The Computer Counter-revolution

The nineteenth century Industrial Revolution (IR) created the middle class and gave them democracy. The 21st century computer revolution (CR) is /a reactionary counter-revolution that is destroying the middle class and what little was left of democracy after decades of elite sabotage and hijacking.

Genuine innovation in the CR

As with the IR, the innovation of the CR is that it anihilates space and time. In the IR, it was the railroad, especially the transcontinental lines, and the telegraph that changed the meaning of distance. The 30 mph of railroads was quite impressive at the time; but the near instantaneous long-distance communication of the telegraph was almost magical to Victorians. The telegraph was a world-changing technology.

OTOH, the internet arrived long after almost-universal telephone service, and tv and radio. The internet increased communication convenience, especially email, but the speed did not overawe populations who already had telephones. Despite the focus on the internet, transportation technology is key to the impact of the CR.

It is Amazon's fulfillment centers that are revolutionary. Next day delivery of any thing anywhere. Thanks to containerization, bar/QR codes, and automated warehouses it is possible to bring the products of third world labor to your doorstep faster and cheaper than visiting your local small business. You can even track your package as it moves from China to the US. Too bad warehouse workers are micromanaged down to the footstep, and truck drivers' eye movements are scanned. Being a galley slave is just the price of progress.

Cell phones made communications much more efficient, eliminating the need for pay phones in public spaces and reducing first class mail volume. Smart phones made markets more efficient, especially in the third world, where real-time access to price information greatly enhanced small business profits. Of course, cell phones can track your location with GPS and your contacts with mail programs. Cell phones are part of the surveillance panopticon.

The increased efficiency and granularity of moving goods has undercut anyone not at global scale. Small businesses, even innovative and successful ones, are forced into monopsonistic deals with Amazon or WalMart. Good ideas are hijacked my Amazon house brands, and good luck suing them.

American business had been at global scale for many decades before the 1970s. But then the elites decided that middle class jobs were a luxury that hurt their bottom line. So they started sending that work to the Third World. At first Mexico, then China, and Viet Nam, Bangladesh, and lately India. China is the glaring exception here. It escaped the "growth without development" trap that capitalism has successfully imposed on the Third World since neocolonialism got started in the 1960s. But even Chinese skilled labor drastically undercuts US wages, due to our obscene healthcare, education, and housing costs.

Toxic innovation

There were some neutral innovations that arose from the railroads. Standard time was one; standard track gauge was another. (In the same era, standard clothing and shoe sizes came out of the Civil War.) These are, as their names imply, neutral standard interfaces that allow anyone who uses the standard to compete on a level playing field. The internet has the standard TCP/IP protocol stack and the LAMP (Linux, Apache, MySQL, PHP) website development stack, which form a similarly neutral foundation.

However, the unmentioned downside of computer innovation is that it is being used to destroy the legal concept of ownership and return the vast majority of the population to propertyless serfdom. At the root of the problem is the Digiital Millenium Copyright Act (DMCA) that declares reverse engineering of software to be illegal, that declares defeating even the most trivial encryption to be a crime, that grants patent protection to intuitively obvious interfaces.

Thanks to DMCA, people are not allowed to repair stuff that they theoretically own. Tractors, automobiles, computers, and cell phones are all protected by DMCA. You are forbidden from trying to fix them. You have no right to repair. When Massachusetts passed a law saying the car companies had to allow independent mechanics access to the internal diagnostic of cars, the NHTSA told car manufacturers to ignore the law. This has recently been ruled illegal by a Federal court, but that took four years.

Physical ownership by anyone except mega-corporations is being eliminated, starting with media. Many media products are only available as pay per view on platform monopolies. You are not allowed to own Amazon e-books, you can only pay to rent them; and if you stop paying, all your books vanish. The same goes for Apple streaming service music and video. "Software as a service" means you can't own something like Microsoft Office. Instead of buying it once, you have to shell out a monthly fee forever.

