990s, the promise was to wring inefficiencies out of many different areas. It's happening.

Ann's comment above touched on one semantic issue. I think of "value" as the measure of what a consumer gets from a product or service. It doesn't matter what a seller charges, the value to the end user is the same. It just happens that the price for what people "value" is going down. E.g. Long distance calls. Skype brought the price down, but it hasn't devalued that call from your kids on Father's Day.

Tom,

This is an insightful post.

The internet has brutally driven efficiencies, while it has not been equally successful at creating credibility.

Credibility is the next big challenge.

While the collpase of business models/ companies built over decades is very painful - the internet has enabled access to education and all kinds of services that werent possible/ affordable at all.

This 'equalizing effect' is as intriguing as the degree of engagement that the internet allows you to choose. This is already in play, with a kind of 'reverse snobbery' where your power quotient is also reflected by the uniform and sketchy story that you put out in the public domain. The real story is still hidden and requires both people and technology to blow this cover.

We are living in an age where irreversible trends seem to be peaking synchronously - with a message we're still decoding.

Best regards,

Anita Lobo

Now I am waiting for the investment community to help develop cost reductions in other areas: energy, food, health care. I realize it is hard to develop new forms of abundant, renewable, clean, low cost energy, but we need that more than we need another incremental Internet improvement.

Very very interesting. A person I know, who is a top manager at the Italian Post, once told me that "not all saving is good".

He gave me this example. Say that for some reason we manage to send digitally all the stuff that still travels by surface mail.

That would vaporize some billions of postal revenues without - reasonably - creating a new Google.

What will each business and/or person have saved? Probably 0,001% of it's/her's daily spend. Will the businesses be much more efficient after that? Hardly.

Will people be much happier or "liberated"? Not likely.

Are we sooner or later going to digitalize 99% of what now travels by surface post? Definetely.

Tom,
It's good to have Saturdays to think big. Your observations are spot on. We see an explosion in the commoditization of products and services. Today, the Internet drives this process but it didn't start with the Internet. Always looking for the more efficient way to do things, is inherent to capitalism (I am stating a fact, not a value.) Look at outsourcing which was a popular practice before 1996. To your other point, I believe the societal change has started and it is called the social web. Last thought: How would you write this article if you lived in India and just landed a job in a telemarketing firm?

The problem here is your word choices. Value and price are not the same thing. Many things have value to a person, but no price can be assigned to them.

Devalue means that something loses its value. A currency is devalued when it can be officially exchanged for fewer goods and services.

What you are saying is that the long term trend of any internet service is to cost less. Different people will like or dislike this fact. All this means that when there is an increase in the amount of any item, the less you can sell it for.

Another word for this is productivity; getting the same services at a lower price. This is universally accepted as good: it is how standards of living rise. What are you -- a Luddite?

Louis: I'm not a Luddite I'm merely describing a powerful trend. You are the one that seems to be making a "value" judgement about this essay :)

Anita: I like your imagery of irreversible trends peaking. But aren't we always in a period of irreversible trends peaking? At least in modern times of the past couple of hundred years.

Matthias: If I lived in India and I were benefiting from this trend then I think the article wouldn't be any different. Just as gravity is no different in India than it is here in San Francisco :}

Ann+Hutch: Yes, the term "value" has a semantic issue because of its common use in a cultural sense. Exchange value and use value are the way economists have sought to avoid confusion but not very successfully.

Suzanne: You put your finger on the biggest obstacle clean tech faces: it isn't a disruptive technology, it is incremental at best, which means it will face a long hard slog.

Fabio: Excellent story and point that you raise: Is it worthwhile to allow technology to destroy an industry when the distributed benefit is so small per person, per company?

I used to work for a technology subsidiary of GM. At the time I calculated the gross revenue per person at about $100K /year/person. More successful companies were doing $250K+/year/person.

Craig's list may do (your numbers) $3 Million/year/person. I would classify them as very successful. It looks like they represent the remaining value in the system, while the other areas are subsumed by technology.

I believe you are exquisitly right about the net being used for sharing and I know free is the exact opposite of the Grade A "consumer buy it model" that the world market is built on.
I think Craig is one of the best people on earth because of his choices, his morals. And the google boys with all their money who help china censor their people are the pigs of the planet, considering their father ran away from communist Russia to have a better life in america those google boys are true white trash ruining the world with their lack of morals.

The internet is a black hole devouring all institutionalized communications.

There is a very simple economic reason for your observation:

- The value of music has dramatically fallen
- Movies and TV shows cost less to watch
- Newspaper and magazines are available online for free
- We don't have to buy much software anymore

The cost of copying digital information (information = everything that can be digitized) is zero!

Producing digital copies of movies/music/news/software information for 10 people costs the same, as making digital copies for 100,000 people and offering them on the internet.

The cost of producing more physical products is much higher. In the old economy the company with the best access to resources and the lowest production costs will win.

The effect of digital information: If company A offers their information good for 20 dollar. Company B could offer the same for 12 dollar, company C for 4 dollar, and after some time in this competition, they all end in offering it for zero money, for free. Because every market player has the same production costs of more copies... zero.

