whybother.org

Maybe something happened on the "Information Superhighway" in September, 1999.

Maybe it didn’t.

Reporting thus far has been skimpy, as if the event or non-event, as the case may be, happened deep in some nightmare no one really wishes to fathom, not even the analysts. The most common reaction has been to attribute, based on little or no evidence, the "September thing" to flaws in the relatively new methods and software that recorded it; that is, to invoke the all-powerful resources of denial and disbelief. It is as Ralph Waldo Emerson said of human disenchantment, the ever-disappointing rediscovery that we really do exist in a world of finitude and limitation rather than the boundless universe of visionary ideas we prefer and work so hard believe: "That discovery is called the Fall of Man. Ever afterwards, we suspect our instruments."

The Great Unbelievable Thing: In September 1999, as millions of pimple-popping adolescents and college kids presumably left behind all thought of sunshine and the great outdoors to return to school and the midnight glow of interminable computer screens, "the number of active Web consumers dropped a slight 2.81 percent from 66.8 million to 64.9 million." Or at least that’s what was reported by Nielsen/NetRatings based on its regular survey of 33,000 Net users.

"So is this truly the end of the Web civilization?" asks ZDNET’s slap-happy opinion monger Jesse Berest ("Why Web Surfing Is Down," October 29,1999). Of course he doesn’t think so, but his offhand and uncharacteristically reasonable explanation has little to offer by way of consolation to the howling mob of Web-hypesters and IPO-conartists who have misled public thinking about "the new information society" since the Web’s inception:

The answer is quite simple: For now, the months of double-digit growth have reached a plateau. The next round of mega-growth is likely to happen sometime in the next few years when fat pipes (aka higher speed connections) permeate the home market. That will bring those who left the Web because of slow access speeds back, as well as attract an entirely new market of those lured by the thrill of "real" sound and video.

"Sometime in the next few years"? That’s over a century away on the time scale we’ve grown accustomed to using to track and predict "The Revolution." Worse, what if this is only a sign of things to come? What if there’s another plateau waiting a few years out, even after "fat pipes (aka higher speed connections) permeate the home market"? Even worse, what if this is really a sign of some underlying, fundamental limitation to the Internet’s appeal as a mass media? What if there is a "virtual" saturation point, hard or soft, beyond which advertising, marketing, news hype, political plugging, curriculum bullying, and declining prices cannot cattle-prod further masses to get and stay online? What if surfing reality really is better? And what if they, the general public, already know it and can by no means be persuaded otherwise? It’s certainly ominous that even September’s continued upward spiral in the total Web population–an estimated 1.5 million newly plugged-in users–was not enough to offset the staggering 1.9 million who, in the same month, joined the pack of digital dropouts who now represent about 32% of the Net’s estimated population.

In an effort to find some "good news" in the Nielsen//NetRatings report, perhaps before the implications of the September data hit Wall Street (linear extrapolation of October data through the 24th indicates a further slight decline for a second month in a row), Berest eagerly grasps at straws:

Nielsen/NetRatings data suggests a growth in some vertical categories, most noticeably sports (the National Football League kicked off in September) and financial sites. … The Web is becoming far more verticalized far more quickly than anticipated. Once Web consumers learn the power of the Internet as a means for gathering news and information, they might prefer going to the inch-wide, mile-deep content purveyors (verticals) than the "one size fits all" sites (search engines, portals). At the highest level, it’s a sign of a rapidly maturing business and one quite appealing to advertisers and commerce companies who prefer targeted eyeballs and are willing to pay for them.

While this line of thought may provide a glimmer of competitive hope for some of the bigger Net-bucks players, particularly those with cash on hand to participate in the current barrage of dot-com television spots, it hardly alters the dark possibility that the Internet game itself may have turned less than zero-sum for the foreseeable future, at least in terms of overall demographics. And that remains the most significant news from September, because the dot-com explosion has been financed almost exclusively on air. No significant corporate or IPO Internet venture is turning a profit. Most are running at incredible losses: hopes and dreams and pyramid schemes.

