What
if Facebook is really worth $100
billion? By
Spengler
"What if Internet stocks aren't a
bubble?" [1] was the title of my inaugural essay
in January 2000, with the observation that an
economy based on downloading pop music and porn
was a possible future state of the world.
"Re-ordering the priorities of the world economy
around the vices of affluent people is nothing
new," I observed. "We went through all of this
before in the 17th century."
Facebook's
initial public offering May 18 with a $100
billion
valuation, to be sure, is not
quite as whimsical as the Internet stocks of a
dozen years ago, which had losses rather than
earnings. Facebook does earn $1 billion a year.
Total US advertising expenditures last year were
$144 billion according to Kantar Media, and global
ad spending was nearly $500 billion. Facebook
users provide data which the firm can process in
order to target ads to the right recipients, so
that the website stands to gain market share, or
so the story goes.
It's Big Brother
running the Matrix on Madison Avenue.
Supercomputers with artificial intelligence
programs will sift our communications for clues as
to our commercial proclivities. Auto companies
will know when to pitch SUV's rather than electric
vehicles, and purveyors of timeshares in St Helena
or shrunken heads will identify the eight dozen
individuals in the world most inclined to buy
their products. Advertisers will replace expensive
broadcast advertising with targeted Internet ads
that follow Facebook users from their home page to
their favorite websites.
I don't believe a
word of it, although I'm not an objective
observer. I confess an antipathy to Facebook. My
publisher insisted that I create a Facebook
account, but I sign in rarely. I've friended some
of the same folk with whom I otherwise exchange
e-mail. And I look at the "ads and sponsored
stories you may like," for example, reverse
mortgages, survivalist guides, and long-term care
insurance. They've read my birthday, to be sure,
but the computer doesn't seem to have processed
anything else.
Where are the ads targeted
to my tastes - harpsichords, assault rifles,
kosher cookbooks, and cat toys? Perhaps I haven't
posted enough for the Matrix to process my
profile. Still, I suspect that the more people use
Facebook, the less the computers really will know
about them.
There still are people who
believe that the Internet exalts individual choice
and will promote a new age of individualism - the
ever-optimistic George Gilder, for example. The
contrary might be true: the Internet draws its
users into ever-deeper conformity. The only news
site in the Web to bear a big valuation in the
last couple of years was the
celebrity-and-soft-porn purveyor, the Huffington
Post, a wired competitor to People Magazine.
What makes Facebook so popular? The
answer, I think is that Facebook exalts the
insignificant. People who spend their spare time
at shopping malls around chain stores and
restaurants or with mass-market entertainment feel
like the ant in Woody Allen's 1998 film -
Antz (1998) - who tells an ant
psychiatrist, "I feel so insignificant!" (The ant
psychiatrist responds, "That's a breakthrough. You
are insignificant.").
Facebook allows them
to feel significant despite their conformity, by
broadcasting to the world their responses to
commercial culture.
Facebook's success
therefore depends on conformity. Why is Facebook
so valuable? Because everyone (even this writer,
reluctantly) is on Facebook. Why aren't people
still on Myspace, or a dozen other social media
contenders?
Because the nature of the
communication itself requires everyone to be on
the same system, just as Microsoft a generation
ago forced everyone to use its operating system
and software. It is not just the so-called Network
Effect, but Facebook's raison d'etre: to advertise
one's conformity to commercial culture in a way
that preserves the illusion of individuality.
It seems incongruous that Facebook
projects the image of nonconformity. As Brad Stone
and Douglas MacMillan wrote May 17 in Business
Week, "In its offering prospectus, Facebook
repeatedly describes its corporate culture as 'the
hacker way'; on its new campus, a 57-acre office
park abutting San Francisco Bay in Menlo Park,
Calif, there's a building with a big sign that
reads 'The Hacker Company.' Those slogans don't
mean Facebook is teaming up with Anonymous or
breaking into NORAD. They're talking about
achieving a goal in an unconventional way."
The aura of non-conformity disguises the
utterly generic content that users provide. We can
post whatever pointless thoughts occur to us about
entertainment, fashion, celebrities, or whatever
might seem to occur to us at random. But it is not
at all random. It is only a multiple choice test
within a predefined range of possibilities.