The only way to get out of this circle, is to offer something truly unique. Because the competition in the 21st century is always global.

Tom-

Loved your article!

And, love the internet and its technology. But, just wondering:

If so many things are being devalued to free, where is the money going to come from to pay the workers to produce free content? (Newspaper advertising paid for the reporters.)

There will always be the "old economy" where food and other tangible goods are produced, but most of that is done outside the U.S. now.

All those people who are presently losing their jobs, might find that the jobs will not be there to go back to. How is our culture going to be able to keep it's current standard of living? It appears that is also being devalued.

Pessimist me thinks we are on a downward spiral. But, most of us could easily do with a lot less.

Just wondering- :)

konterkariert: Exactly. It's a race to the lowest cost denominator. Google makes sure no one can get below it's low costs of business. We used to talk of price umbrellas with IBM and its computer business - now things are more like a price manhole cover - you can't pry it up.
Zoe: Yes, the jobs won't be back, it's not a business cycle, it's a downward spiral if you are caught in the drain. We could figure out a way to share in the incredible productive capacities of our technologies but that's also a scary future, a regulated one. But that's the eventual direction.

"Value" has two meanings. MBAs are taught in business school that their goal is to "maximize value", but that means only monetary value. "Value to society" means zero to them.

Tom's essay is a good summary of many trends. Digitization lowers the costs to zero.

Another good example: Rick Astley's song "Never Going to Give You Up" has been viewed over 100 million times on YouTube. Google's royalty payment to the songwriter? $17. Digitized media is not good for artists.

Maybe we'll see a move away from digital? I was at a music concert in Denmark last week. The rules: nothing electronic. No MP3s, no iPods, no recorded music, no loudspeakers. Everything was acoustic.

Advertising will also collapse. Google tried to do ads on AM/FM radio, but the bids were only $0.15 for 30-second ads. Radio stations can't live on $6 per hour so the radio industry quit on Google.

The same with TV. We pay $2 to run an ad on cable TV via Google.

Google's advertising platform will kill TV advertising (currently, a $70 billion industry). All of those ad agencies, TV studios, camera operators, etc., will lose their jobs.

The Internet has drastically affected the used book business, too.

Used to be that you could search for years to find that one title you wanted; this happened to me many times. In the old days, some bookseller in Idaho might have had a book that a guy in South Africa desperately needed, but they couldn't find one another.

Now, if it's available from one of the thousands of bookdealers who put their inventory online, you can find it in 10 seconds.

As a result, the price of a book has now dropped to whatever is the lowest amount somebody somewhere in the world will take for it.

Common books or ones that exist in moderate quantities have fallen through the floor to pennies.

But decent and rare books have gone up, as there are many more buyers for them, relative to before.

Interesting effects.

Chester: Thanks for the used books example. And yes, rarity is always valuable. And information about rarity can bring down the price of items, such as used books. De Beers approach is to control the rarity of diamonds, which are not as rare as you might think.

Tom --

Great article as always, and great comments, everyone. I am seeing these just today, and joining the conversation quite late.

The trend I see is that yes, information of all kinds has become commoditized.

This is bad for information professionals (my own career change away from pure info tech began with the commoditization of my field, email, in the mid 90's).

But it is potentially a huge boon for the challenging, information-dependent problem-spaces we face today. Addressing our crises in physical infrastructure and resource management, in healthcare technology and practice, in education and thought development -- all will be supported on a foundation of pervasive information. Information is far from sufficient to get us through the challenges ahead -- but it is critically necessary.

Developing a much deeper understanding of the natural world, and learning from its engineering prowess, will be another critical element. To break through beyond incremental innovation in clean tech, we will have to re-member and re-imagine our relationship with, for example, carbon -- that currently demonized fundamental-to-living-systems element. Learning to understand and engineer natural carbon cycles may allow us to break through our energy and climate challenges, and to disrupt our too-slow rate of progress in this urgent area. This is one of the areas I plan to watch.

This was a great article, Tom! I actually sought this out because there is a trend that I am seeing in terms of devaluation on the Internet, but it has nothing to do with digital (re)production or jobs.

No, I'm seeing the Internet as a forum for devaluing other people. I was waiting for this example to show up throughout the article, but found it to be conspicuously missing. It's true you mention in your title that anything "digitized" can be devalued. And, while a person technically can't be made digital, the expression of one's personality and identity can. Without any physicality on the Internet, a person in that setting looses a large part of what makes him/her human, and is susceptible to being reduced to an object.

The anonymity and elusiveness of this virtual world opens doors for easier ways to dehumanize other individuals. I guess my point is that it's easier to be hateful or inappropriate when you're guarded by an anonymous screen name and many miles between you and your target.

On the other side of the coin, it's worth mentioning the kind of community building that the Internet allows for that didn't exist nearly 20 years ago. You have to take the good with the bad, but I'm wondering if "people" can't be added to your extensive list of devalued internet objects.