Consider the case of online retailer Buy.com, the latest Southern California huckstering scheme to file for IPO with the Securities and Exchange Commission. In its first six months of operation in 1997, Buy.com earned $390,000 on sales of $878,000. Thereafter, as is typical of these basically unregulated con-games, Buy.com entered its secondary round of private capitalization and started to loose money as if there were no tomorrow. Of course, the only tomorrow that counts in the IPO game is the public offering. Then founders, initial investors and ideally second and third-round investors fleece the market-mad public for double-digit multiples of pre-IPO investments, selling out and shifting these multiplied dollars from the now over-valued IPO company, incapable of ever earning a decent return on it obscenely bloated public capitalization, to similar schemes or to more sound stocks and bonds, avoiding capital gains taxation on their IPO windfall and thereby fleecing the general tax-paying public as well. In 1998, Buy.com posted losses of $17.8 million on $125.3 million in sales. And in only nine months of this year, Buy.com has surpassed its 35-year-old SoCal founder’s wildest dreams, posting losses of $80.5 million on $397.6 million in sales.

Yet, according to the LA Times ("Retailer Buy.com Files for IPO," October 28, 1999), top market analysts, such as Yobie Benjamin of Ernest & Young, believe "the stock market is likely to embrace Buy-com’s offering," despite consensus that, as Benjamin bluntly put it to the LA Times, "I don’t think it’s a sustainable business." Not that it takes a wizard to figure that one out.

Buy.com’s "business" thus far has been to front for the Ingram family empire based in Nashville: "Almost all the company’s distributors are related to one of the nation’s riches families … whose members control the country’s largest distributors of computer hardware and software, books, videos, DVDs, and computer games." Buy.com essentially gives away the Ingrams’ goods at or below cost, thus its mounting losses, while the Ingrams take their profit on Internet-supercharged flow-through. Meanwhile, Buy.com officially seeks a profit from advertising alone–selling banner space on its site–while trying to last it out until the great IPO tomorrow. Not surprisingly, no one can sell or even take orders for advertising as fast as $80.5 million can be lost retailing $397.6 million in mostly hardware and software at or below cost. So on the eve of its IPO dream-come-true, Buy.com has had muddy the water by declaring a change of course: now it says it will sell goods at a profit, relegating its steep discounts to consumers to a traditional loss-leader strategy. Even that announcement may not have been necessary internal wrangling had not delayed the planned IPO by a year. The final obstacles were cleared only last month. Founder Scott Blum stepped aside, his 56% ownership still intact, to let a trusted Ingram family insider see the scheme through to fruition as CEO, with the help of a truly world-class number juggler from Disney as chief financial officer.

Buy.com founder Scott Blum’s current employment? Online retailing, in which he presumably has some experience and perhaps some new ideas? No, that’s neither the "experience" nor the kind of "idea" that counts these days. Admitting "he’s not suited to run large companies," Blum has just formed, according to the LA Times, "an Internet venture capital firm with the Japanese investment giant Softbank Corp." Now a credentialed big-time IPOer, Blum can dispense with the need to come up with an idea to match or top his first. He only needs to dredge, with ample Japanese funds, for quick turnovers in the expanding cesspool of wannabe scammers from which he was lucky enough to emerge with Buy.com.

The Buy.com story is not unusual. It’s a window into the Internet IPO business, especially into the e-commerce boom we are all being sold in one way or another. But IPO e-commerce schemes are precisely those most threatened by reports of a static or diminishing pool of active Internet users, lasting perhaps for several years. And, although Jesse Berest would hardly say so even if he thought so, this may be the real "good news" of the Nielsen/NetRatings report: that some, just some of the most overpowering scam money may be driven out of Internet, allowing the formation and continuation of smaller but actually profitable companies capable of building for end-users a Net that will last beyond tomorrow.

Even better, the best news from September’s bump in the night on the Information Superhighway may be that none of us, from the currently "unplugged" to the Ingrams of Nashville and Softbank of Japan, yet know what the Net is or might yet become.

Scary, isn’t it?

Happy Halloween, 1999.

