The Data Factory – How Your Free Labor Lets Tech Giants Grow The Wealth Gap

You’re the product, but when you’re sold, it’s only a lucky few who get rich. Technology lets big companies distribute tools that turn us into volunteers who contribute our time and data while they profit. In today’s TechCrunch Disrupt Keynote, Sequoia Capital’s Sir Michael Moritz detailed how these “data factories” have spawned a golden age for entrepreneurs but make it tough for everyone else.

It wasn’t always like this. To earn a profit, companies used to have to do the dirty work themselves. They hired huge staffs in real factories to sew textiles or build cars. People worked for wages and bought products.

But technology changed all that, as former journalist and legendary investor Moritz explains. Check out the full video of his Disrupt keynote here:

During the presentation, Moritz named several building blocks of the data factories:

  • Huge expansion of bandwidth, up 236X since 1986
  • A vast increase of storage capacity, from 2.6 exabytes of total data in the world in 1986 to 295 exabytes by 2007
  • The rapid growth of computational power, leading today’s game consoles to be exponentially more powerful than work computers in the 1980s
  • “The App Explosion” – 40 years ago the IBM 360 had 244 apps, but now there are more than 1 million apps for Android
  • A massive reduction in the cost of tools. A single $800 Samsung Galaxy S4 has the same power as 375 IBM 3340 computers that cost a total of $33 million in 1973
  • A proliferation of production capacity. In 1994 peak automobile production was 15.4 million per year, while we now make 674 million mobile phones per year
  • A new generation of free tools empowering small business and individuals, including Google Apps, Skype, Dropbox, MySQL, Mongo DB, LinkedIn, Salesforce, Facebook, Twitter and Amazon

Moritz explains that these factors will change our entire lives, starting with the workplace, for the big guy and the little.

Data Factory

First, big-data factories employ many fewer people than their meatspace equivalents of yore. Ford at one point employed 700,000 people. Now Apple, at times the most valuable company in the world, employs only 80,000 people worldwide including its retail staff. Data factories don’t create nearly as many middle-class jobs.

Instead, the data factories get free labor. They distribute what seem like useful services to the world, things like YouTube, Facebook, Twitter, LinkedIn, Etsy, or Kickstarter. Those services help people share, connect, find jobs, sell their own goods, or fund a project. But in actuality, they also collect troves of data and earn tons of money for the tech giants without forcing them to do much work. That money stays concentrated around the data factories and their limited staff instead of distributing it like traditional factories.

What’s the impact? “It means that life is very tough for most everyone in America” says Moritz. That’s not just some ambiguous sense of hardship. The median American household has stagnated. The absolute minimum wage value has decreased significantly. “It’s tough if you’re poor, it’s tough if you’re middle class. It means you have to have the right education to work at [the tech giants]. If you’re not like us, it’s tough” said the highly successful venture capitalist.

Personal Revolution

It’s not all bad, though. The tools and platforms listed above have given way to a “personal revolution” that’s delivered unprecedented productivity and reach to small businesses and entrepreneurs. You don’t need nearly as much money to start a business anymore. Moritz gave a slew of examples of people who made small fortunes selling sleds on Amazon, becoming makeup spokeswomen on YouTube, becoming best-selling authors via Kindle, or earning huge real estate commissions through Trulia.

If you’re a gung-ho self starter, there’s never been more opportunity to change the world and get rich. But if you’re not, you might be spending your free time toiling in the data factories to make fat cats fatter.

As a technology community, we have to ask whether this shift is sustainable. Can we keep eliminating middle-class jobs and concentrating wealth without consequence? Or will this weakening of the bottom of the pyramid lead to a global financial collapse? Moritz provided more questions than answers, but the first step to harnessing technology to promote global thriving is realizing the shift is underway, whether we like it or not.

You can check out Sir Michael Moritz’s entire slide presentation here:

Backstage Interview