Daniel: You raise an interesting point about "devaluing" persons. And you do see some of that happening -- attacks on a person's character, intelligence, looks, gender, reputation, etc. And it can be devastating especially amongst school children where cyber-bullying continues to be a big problem. I think such problems can be partially solved by deleting the hate. Yet so few web sites want to moderate what is said by their users. This is not a free speech issue, this is a hate issue and I believe you should delete nasty comments. Some people argue that anonymity should be banned and that this would decrease the amount of nasty comments and personal attacks. I don't see how you can prevent people taking assumed names. Active monitoring and moderating the content is by far the best way but it takes time, it takes work.

Sorry, I could not disagree more. The Internet brings much value. This is like saying "TV devalues books". Such a sweeping statement is naïve and narrow minded, smacking with tunnel vision and a pinch of western elitism.
Just a few examples:
1. I am sure citizens of a developing market like India or China were new jobs were created do not feel that outsourcing has devalued their jobs, quite the opposite. The simple fact is that sitting in silicon valley with inflated prices all around makes developers too expensive. A gallon of gasoline in California is more expensive than most other places in the US. Many other things are also. Other costs such as medical are insanely high in the US. Its not the internet – the US is to blame for pricing itself out of the market. The market has simply responded by looking for better value, rather than inflated value. Consider this – the benefits (medical etc) paid to employees in the US to build a new car in a US motor plant costs more than the entire cost of Tata’s new budget car in India. When you price yourself out of the game, crying foul when someone offers new value is not a viable solution.
2. The music industry has failed to move with the times and adapt to the market demands. The Apple music store has done very well selling the songs people want at $1 a piece – a good move. Surely this is not devaluing that music, it’s a new channel. Even that new channel fails however when in many markets Apple will not accept the purchase. You can not buy from most places in Asia. You examples of lala.com and others – these are new businesses that have moved with the times – yes, they may have replaced a bricks and mortar music store – but the odds are they are making more money than those stores – i.e. more value and probably more jobs.
3. With videos, it most certainly has not been devalued. Its about efficiency. Its far more efficient to deliver via a stream than a physical store and disk. Are the profit margins of Netflix lower than a bricks and mortar store? This company is staying in business for a long time – i.e. makes money, which in your narrow definition equals value. Other companies like Hulu are moving with the times and making new value as well. Don’t make the mistake of lower cost equals lower value, its simply not true. Efficiency and productivity changes along with new deliver models enabled by the internet make new revenue streams viable.
4. Graphics designers – now have much more work because of the Internet. Did all the graphics, layouts and artwork on millions of web pages just magically appear? No, graphics designers did the work. Work they would not have done without the Internet. New value was created.
5. News papers online for free is a good thing. I have many friends in the publishing industry. Many of them for physical news papers. The online versions are generating for many more revenue/value than the print versions. Not just through advertising, but access to back files and other innovations provided by the internet.
6. If you don’t have to buy much software, then I guess all those software companies should be going bust???? Instead there are more software companies today than before the internet. Many have web based models or sell via the web. Many sell components to build software. Many distribute their software online. Many sell their software, while others make money via other means such as subscription or embedded ads. Access to software is easier and software of value is still being purchased. Only with the Internet it can be found easier and purchased easier – i.e. more value.
7. Cost of distribution is less. Yes, this is true. Does that mean that the housing market devalues. Online real estate sites have helped to add significant value to this industry and many others all because their housing catalog can be distributed more efficiently. Many websites like www.gizmag.com used to be paper first, but moved to online because they make more money and distribution is cheaper. This is one example of a paper magazine that switched to the web and ditched paper. Today this company like many others reaches more readers and makes more money than when they did not use the internet and are now internet only. Blanket statements like the “The Internet Devalues Everything It Touches, Anything That Can Be Digitized” as simply wrong.
8. Telephone is less expensive, not because of Skype, because of many technologies. The amount of calls that can be placed through an undersea cable is now vastly higher because of fibre optics, more cables creating competition and many other factors. May parts of the world don’t have sufficient connectivity to even run Skype reliably. VOIP is a contributor, but not the cause.
I could go on with flaws in just about every argument you have put forward. The fact is the statement “The Internet devalues everything it touches” is wrong. Even most the examples you have provided are wrong. The reality is that the Internet has bought about new business models and greater efficiencies. This in turn has created millions of jobs world wide. Industries that fail to adapt to a change in market demands, irrespective of the cause (Internet or otherwise) are doomed to failure. As Charles Darwin said “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
Value is not about cost, its about return. Nearly every example you have provided has given “better value” to consumers and better value to the industries when the industries have adapted instead of watching the change and doing nothing about it.

I agree that where value is destroyed new value is created. But the creation doesn't equal the destruction, it is not a law of physics where matter and energy are always conserved. I make no ethical or moral judgements I am bringing attention to what the Internet enables, to what is already happening.