For more than a year now, the media have enthralled us with the threat of anarchy on a global scale: the total breakdown of crucial informational, financial, commercial, social, governmental and even physical infrastructures directly caused or indirectly precipitated by the Y2K Millennium Bug.

The race is on. The countdown has begun and there’s no stopping it. Ready or not, 11:59:59 December 31, 1999, and the doomsday second after will arrive. The problem is real enough. Some of us actually are scrambling, at work and at home. But, real or not, every last one of us has received not just an engraved but a multimedia extravaganza of an invitation to hold our breath for the New Year’s spectacle, that magic moment. What will happen? Perhaps nothing much at all. That doesn’t matter to the event, to the spectacle. The best part of the Y2K entertainment has been coverage debating whether the scare is really worth it. Like any good media issue these days, the hype only intensifies, feeding on its own exposure as hype.

Whatever will happen will happen. But catastrophe or no, there is one thing of which we can be certain: there will be an afterward. Yet this question–what happens afterward?–has been conspicuously absent from nearly all discussion of possible Y2K scenarios. With the notable exceptions of netwar hawks looking to "lock down the net" and corporate propagandists out to demonize class action lawyers (and these two groups do make strange bedfellows), almost no one is publicly speculating about what the landscape looks like after January 1, 2000. What is going to happen? Not as a result of the Millennium Bug, but in consequence of all that has been done, is being done, and will yet be done to "fix" the Bug?

Despite the now commonplace claim that we are living through a "revolution" in information and telecommunications systems akin to the prehistoric agricultural and 19th-century industrial revolutions in significance for human existence on this planet, it seems no one wants to look at, or no one wants us to look at, what it might mean that in the short span of a very few years American business alone will have spent upwards of $50 billion in Y2K money to update its digital infrastructure. More important, this Y2K spending, in addition to massive on-going investment in information and communications systems, has been directed almost exclusively toward updating and/or replacing the oldest, least accessible, least inter-networkable, most data-intensive core of the corporate world’s digital operations. It’s not just one bug problem, however big, that’s being fixed. Businesses, as well as governments, are preparing for more than the Millennium Bug. They are preparing to do business in new modes for the millennium to come.

How they see business in the next millennium is not hard to discern. Across the boardroom, the coming millennium is anticipated as one in which corporate entities and alliances of unprecedented size and scope will, on the one hand, have increasingly detailed demographic, cradle-to-the-grave tracking and targeting data on end consumers, first in the United States and very soon afterwards among affluent, "plugged-in" classes globally. And, on the other hand, these same corporate entities and alliances will be able to employ the same information and telecommunications infrastructure to raise "productivity" to previously unimagined heights; that is, to continue, with a vengeance, the "downsizing" and "restructuring" agenda begun with so much success in the early to mid 1990s, to lower the labor cost of each and every branch of global corporate, finance and marketing operations.

It should deceive no one that the late 1990s brought an interruption to this agenda, that for a variety of reasons, including the Millennium Bug itself, we entered a period of weirdly full employment in America as the rest of the world continued to struggle. The agenda has not changed. Though massive corporate restructuring layoffs stopped coming in waves in the late 1990s, the long-term opportunities and pressures noted at the time have not changed. Today, Wall Street continues to reward just about any employment-reducing "restructuring" announcement with immediate stock jumps. Certainly, we have not seen the last of the New World Order that peeped through in the first half the decade, a New World Order in which comparisons between the distribution of wealth, power, and privilege in the United States and in Brazil became, however exaggerated, at least thinkable.