We hesitate to like (that is, push the
Facebook "like" button) things that might
embarrass us. We want to like things that make us
seem more attractive to others; that implies we
will pretend to like the things we think that we
are expected to like.
Rather than divine
the personal tastes of its users, Facebook's
supercomputers will get stuck in a positive
feedback loop. Its users simply feed their
fascination with commercial culture back to the
computers, which will spew out "personalized ads"
that simply reinforce the message of the
commercial mainstream.
Fads that might
have taken weeks to propagate will sprout and
decay within days. Like Brian in Monty Python's
eponymous "Life," Facebook tells its users,
"You've got to think for yourselves! You're all
individuals!" And like the man in the back of the
crowd in the movie, each Facebook user replies,
"I'm not."
No one is likely to learn much
about anyone else by reading their Facebook page,
or, indeed, by becoming their Facebook "friend". A
Facebook page is constructed to maximize our
appeal and white out our warts. We learn as little
from the pages of Facebook "friends" as
prospective employers learn about job candidates
from a resume.
We learn about people by
playing sports with them, or drinking with them,
or praying with them, cramming for final exams
with them, working with them, or marching
alongside them in the military - from situations,
that it is, which cannot easily be controlled and
which elicit spontaneous responses for better or
worse.
A Facebook page is a pre-arranged
display window whose purpose is to block our gaze
from the real person behind it.
That is
Facebook's curse.
It attracts hundreds of
millions of users by providing them with a
platform for narcissism and the means to lie about
themselves more persuasively, but it hopes to make
money by learning what it is that they really
like, the better to show them advertisements.
Sadly, the system is worth a great deal of money,
but not 100 times earnings.
By no means do
I mean to imply that people actually are
insignificant, except to the extent they mold
themselves to mass-market culture. Nothing
displays more individuality than children and
their parents. Tolstoy said that all happy
families are happy in the same way, but unhappy
families are all unhappy in different ways.
Tolstoy was being dense.
All families are
unhappy, which implies that they all are
different. Everything important that we do in
life, we do alone, and in our own way, for there
is no-one else to do it for us.
To the
extent that social media become a substitute for
unpredictable interaction with real human beings
with something real at stake, Facebook and its
imitators diminish us.
That's why it would
please me to watch Facebook fail like the whole
generation of Internet entrepreneurs that got rich
briefly in the late 1990s. Of course, it won't
repeat the Internet bust; it has actual revenues.
Its founders will remain super rich, if not the
investors who bought in to last week's IPO).
Suppose that Facebook really was able to
mine all the data that its users shovel into the
system and design personalized advertising that
made us more malleable consumers? The computers
would elicit from us even a more urgent need for
instant gratification. The world economy would
spin around the wobbly gyroscope of consumer
impulses.
We have done this sort of thing
before. As I noted in my inaugural essay in
January 2000, the economy of the 16th through 18th
centuries decimated the population of four
continents to satisfy Europe's desire for luxury
goods:
Item: After the
conquest of the New World, Spain's entire
capture of precious metals went to India and
China to pay for luxury cloth and spices. That
did for approximately 90 percent of the
indigenous pre-Colombian population.
Item: The African slave
trade instituted by the Portuguese and later the
British first produced sugar in Brazil and the
Caribbean, to be turned into cheap intoxicants
for the European market. Tobacco was a second
absorber of slave labor. Cotton became important
much later. Production of these vices did for a
third of the West African population.
Item: In order to sell
cheap cotton cloth to India, the East India
Company arranged for Indians to grow opium and
for Chinese to buy it. All the silver mined in
Latin America, which two centuries earlier had
passed to China to pay for silks, found its way
back to Europe to pay for opium. That did for
untold millions of Indians and Chinese.
Does the Internet shrink the world? How
can we compare it to an earlier technological
revolution, namely ocean navigation - including
breakthroughs in astronomy, shipbuilding, time
measurement, map-making? At the end of the day,
silks, cottons, coffee, tea, spices, sugar, rum
and tobacco ruined four continents as the
world's capital flowed to Western
Europe.
The difference this time
around is that instead of ruining an outlying
empire, we will ruin ourselves.
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