I agree, value created does not equal the value destruction. Read the examples I provided above. In many cases, the value created is many times more than the value destroyed. This is the case with video, audio, new jobs in India and China, Graphics design, publishing, housing market and much more. Simply look at the examples like www.gizmag.com, which makes more money since it moved to web only than it ever did in the print business - and they no long have to kill trees and polute the environment with paper and plastic wrappings, ink in printing presses and fuel to deliver the printed magazine to do it - there is value for you right there!!

Your article is very narrow minded. Not once did you mention the millions of new jobs created by the Internet - is that not value? How many PCs do you think would be sold if there was no Internet? How much media would be sold? How many PC addons, printers, modems, phones, hard disks, joy sticks, scanners etc would be sold without the Internet? How much undersea cable would be laid? How many 3G phones would be manufactured? How many semiconductors would be manufactured? How much electricity would not be consumed? How many software companies have been created because of the Internet? How many people access knowledge that they did not have access to by any other means because of the Internet? This list can go on and on.... Don't all these industries and many more have new jobs and new value because of the Internet? I am sorry, but your argument is totally flawed and narrow minded, while completely ignoring the simple fact - with or without the Internet, industries change and evolve to meet market demand. As said previously, those industries that adapt get value, those that remain stagnant in old models decline. Its pretty basic.

But the real question is value for who? The consumer is certainly getting more value - something that was often over inflated in price from the outset. Perhaps its more of a case of businesses not delivering the value that the consumer wants and demands. Its a bit like Walmart. You dont see their customers complaining that things are cheaper when done more efficiently.

Bottom line - industries and businesses can complain all they want that the Internet is doing them an injustice. But the reality is that while they stick their heads in the sand and dont listen to their customers, charge overinflated prices because they have not adapted to the new mediums and markets that have been formed as a result, they have noone to blame but themselves with their inefficencies and outdated business models that fail to deliver in a modern world.

P.S. Sorry my English is not so good, its not my first language and I am still learning :)

One more comment to add to this. The US has a H1B Visa program. It was created for a reason - not enough individuals in the US with the right skills. This article from 1989 entitled "US PUPILS FARE POORLY IN MATH, SCIENCE TESTS" shows part of the cause (http://www.encyclopedia.com/doc/1P2-8106353.html.) 16 years later another article entitled "A fair comparison: U.S. students lag in math and science" (http://www.educationreport.org/pubs/mer/article.aspx?id=7036) in which the US was ranked near the bottom of 45 participating countries. Little has been done to improve the education situation and in many cases it getting worse. I have friends in the US who are teachers and they are paid so poorly its almost a crime - yet these are the very same people that are supposed to educate the future of the nation. My friends classrooms are so under resourced that they often have to buy supplies for their classes out of their own pay checks. Even they earn so little, they do their best to help. Meanwhile in Asia, my son attends a private school for less that US$1000 per month and has all supplies provided for and an adult to child ratio of 1 adult per 7 children. Now thats value on all fronts!!!

Perhaps some of the root causes should be addressed before the complaints bought forward - what is the modern US bringing to "value add" and higher up the "value chain" that cannot be done be done elsewhere better and cheaper. A legacy of success does not guarantee a future of one.

This is not an anti-US rant, this is a simple analysis of facts on the ground. Many countries have to run faster just to stand still, many are. The US should not be an exception to this rule. It used to lead, but now in many cases it follows. Its time to get moving again.

I totally agree. I think it is a disgrace that Silicon Valley's public schools are often basket cases when they should be showcases. We can't go around saying to the world "we are inventing the future" yet our own communities are so poorly educated and our schools so poorly funded. I'm fed up of super star Silicon Valley CEOs flying to Washington D.C to complain about education yet they won't walk down the street to their local school and help in their communities.

Tom, it would be nice to get your perspective on the points that I raised. I spent considerable time addressing what I personally believe is correct and the gaps/bias in your article.

After all, the Internet has not "devalued" your ability to write and publish this article or the ability for you to draw a revenue stream from the advertising embedded in this very page. Could you gain the same revenue from print ads?

Its more than a little ironic that all the advertising and promotion on your own page, many of which you draw a revenue stream/create value from, is enabled and value added by the Internet. Cloud Computing from Tibco, CNET are the the advertisers - these businesses are totally enabled by the Internet and would not exist without the Internet. All the upcoming events including "MusicTech Summit #5" (directly in contrast to your statement that the Internet devalued music - note, this is #5, not #1, someone must be getting value!), SVASE, MacWorld etc, are all enabled and enhanced in value by the Internet. Even your own webcast...

If your argument that "The Internet Devalues Everything It Touches" were to hold true, then this would mean that this very article is of no value to anyone, including yourself. I do not believe that is the case.

Mr Reality Check: All the revenue you attribute that comes flooding in from this page of ads amounts to a pittance. I've barely made any money in the past six months and have to turn to consulting to try and support my habit (of writing SVW.)

Yes, there are companies using the Internet to create value ($$) by disrupting the value of other companies. Yet they are vulnerable to the same disruption down the line. And, yes, this article does have value but I'm unable to figure out how to collect its value without closing access except to subscribers. I see nothing that contradicts the title of this article.