Perhaps most telling of the function and achievement of American corporate and corporate-centered media is that those comparisons between the nominally first-world United States and third-world Brazil, and the alarm bells they were meant to sound, came not from "the left" but from within the American and international business community. The business press was loud and clear, warning and preparing the community it serves for new global challenges to be faced in the coming millennium:

Percy Barnevik is the chief executive officer of Asea Brown Boveri, a 29 billion dollar a year Swiss-Swedish builder of electric generators and transportation systems, and one of the largest engineering firms in the world. Like other global companies, ABB has recently re-engineered its operations, cutting nearly 50,000 workers from the payroll, which increasing turnover 60 percent in the same time period. Barnevik asks, "Where will all these [unemployed] people go? He predicts that the proportion of Europe’s labor force employed in manufacturing and business services will decline from 35 percent today [1994] to 25 percent in ten years from now, with a further decline to 15 percent twenty years down the road. Barnevik is deeply pessimistic about Europe’s future: "If anybody tells me, wait two or three years and there will be a hell of a demand for labor, I say, tell me where? What jobs? In what cities? Which companies? When I add it all together, I find a clear risk that the 10% unemployed or underemployed today could easily become 20 to 25%."

Peter Drucker, whose many books and articles over the years have helped facilitate the new economic reality, says quite bluntly that "the disappearance of labor as a key factor or production" is going to emerge as the critical "unfinished business of capitalist society."

Peter Drucker has warned his business colleagues that the critical social challenge facing the emergent information society is to prevent a new "class conflict between the two dominant groups in the post-capitalist society: knowledge workers and service workers. (Jeremy Rifkin, The End of Work: The Decline of the Glbal Labor Force and the Dawn of the Post-Market Era, New York: Tarcher/Putnam, 1995, 11-12, 176.)

Class conflict? Communism may be a "dead ideology" in the mainstream media for mass consumption, but it seems Marxist analysis is alive and well in the corporate world, busy helping international capital in the information age avoid Marx’s prediction that capitalism would become its own gravedigger.

What can we expect after the Y2K problem is overcome? The commonplace and probably conservative business press estimate–Wall Street Journal, Business Week, Forbes, etc.–is that less than 5 percent of potential corporate restructuring to take advantage of the information and telecommunications revolution has already occurred. It may well be that the most frightening and socially disruptive consequence of the Millennium Bug will be that in "fixing" the Bug, in investing in refurbished and entirely new inter-networked data and communications systems, America’s and the world’s largest corporations will have cleared away, in a few short years, nearly every legacy-system barrier to the remaining 95 percent of this "unfinished business of capitalist society." After 11:59:59 December 31, 1999, restructuring is likely to proceed at unforeseeable rates, restrained only by the need to maintain social order among those not destined to share in the benefits of the coming millennium, the over 80% of America and even greater percentage around the world who will not be needed as plugged-in "knowledge workers."

What may prove most interesting about the post-Y2K wave of corporate mergers, "downsizing" consolidations, and data-driven marketing campaigns is that the first and hardest hit victims are likely to be business people and professionals already using networked data on a daily basis.

What happened last week (late October 1999) in the travel industry is probably the surest sign of things to come in the wake of Y2K. United Airlines reduced its discount price to travel agents from 8% to 5%, and most other airlines promised to follow suit in this latest in a rapid series cuts. Quite simply, the airlines no longer need travel agents nor the agents’ long-existing computer network to sell airline tickets. A daily-growing percentage of Americans–those Americans who count, those who can afford personal computers and frequent flight–not only can buy their tickets off Internet but are also apparently willing to pay an average of 5-10 percent more for those personal Internet purchases than they would be charged by a travel agent using the full search and comparison capability of their non-Internet data network. According to one travel agent, a frequent guest commentator on tourism matters for local San Diego newscasts, the new 5% discount rate represents a cut below agents’ cost of doing business. This data-network-based industry is staring its own death in the face. It will not be the last.

Asked what travel agents intended to do about the discount rate cut and specifically about the possibility of an agents’ boycott of United Airlines sales, the local industry spokesman replied, "That might be a good idea, but there are some laws against that kind of cooperation, maybe. And, in any event, travel agents tend to be very independent, entrepreneurial types of business people. Trying to get them all to agree on anything is like herding cats."

Ironically, the first and hardest hit victims of the coming millennium may well be those least politically, socially and ideologically prepared to employ collective action to remedy a collective harm. They may be precisely those who most eagerly envisioned their future glowing bright and beautiful in the broad, I-Me-Me-Mine, union-bashing strokes of Ronald Reagan’s American Dream.