It is more and more a company store situation. Amazon does not give refunds. Any refund is put into a credit account that you can only use to buy more stuff from Amazon. PayPal can decide not to let your transaction be completed if it is not compatible with their current political orientation. The flood of gift cards is pure company store - "money" that can only be spent in one place. Additionally, many gift cards have expiration dates - "money" that vanishes, to the profit of the issuing company.

IR and CR - Similarities and differences

As Mark Twain said: History doesn't repeat itself, but it often rhymes. While the history of railroad monopolies offers some guidance to the problem of platform monopolies, it is not completely predictive

Similarity 1 - Managing scale

The following excerpt could just as easily apply to the tech bros as to the robber barons:

One thing (the robber barons) all had in common was that they made their money from the relentless logic of the economies of scale. By driving out competition, controlling the supply and distribution chains, and keeping wages as low as possible, the robber barons ruthlessly cut costs. They forged their path in the business world at a time when new technologies – steel, oil refining, railroads and steam-powered factory technology – were remaking the material basis of the western world. They were the exploiters, not the inventors: men who took small-scale operations and scaled them up, and then up again...Size was everything...

At the heart of the problem – as their critics saw it – was the sheer scale of the robber barons’ enterprises. It was ‘the curse of bigness’ that gave these men the giddying power they had. But the robber barons’ riposte was that the new economy required central planning. “The day of combination is here to stay,” Rockefeller assured an interviewer in the 1920s, as Europe experimented with different types of state planning. “Individualism is gone, never to return.”

- The Rise of the Robber Barons

Its ironic that Rockefeller was calling for state planning, isn't it? Of course we know that corporations are completely anti-democratic. So were not really talking about state planning. We are talking about corporate planning.

Similarity 2 - Destroying small businesses

The instant order and next day delivery service of Amazon is wiping out small businesses. Amazon is like a railroad directly to your house for individual products. They can probably beat the local store on delivery time if a product isn't in stock, and they can definitely beat it on price. The same small business destruction happened in the Gilded Age as refrigerated rail cars put local butchers out of business. And just like the meatpackers' "disassembly lines" lowered pork prices by "selling everything except the squeal", Amazon's "long tail" warehousing lets it profit on even rarely purchased items.

Rhyme 1 - Purchase/destruction of the press

In the Gilded Age railroad barons bribed newspapers to smear their enemies and hide their own malfeasance. Newspapers were of value insofar as they forwarded the lobbying of the corporations.

The CR has gone beyond bribery. The CR has killed newspapers, genuine investigative reporting, and thus journalism. Craig's list and eBay destroyed the classified ad revenue that funded reporting. Putting news online for free was another nail in the coffin of journalism. Alden Capital is the private equity giant that is feeding newspapers into the chop shop for real estate value. What little is left of "mainstream" journalism is owned by the billionaires and run for the political influence, not the revenue. Jeff Bezos's Washington Post is the gold standard for this kind of ideological takeover.

As a result, people get most of their news from random websites whose fact checking and political agendas are suspect at best. Editorial judgement has been reduced to little more than the personal prejudice of the website owner. That's because of the horrible Section 230 "get out of jail free card" for platforms. Even if legitimate news is produced, it often is removed from the major platforms by "fact checkers" who are nothing more than censors.

Beyond news outlets, Amazon crushed independent book publishers in the infamous war with Hachette. As a result, Amazon gained control of the pricing of Hachette's books. They set a low price for e-books, heavily impacting the bottom line of Hachette. Amazon's tactics were pure monopoly hardball.

(Amazon made) a series of retaliations against Hachette, including removing the pre-order buttons on upcoming books by popular authors — such as Rowling’s The Silkworm, which is written under the pen name Robert Galbraith. It has delayed shipment on other books, pared down discounts on some volumes and removed certain titles from search. The retailer is also in a similar fight with Time Warner and has suspended some DVD pre-orders, according to a June 10 story in the Times. Amazon’s actions have baffled even some of its supporters, who question the company’s uncharacteristically anti-consumer tactics.

Proponents call this "creative destruction", and its true that technology changes the terms of competition. But the result is to concentrate power in the platform monopolies that increasingly dominate media delivery.