Ok then. Lets just follow your logic. The Internet Devalues Everything It Touches, which of course follows on with guns killing people, pencils misspelling words, cars making people drive drunk and spoons making people fat.

With this logic, your inability to monetize articles such as this is not because of the Internet, its because of the real value of your article. Open the blinders. Please tell me how a software developer in India is devalued when he got new work from the Internet. How about the other examples that your have failed to consider that I posted above.

If you are threatened by the Internet because of your lack of ability to create value in a market that constantly demands better, then perhaps you should look to addressing the reasons for change or your inabilty to change to accomodate those reasons before crying that the sky is falling.

If you are indeed getting value, monetary or otherise from publish these articles, then one must of course thank you for you charity.

One final comment. What is wrong with your title is simple. Its too broad and therefore invalid:

The Internet Devalues EVERYTHING It Touches, ANYTHING That Can Be Digitized

Your own response "Yes, there are companies using the Internet to create value" even contradicts this title.

Enough said.

Mr Reality Check: Show me an industry sector which deals in digital products or services that hasn't been drastically affected by the Internet? The fact that some companies are creating value by exploiting the Internet's technologies doesn't devalue my argument because the overall value is being depleted. And those companies are then vulnerable to the same challenges. PS: Why don't you use a real name?

Most have been affected, but that was not your argument. Your argument was "The Internet Devalues EVERYTHING It Touches, ANYTHING That Can Be Digitized". It is not “Digital products and services have been drastically affected by the Internet”. If you are going to make such a blanket statement using the words “everything” and “anything” and post in such a public space, then you should at least be willing to defend it. I listed in response to your earlier post many businesses that have benefitted without destroying another. Take the property industry for example. Did it get devalued by the Internet? Did individual musicians get devalued by the Internet? No – they go empowered, bypassing brutal music giants and cutting out the bad practices of many middle men.

P.S. I don't use my real name because your website give me the value of being able to post anonymously. You have given me such a value. Asking me why I don’t use my real name is a pretty weak defence. In my posts, I make clear and valid justification for nearly all my statements. You on the other hand have failed to acknowledge the value created in the examples I have provided. Instead posting blanket statements which are simply and unequivocally false. Not one shred of proof have you offered that your sweeping title statement is correct in response to posts disagreeing. This my friend is why you make a pittance on your articles. Publish something solid that can be defended and is based on fact and you will get respect and you will get readership. If you don’t generate enough hits like TechCrunch or GizMag or hundreds of others do to make money, then there is only one person to blame. Good luck with the consulting.

Mr Reality Check: The property industry has been devalued, office real estate is in the dumps because people can work from home and they do. IBM only has desks for 60 per cent of its workforce... Musicians have been devalued, they use the Internet to distribute their content but have to make money from live shows when they used to make more money from sales. And Ticketmaster will take 100% fee just for booking a ticket online to a show, they are losing out on both ends of the deal. You are welcome to keep posting under your alias I was just wondering why, not defending...

I give up Tom, you are correct on EVERYTHING. In the exact same way the Internet devalues EVERYTHING. To say realestate is in the dumbs because of the Internet is nothing short of outrageous - did you not notice the world financial crisis around you triggered by US housing. Wake up, climb down from your ivory tower, remove your elitist blinders and smell the coffee.

Nearly EVERYTHING you have put forward above is flawwed in logic. Clear black and white examples showing why were provided that you refuse to acknowledge. This is called progress my friend and you clearly can not keep up with it.

You live in Silicon Valley for a reason. You write this column for a reason. You consult for a reason. Unqualified hunches that cannot be supported by fact dont belong in any such column as this. They belong on conspiracy theory sites. Try doing some research to support your conclusions with facts before publishing diatribe such as this. Or you can continue this foolishness and write something that is of no value to anyone. Opps, there is that value word again.

This is my last post. Clearly there is no value in trying to debate with you as you have not come back with one fact based response that can even remotely defend your position.

Bottom line: The Internet devalues SOME things it touches, but enables MANY others. Change, progress and evolution driven by market demand ARE inevitable. Those who do not adapt to those changes and move their business models to meet this demand WILL be left behind. --- This includes you.

P.S. Perhaps next time you will not write such broadly blanketing statements that are not based on fact or reality and cannot be defended.

Mr Reality Check, you sound very angry, I hope the Internet hasn't been disrupting you. Would you write in this manner if you had to use your real name? BTW I am not against progress I am just describing something that I see, some things that Internet technologies make possible. I am not critical of what is happening, in fact I welcome it, because it accelerates us into what I feel wil be a new golden age of humanity.

I have to agree with Mr. Reality Check. See the article at the Guardian news paper that was published on this topic in September this year.

Selected quotes:

In a statement seen by the Guardian, a coalition of bodies representing a range of stars including Sir Paul McCartney, Sir Elton John and Damon Albarn attacks the proposals as expensive, illogical and "extraordinarily negative".

The Featured Artists Coalition (FAC), the British Academy of Songwriters, Composers and Authors (Basca) and the Music Producers Guild (MPG) have joined forces to oppose the proposals to reintroduce the threat of disconnection for persistent file sharers, which was ruled out in the government's Digital Britain report in June.

