Why is inequality increasing in a digital world?
When I was growing up, I fell in love with computers. I always believed that digital technology would be a tremendous force for opportunity and empowerment. But is that really happening?
Key points from the book:
- The main question: Why would digital technology increase inequality? Will more coding skills, or better regulations, reverse this trend?
- To understand technology and inequality, focus on wealth. Wealth has shifted since the 1980s from real to financial assets, and away from the energy and commodities sectors towards technology and finance. These shifts have tended to increase wealth concentration.
- Digital technology changes not just products and services, but how markets and the economy operate. Digital markets are different from classical ‘perfect’ or ‘free’ markets.
- Digital technology offers unique opportunities to profit through taxation and regulatory avoidance. It’s no coincidence that tech companies have some of the largest overseas cash holdings.
- When we look at new digital industries, like search, social media, and the more recent sharing economy, we see highly profitable, highly concentrated industries making complex technological choices about who receives what information—how reality and relationships are mediated by digital technology.
- What’s the solution? More education and better regulation can help, but to make a real dent in wealth concentration, the business model for the basic ‘use cases’ of our digital world needs to change. For the three key information relationships we identify (connecting buyers to sellers, people to people, and people to external reality), non-transparent businesses that profit from maximizing ‘engagement’ and ‘conversion’ seem to concentrate wealth.
- The tech industry may be a little bit too successful at value creation, and especially value capture. While wealth concentration is not an inevitable outcome of digital technology, there are few economic, political, or cultural forces acting as a balance against it.