“The macro picture here is that all analog goods are becoming digital goods in media,” says David Pakman, a partner at venture capital firm Venrock. “Newspapers became websites. Magazines became apps, CDs became downloads, and now downloads are becoming streams. Physical books are becoming e-books…. [Media faces an] electronic future, not a physical future.”

…the cost of digital delivery has fallen to “basically zero,”

- Amazon versus Hachette

Similarity 3 - Subsidies

The railroads were funded by government payments and land grants, but corruption abounded. Whether by ruinous competition on the same route, stock watering, or crooked building corporations like Credit Mobilier, the railroads were always short of cash or going bankrupt - even as the owners made out like bandits. For twenty years after the Civil War, railroad construction was shoddy and maintenance often failed to keep up with degrading assets.

All this corruption and bad performance caused the creation of various state and federal railroad commissions. The commissions tried to untangle the massively crooked bookkeeping of the roads. They tried to put regulations in effect to prevent monopoly price gouging of shippers and kickbacks to other monopolies like Standard Oil.

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At first it might seem that the platform monopolies did not receive government subsidies. But that deliberately ignores the 25 years when the government created the internet, set the internet standard protocols and interface hardware, and funded organizations to use the net. Mariana Mazzucato has written about this in The Entrepreneurial State.

every technology that makes the iPhone so ‘smart’ was government funded: the Internet, GPS, its touch-screen display and the voice-activated Siri.

The government got not one penny for creating the fundamental technology of the CR. Yet all we hear about are the tech bros successes, not their subsidies. Amazon fought to avoid paying sales tax for decades. Google spun out of DoD research at Stanford. Facebook went public on the same day that the government took down "Life Log" because of its potential for surveillance - because private surveillance is good. Right.

Difference 1 - Subsidies without regulation

The big difference between IR and CR is that the internet has no effective regulation. It is the Wild West. That metaphor has been championed by the Libertarian crowd since the 1980s, when neophyte tech bros were exalted as John Gaults by the Koch Brothers. The DMCA and Section 230 of the Communications Decency Act of 1996 codify the lawlessness of the internet.

Anti-trust laws had long since been abandoned by the market fundamentalist "Law and Economics" movement, led by Richard Posner. The courts found no fault with Facebook and Google buying any competitor who showed up. The one good thing Joe Biden did was to make Lina Khan head of the FTC and start prosecuting monopolies. Of course, Khan was one of the first casualties of the Trump Restoration.

Because of Section 230, libel laws do not apply to the internet. That is unless you are Peter Thiel, who has an infinite legal budget and can go judge shopping. Thiel funded Hulk Hogan's lawsuit to bankrupt Gawker. Without libel, genuine fact checking is optional - the majority of today's fact checkers are propagandists.

Another upshot of 230 is that censorship abounds. Platforms censor anyone who questions the government line on vaccines, Russia, China, Israel, etc.

Difference 2 - Capital without naked corruption

Like the transcontinental railroads, there is a financial barrier to becoming a platform monopoly. The aspiring monopolist needs enough money to build out data centers all over the country/world. The early platforms grew by "network effect" until they achieved "lock-in". (The whole idea of positive feedback is still denied by fake economics.) They got loans to grow because they were already growing. This is called "winner take all" economics.

Unlike the railroads, the platform companies have never been anywhere near bankrupt. Amazon has never paid a dividend. It keeps self-funding its relentless expansion out of revenue.

Companies like Apple, Microsoft, and Amazon are sitting on a combined $500 billion in cash. That kind of cushion means they're not expected to pull back when it comes to buying their own stock. And according to Bloomberg Intelligence's Robert Schiffman, there's little or no slowdown in sight. Alphabet and Apple are known for announcing new buyback plans around Q1 earnings. Last year, Alphabet rolled out a $70 billion buyback and introduced a dividend. Apple went even bigger, committing $110 billion to repurchases.