-----Seems all these guys diagree with you that they are being devalued.

New ways of getting music online began to appear. MySpace debuted in 2004, providing a new platform for bands to interact directly with fans, allowing them to post music that could be listened to instantly. In the same year, digital single sales surpassed physical single sales for the first time. In 2008 Spotify, a legal ad-funded online streaming service, was launched allowing music fans to listen to hundreds of thousands of tracks and albums instantly, and for free.

Video games like Guitar Hero, released in 2005, began boosting music sales for some artists. As CD sales continue to fall today artists are making more money than ever from concerts – figures from PRS for Music revealed that UK music tour revenues increased by 30% last year. As a result, record labels are increasingly trying to sign artists on "360º contracts" that take a cut of merchandising, live music, and sponsorship deals.

The industry continues to look for new ways to make money in the digital age. In June the cable company Virgin Media announced the launch of an unlimited download service in partnership with the world's largest music company, Universal, which would allow subscribers to stream and download as many tracks as they want for £10-£15 a month.

------This is the direct opposite of what you have tried to show, but failed to back up with fact. Mr. Reality Check is a bit harsh, but he is right none the less. There is clear examples of value being created considerably greater than that of the legacy business models. The music industry is one good example. It has moved (late, but better than ever) to new Internet enabled models that are now giving better returns. It is adapting to market demand.

Dude, do some research to support your arguments. Stop shooting from the hip.

Sorry, I forgot the article URL from my post above: http://www.guardian.co.uk/technology/2009/sep/03/youtube-prs-deal-file-sharing

Thanks David. Clearly the music industry has been disrupted. Making money from live acts is something which is outside the scope of the the Internet, which deals in purely a digital experience. Although live webcasts could offer additional pay-per-view opportunities. It seems from what you say that the jury is still out as to whether the labels will be able to transform into new business models in the same way that newspapers are being forced to transform their business models. Yes, the Internet does enable new businesses to be formed but it does so at the expense of the old establishement. And those new businesses themselves, have to deal with new disruptive challenges that the Internet enables. In many ways, this is nothing new, technology has since the beginning of the industrial revolution, been used to create ever larger production efficiencies. The basket of technologies that comprise the Internet seem to be accelerating that trend and disrupting those industries that can't change quickly enough. If you combine Internet technologies with the acceleration in manufacturing technologies, it won't be too long before our society can produce much of what it needs in terms of products and services, for a fraction of what it costs today. Since labor is the largest cost of any manufacture or service, ultimately, it is labor that gets disrupted. Can labor reinvent itself? Yes, to a degree. But this is the end point that ultimately interests me.

I agree with David Harrison - stop shooting from the hip.
Your sweeping statements are what are tripping you up.
Examples:

1. Since labor is the largest cost of ANY manufacture or service... – how much labor is involved in Internet radio? How much labor is involved in having my company account for CRM at salesforce.com? ANY does not seem to apply.
2. The Internet Devalues EVERYTHING It Touches, ANYTHING That Can Be Digitized – Nuff said.

The second thing that is tripping you up is when you contradict yourself constantly.
Example:

1. “Yes, there are companies using the Internet to create value … … … I see nothing that contradicts the title of this article.” Does this not contradict the “EVERYTHING” and “ANYTHING” statement in the title?

The third is when you fail to research or understand what you write about and then pretend to talk like an authority:
Examples:
1. The music industry: "Making money from live acts is something which is outside the scope of the Internet, which deals in purely a digital experience." - How many live broadcasts have been done on the Internet? How many Internet radio stations are there? How many regular radio stations also broadcast live on the Internet? How much music merchandise can be ordered over the Internet? How many videos can be ordered over the Internet? Do a search on Google for “live concert” and it gives you 39 million results. Samples of the headlines: “Apple Signs with Live Nation for Live Concerts via iTunes‎”, “WolfgangsVault.com - Free streaming live music, Live concert ...”, “KISS Live, Ustream.TV: Kiss Live from the Staples Center in LA ...”, “John Mayer's Live Concert Event with Daily Noise Guest Host ...”, “LIVE 8 – The Long Walk to Justice” - are these all outside the scope of the Internet? All 39 million hits on Google surely are not
2. Your comments on the housing industry…. Nuff said.

The fourth thing that trips you up is blaming the Internet as an all encompassing evil for all the items you used in your examples and responses.
Examples:
1. The housing market is devalued – are you sure this is what caused it, not bad financial practices?
2. Outsourcing to lower cost markets – hmmm – Indians and Chinese are not devalued, their value has increased. Is the Internet the reason for these jobs moving, or did it simply make it easier while America priced itself out of the market with 10%+ salary increases and unions wanting more and more year after year.
The fifth thing that trips you up is because of all the first three things above, you are unable to defend your position, so you simply ignore sensible debate and ramble off on other fronts when there is a challenge to any of your statements.

