Thoughts on virtual value
Over the time, the concept of value in our society has evolved in ways none of the pioneers (from Adam Smith / Ricardo to Karl Marx) would have possibly imagined. Conversely to what Marx argued, value keeps no longer proportion with labor [of production]. At the contrary, now value takes the form of all possible shapes but those related to production. Starting with banks who magically create money as loans. We’ve seen how hedge funds and investment groups make money out of lots of NOTHING by just moving virtual debts around (as mortgages). Others make money just by buying and selling huge amounts of currency among different countries. No real economy here, no goods produced, no value added, and yet money seems to appear from the void.
However, money does not appear from the void, there must always be a loosing part. And that’s the point of my article. As the ways of value creation change, society should change with it or at least understand what the change is all about if people do not want to be fooled. The current economic meltdown is nothing but us not understanding the model of value creation. Now as ever, our ignorance is their allowance to do it.
IT is my field, and it is clear to me the role information is taking in value creation. Information is crucial for competition, and I’m not talking about market’s information (that is obvious), but also the information of every step of any firm’s value chain. Take, for instance, logistics. The fact of controlling where your trucks are, how they move, organize the routes, the deliveries through information systems have improved dramatically the business efficiency and reduced final costs (See Virtual Value Chain). To the point that it intrinsically determinates who takes the markets. It’s fun to see how the classic value chain model of a firm is getting covered by so many transversal layers that, at the end, it makes no sense whatsoever. Someone could just think of changing the model, though getting stuff simple and readable has never been the aim of Economics.
Of course, in recent years this revolution of the way firms learned to use information took place, precisely, within the business sector, away from normal people. Business actors learned all ways to gather information of their own processes and activities and obtain value from it. Indeed, it couldn’t take long ’til someone realized this same technique could be applied on people.
Thus were born the “free” services delivered over the Internet. Basically, we’re given a new way to perform our normal activities, all through their services. Google probably deserves the first place in this new ranking of business, fully devoted on gathering huge amounts of personal data, studying and transforming it to valuable information. Facebook is just another simple example (over $10 billion worth of stock value) of a company fully devoted to it. One could think these companies were a bit lost in the beginning, as Twitter has proved over the past years (though listen to Gary Vaynerchuck), they knew all of this data would proof profitable and valuable somehow in the future but didn’t quite know how. Now they surely do.
Marx couldn’t think of this new era of value creation, though his principles remain the same. Some people still take profit of others ignorance and “alienation” to make money out of it. Most people still don’t understand the value of information, and would fill out or answer any survey without knowing how valuable are those minutes to a company. At the same time, people use Internet services happily thinking everything is free and naively give up all their personal data that will be acquired after by all sorts of companies with all possible aims. In other words, privacy is no longer a fundamental personal right, but also a tradeable commodity that people is selling out for FREE.
Information has already become the exchange unit of value nowadays. The specific description of the way we go to the toilet is worth money and if we make it public to one of these companies I promise they’ll find someone interested in buying it. If you are prepared to give out all this information for free, it’s up to you, though just be aware of it, and think businesses are out there to increase their profits, not give stuff for free.
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Tags: free internet servicesit economicsvalue creationvirtual value
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