Even with heavy investments in AI, these firms are still printing cash. Analysts expect Apple, Microsoft, Nvidia, Alphabet, Amazon, and Meta Platforms to generate nearly $100 billion in free cash flow just in Q1 2025

- Wall St. Bets On Big Tech

How is it that the US is broke and massively in debt, but The Magnificent Seven is rolling in money?

Difference 3 - Competition without cannibalism

Unlike railroads building parallel tracks and trying to steal each others' customers, the platform monopolies tend to "stay in their own lane". Amazon sells physical things and compute services. Google does search and advertising. Facebook does (anti-) social networking. Netflix rents video. Apple makes phones and computers. When there is the potential for competition, it is handled by payoffs, like the one that Google pays Apple for making Google its default browser. (Reportedly $18 B/year!) There is IR precedent. The railroads paid off steamship lines to keep the cargo rates from undercutting the railroad rate.

in 1870 there was an agreement between the Steamship line and Union Pacific to prop up freight rates and allocate an agreed division of traffic between railroad and steamship: in effect, to impose maximum shipping quotas on each mode of transportation in order to raise freight rates.

- Railroad cartels

Difference 4: Self-made, barely literate men versus children of privilege with top university training

It only took a little cash and a lot of chutzpah to start a railroad. Just enough cash to build just enough railroad to get the first government subsidy. After that, it was all insider scheming. Most railroad presidents had little understanding of the technology of railroads. They left that to hired engineers and the self-organizing work force.

Contrast that with the CR billionaires, who come from rich backgrounds. Bill Gates' father was a successful lawyer, president of the Washington state bar. Mark Zuckerberg hailed from Westchester county NY and had two medical professionals as parents. He attended the prestigious Philips Exeter Academy. Both Gates and Zuckerberg went to Harvard, but dropped out to found their companies. Jeff Bezos's maternal grandfather ran the Los Alamos division of the Atomic Energy Commission and was a founder of DARPA. Bezos went to Princeton, but dropped out. Google founders Brin and Page both had Ph.D. mathematicians as fathers. They attended Stanford and got the Google Search Engine to work as a graduate project funded by DARPA.

Despite all the differences, the tech bros share one trait with the robber barons; they were socially boorish. Gates began as a hyper-focused, unhygienic, tightwad slob. Bezos is a nasty, semi-autistic martinet. Zuckerberg comes across as a shady character. ("They trusted me, the suckers.") By and large, Brin and Page seem more benign. But, Google was taken over by Deep State plant Eric Schmidt.

The CR billionaires are smart, ruthless, and they understand the details of the very complex work they are doing.

It is a far cry from the crooked, bloveating self promoters of the Gilded Age. If you want one ot those, you can have Donald Trump. His tariffs (read sales taxes) are the same game the robber barons played to extract maximum value from their customers by weighting the "take" to the maximum the customer could bear. Trump is in the early stages of discovering just how much tribute he can extract. Expect a lot of recalibrations.

SUMMARY - The CR has all the problems of the IR with none of the solutions

The CR outdoes the IR for domination and centralization any day. The founders are much better educated and connected. They have been subsidized without attracting any regulation. They have access to immense amounts of money, and they try not to get into damaging turf wars with each other.

(The robber barons) profited from one of the most profound revolutions in the human experience: the transition from a society in which most people were either self-employed or in some form of unfree labour, to one in which most worked for wages.

Today, the transition is from having steady jobs with benefits to having Gig Work. Society is being nudged from customers expecting customer-facing humans (even boiler room workers in Asia) to being a giant vending machine full of gotcha traps. The CR has destroyed any semblance of labor power. Organizing is monitored and killed in its crib. Warehouse workers are little more than animated zombies. Every step is monitored. The pace is so killing that most workers quit within a year. Truck drivers are monitored by GPS and by cameras in the vehicle. (They can afford cameras but not air conditioning in the trucks.)

With monopolies established, well-funded, and not under any serious attack, they are on course to completely rule society, and to destroy or privatize government in line with their Libertarian ideology. Given what zeros Trump and Biden are, one could say that the government was destroyed a decade ago.

Nothing more to say. Enjoy the ride. It is nearing its end.