Yes, I would write like this if I were not writing anonymously. I have done so many times and in far more public forums than this. I am a former Gartner analyst and I am used to having to defend my positions from extremely critical peers within Gartner before anything I wrote was published. This was at times harsh and very direct, much more than anything posted here. Gartner’s model is simple – “if you cannot defend your position internally to other analysts, then you don’t publish as it cannot be defended in public.” – hmmmm … food for thought Tom. Once the research I wrote was published, then I had to defend it in public so I had to make sure my facts were correct and checked…. Hmmmm… more food for thought Tom. But back to your blog – if you don’t want people to use the feature of not including a real name, then don’t offer it as a feature. While the feature is still available, you have no reason to complain when the feature you offer is used – you are in control of your own blog.

How about a new title for your article – “The Internet devalues EVERYTHING and ANYTHING that I write because I blame the Internet for EVERYTHING and ignore other much more relevant influential factors, I don’t research before writing, I fail to understand the subject matter, pretend to speak broadly as an expert when clearly I am not and I constantly contradict myself while shooting from the hip and yet I still cannot figure out why all the revenue that comes flooding in from this page of ads amounts to a pittance” – Much more appropriate and accurate.

Oh… no I am not angry – I am entertained. Nothing more… I have read just one article of yours – I am too scared of what might come out if I read any more.

One thing I will give you to your credit – at least you have not censored any of the posts, even if they are critical of your work. Thank you for giving me this value.

Mr Reality Check: Your logic: anything that devalues something else via Internet technologies, is actually proof that value is created, therefore it negates the fact that the Internet devalues anything that can be digitized?! There's no way forward with that argument...The use of Internet technologies, actually most technologies, is to reduce the cost of a service or product. The way that's done is to improve productivity, and productivity is determined by human labor. If you replace human labor, to any degree, that reduces costs. If the cost savings are large enough then you have the makings of a disruptive technology.

The value created is at the cost of the disruption that it enables, and it is not a zero-sum operation, there would be little point if it were.

Also, your example of Internet radio for instance, and CRM, does involve labor, somebody had to do the programming, someone has to do the admin of the IT systems. Human labor is involved within everything we do. Less and less human labor is required than before, but it is still there.

And yes, I won't censor any posts, I like the debate and thanks for taking the time to engage.

Tom, This is a very thoughtful post and most of the comments are interesting to.

I look forward to reading them all tomorrow.

In the meantime. Thought I'd chime in that I agree that many things have been devalued by the strategies employed on the internet so far. (And by the way, lowering the price does lower perceived value.) The next step is to capitalize on the internet's real time interactivity possibilities to add new value dimensions.

So far the internet has been used primarily as another distribution point, not a technological breakthrough that adds new value.

Katherine Warman Kern
@comradity

Thanks Katherine. You make a good point about real-time capabilities of the Internet producing something new rather than a more efficient distribution system.

Tom: Thank you for what I feel is the first response you have given to my posts that has had some solid thought applied to it before writing and is much more constructive in nature. I will do the same in my response.

Quote: Your logic: anything that devalues something else via Internet technologies, is actually proof that value is created, therefore it negates the fact that the Internet devalues anything that can be digitized?! There's no way forward with that argument...

This is not my logic at all and I have not once stated in my responses anything similar. My argument is that new value is often created by efficiency, delivery time or relevance and that value is far more that the initial revenue from first contact. Often there is no devaluing at all, even at this first stage, which is why I took exception to your article and the very broad and overreaching title. Value is what someone receives (not just money), not just what the companies selling goods or services receive. What you label devaluing many others would label competition. Amazon competes with bricks and mortar book shops. The publishers and authors of books don’t feel devalued. They are selling more as a result. Not only that they are able to have added value from people reviewing the books online and many other innovations that Amazon can do that a bricks and mortar business can not. For example, “people who bought this book also bought abc book and xyz book”. This is value for the customer, value for the publisher, value for the author.

Bricks and mortar shops could have chosen to go online and had a dual presence. Few did. Barnes and Noble tried, but came to the game late. They are still successful online, but a new entry Amazon is the clear leader. Barnes and Noble could have competed with Amazon on the ground and on the Internet much earlier and perhaps they would have competed better, but they did not. Amazon then expanded into other services. Barnes and Noble stayed in their traditional model. These two companies had similar opportunities, it could be argues that Barnes and Noble could have more opportunities even given their brand and track record. They did not adapt to change and market demand.

Quote: The use of Internet technologies, actually most technologies, is to reduce the cost of a service or product. The way that's done is to improve productivity, and productivity is determined by human labor. If you replace human labor, to any degree, that reduces costs. If the cost savings are large enough then you have the makings of a disruptive technology.

This is not strictly true. In the example of Amazon / Barnes and Noble, the books online are about the same price as bricks and mortar book shops. If you add shipping, perhaps the books are more expensive online when this is added to the total. But what makes the products more attractive online is that they are easier to find and there is a lot more information available. Amazon has different costs than Barnes and Noble’s bricks and mortar operation when it comes to delivering its product, but that does not mean that Amazon has lower costs than Barnes and Noble.

