The hidden value of digital free goods

James Surowiecki frames the Twitter IPO frenzy in the context of perhaps the most important unanswered economic question of today: How do we value the part of the economy that is free? How, exactly, do we find $24 billion in just $535 million revenue and 30 million active users?

Surowiecki points out that the measurements of value we place on digital goods (Twitter, Facebook, Skype) do not equate with our primary measuring stick for the overall nation's economic health: the GDP. 

The basic assumption is simple: the more stuff we’re producing for sale, the better off we are. In the industrial age, this was a reasonable assumption, but in the digital economy that picture gets a lot fuzzier, since so much of what’s being produced is available free. You may think that Wikipedia, Twitter, Snapchat, Google Maps, and so on are valuable. But, as far as G.D.P. is concerned, they barely exist. The M.I.T. economist Erik Brynjolfsson points out that, according to government statistics, the “information sector” of the economy—which includes publishing, software, data services, and telecom—has barely grown since the late eighties, even though we’ve seen an explosion in the amount of information and data that individuals and businesses consume. 

Advertising revenue accounts for only one side of the coin - the business-end value of a digital service, and not the consumer facing value. What are the implications when we forego the parts of the internet that are free? Workarounds like time spent online (a metric developed by economists) get closer to a solution. In one case Surowiecki makes, open-sourced web tools democratize ecommerce. And in turn, this begets a rising welfare. But the back-end calculation is a lowering GDP compared to a world where Microsoft's server software has a pricetag that small business owners have to pay in order to use the service. In another example, digital innovation actually shrinks GDP: Skype has reduced the amount of money that people spend on international calls, and free smartphone apps are replacing stand-alone devices that once generated billions in sales (think Garmin vs Google Maps). 

The additional layer to Surowiecki's questions is how a miscalculated GDP affects emerging markets. As Google's Project Link brings high-speed fiber optic connectivity to Kampala, Uganda in 2014 we can expect the same economic measurement hiccups. And these hiccups hold larger table stakes in a much less developed environment like Africa. Whereas the United States experienced the digital age in a logical metered rollout (first came the mobile app marketplace, then Square, then Squarespace, and only then, the nomadic retail pop-up shop in Brooklyn), bringing the next billion people online brings all of these tools overnight. Like turning on a light switch, a huge population without access to some opportunities will now have access to the latest news, a tool to join in worldwide commerce, or a platform to create and contribute photos, video, and more. All great things no doubt. But the question of measurement will be tenfold the conundrum we've just seen with Twitter in the US. 

I plan on picking up Erik Brynjolfsson and Andrew McAfee's The Second Machine Age to get a better grasp at how we are/aren't collectively adjusting to the phenomenon. 

The definition of good art

David Foster Wallace's 100 words on the biggest problem our new Millennium faces: 

We're all—especially those of us who are educated and have read a lot and have watched TV critically—in a very self-conscious and sort of worldly and sophisticated time, but also a time when we seem terribly afraid of other people's reactions to us and very desperate to control how people interpret us. Everyone is extremely conscious of manipulating how they come off in the media; they want to structure what they say so that the reader or audience will interpret it in the way that is most favorable to them. What's interesting to me is that this isn't all that new. This was the project of the Sophists in Athens, and this is what Socrates and Plato thought was so completely evil. The Sophists had this idea: Forget this idea of what's true or not—what you want to do is rhetoric; you want to be able to persuade the audience and have the audience think you're smart and cool. And Socrates and Plato, basically their whole idea is, "Bullshit. There is such a thing as truth, and it's not all just how to say what you say so that you get a good job or get laid, or whatever it is people think they want...Look man, we'd probably most of us agree that these are dark times, and stupid ones, but do we need fiction that does nothing but dramatize how dark and stupid everything is? In dark times, the definition of good art would seem to be art that locates and applies CPR to those elements of what's human and magical that still live and glow despite the times' darkness. Really good fiction could have as dark a worldview as it wished, but it'd find a way both to depict this world and to illuminate the possibilities for being alive and human in it.

This was originally published in a Rolling Stone interview but I was brought to DFW's words, as such is the nature of any philosophical advice, through a series of serendipitous events and the rabbit hole of our hyperconnected world - an email from a friend that led to a dinner that led to a website that led to a video that led to the quote.

That website was Creative Mornings, a breakfast lecture series for the creative community. That video was founder of Cards Against Humanity Max Temkin's talk at the latest Chicago installment of Creative Mornings. If you are looking for a departure from the beaten path of TED talks, Temkin's talk is a great example of bringing the listener on a journey from one thesis to another. What Temkin's talk is not, and I would argue many of the other videos on Creative Mornings, is a five paragraph essay spoken out loud framed with a thesis and conclusion.