Quote: Also, your example of Internet radio for instance, and CRM, does involve labor, somebody had to do the programming, someone has to do the admin of the IT systems. Human labor is involved within everything we do. Less and less human labor is required than before, but it is still there.

Yes, there is labor involved. But its not the same labor. This has created new labor in many areas and often at a much higher cost/salary. For example, a network engineer who would not have had a job at Amazon.com if they were not online, could not go and work in Barnes and Noble selling books at the same salary. New jobs are created, often in a domino or spider effect. For example: Amazon sells books online – new jobs are created in programming, graphics design, market research, network design, accounts, admin, warehouse management, crm management, salesforce management etc. From this, suppliers create more jobs to meet the new demand created by Amazon. Amazon also contributes to bandwidth consumption, many ISPs grow or are created as a result of this new demand, new jobs are created. Telcos respond to the demand and lay new cables, launch new satellites etc, all creating new jobs. In the delivery industry, new jobs are created in Federal Express in countries around the world to support the delivery of these products and goods. Other countries Internet use increases as a result of companies like Amazon, new business are created as a result and new jobs are created. This continues on and on. Some business increase, some drop. This is healthy market competition that is normal in any business with or without the Internet. If I own a corner store and 711 opens next to me – the same economies of efficiency are present. I arguably get better value from 711, because I can buy more variety of products from cheaper suppliers who produce more and employ more people due to bulk orders.

Value is not limited to the revenue for the legacy company that was first in the chain between end consumer of a product or service. Value is much broader reaching and ranges from what the consumer receives on one side through to the employment of a scientist that worked on a more fuel efficient rocket that was used to launch a satellite for extended communications capability. Value is not limited to creating value within the borders of the US. The Internet is a global platform. Value was created for many companies outside of the US. US companies declining as a result is about competition and what the end customer, many of which get better value, which is in turn passed on to consumers. You don’t find many Wal-Mart customers complaining that their clothes are too cheap. There is a market demand and Wal-Mart filled the demand. Some may have lost their jobs due to Wal-Mart, but many more jobs were also created. Where people have been employed may have moved, this includes locations in the US (i.e. different states doing work more efficiently though central distribution hubs than a local network of smaller distributors) and jobs created outside of the US in places such as China. But there was none the less value created in many elements. Looking at just the one spot of a company that did not adapt or could not compete is a very narrow view point. That same company could have failed for many reasons, including poor management, other non-Internet competitors etc.

Another angle while continuing to use Amazon as a case study – I have many friends in Japan who love buying books online from Amazon.com. The English books are twice as expensive in Japan as in the US, even when you include the shipping cost. Not only that, many books are simply not for sale in Japan. With enough overseas orders, Amazon would need to increase capacity, so hires more people to manage warehouses, for delivery, to market in foreign countries etc. All value creating, across the world in many sectors. Richard Florida wrote a book entitled “The flight of the creative class” – the same principles that apply to making markets attractive to talented people and they move, apply to customers and markets for products and services. If individuals are better served, profit more, have better value, from one location than another, they will move. When a company stands still while others are running like many bricks and mortar companies have done, is it really any surprise that the company is left behind and its customers have moved forward.

My entire response is further proof that your article title and much of the justification you initially provided is far too broad and all encompassing, while at the same time looking with tunnel vision of just a small space with respect to what value really is.

One more perspective on value – you mention that you earn very little from this blog. But is revenue directly attributed to this blog from advertising why you spend so much time and energy doing writing? There must a reason that you write and I doubt it’s the pure love of writing. Through this blog you are able to create/extend your own personal brand. You are able to further expose your credentials as a former FT journalist and as a result increase your exposure and potential customer base when consulting. I would expect that many of your consulting customers found you via this blog or reviewed your capabilities and the potential value that you could bring to their business by reading your articles. This in turn creates further revenue for you in the narrow definition of value being money that you have defined. I expect that you could not charge the same rates if you were less known and the Internet has given you the opportunity to increase your own personal brand value.

How about an article that explores the value chain created and destroyed in depth, not just using the narrow definition of this article. Case studies of Amazon or even your own blog in more detail would make a good starting point. There are hundreds of thousands of examples that could be explored.

Thank you for the constructive debate.

Thank you Mr Reality Check for the reality check :) Thank you for engaging.

Tom-
I found your article to be very thought provoking and interesting. I'm now following you on Twitter!

Also enjoying the civil debate in the comments. My two cents; in many of the cited industries the hard $$ value has been irrefutably decreased (a 45 rpm single of the Beatles purchased in the 60's would have cost more than $3.00 in today's money).

The question is, who's LIFESTYLE is being devalued? Third world workers would have a vastly different perspective on this question than someone in say, the Silicon Valley.

Rick: Thanks for your feedback. You make an excellent point about how the Internet has been abe to help in the distribution of wealth. But it is not a zero-sum operation. The Internet enables business models that can challenge existing businesses because they are deflationary--that's the reason they are successful because you can take costs out of the system. This is true of all successful technologies throughout history.