Welcome to the New World

 The practice of colonialism crosses the globe and reaches far back in time. The ancient history of Asia, Europe and Africa has been marked by great internal colonizations. The modern form of colonialism (European State colonialism) began in the 15th century with the “Age of Discovery” led by the Portuguese and Spanish exploration of the Americas. During the 16th and 17th centuries the English, French and Dutch all built massive colonial empires, arrogating to themselves the territories, wealth and resources of conquered lands.

Colonial expansion required extensive resources. The investment was huge but the pay-off was even bigger. Nation states couldn’t afford to make this investment alone so to assist them in their endeavors, governments issued ‘letters of marque’ to various privateers allowing them to claim lands on behalf of their Sovereign and wage war on the ships of rival nations. The holders of these letters were nothing more than licensed pirates; people like John Avery and Sir Francis Drake who were scions of early colonial period. The industrial revolution only quickened the pace of colonization in the 18th & 19th Centuries with a frenzied scramble to penetrate and map Central Africa. Cecil Rhodes and David Livingston were the romantic heroes of this age, claiming lands for the British Empire and their private sponsors and civilizing (or rather subjugating) indigenous peoples through religion, trade and force.

It’s a historical fact that all the wealth plundered from the New World during the age of European colonialism was not shared evenly within European society, nor even amongst the colonists who did most of the dirty work. Rather it was concentrated into the hands of Sovereigns, their buccaneering cohorts and their favoured functionaries. Whether we realize it or not, exactly the same process is going on today. We are living in an age of digital colonialism and the same dynamic is playing itself out again.

In just the last two decades (since 1995 by my reckoning) an enormous landscape of “big data’ that never formally existed has sprung into being thanks to a plethora of new data-generating and data-analysing technologies. This new ‘big data’ landscape represents a “New World” for governments and businesses and it’s being colonized at a furious pace by both governments and corporations (mostly tech companies) desperate to secure their sovereignty over some part of this new digital realm. This time around the roles have changed slightly but the process is still the same. Today’s privateers and buccaneers are technology companies and global corporations. The State actors are still there but instead of the privateers working for them, governments are now more or less working for the corporations – although both parties maintain pretenses otherwise. There’s an intelligent and cultured indigenous population there as well, only this time it’s not native folks in loin cloths, it’s you and me.

The same old process of dispossession is also in play: a naive indigenous population finds itself confronted by a rapacious colonial power who’s world view and economic system is vastly different to that of the native folk. The indigenous population happily surrenders their sovereignty to these new colonists for virtually nothing because they fail to understand the implications of what they’re doing – just as local Indians traded Manhattan to Dutch settlers for a string of beads. Of course, once the trade is made, there’s no turning back. The net result of all this is the systematic dispossession of the native population and a massive concentration of wealth in the hands of a very few digital barons.

We’re in the midst of a transition from an analogue or physical economy to a digital one.  Value is moving from physical assets and markets to digital assets and markets. The great fortunes of the future will all be in the digital realm, not the physical realm. Data is the raw material of the digital economy and this is what is being colonized right now by big corporations. You may not even realize what’s going on, but every single data point about you that you generate by virtue of simply living your life; where you go, who you’re with, what you buy etc., is valuable and companies of all stripes really want to get their hands on as much of this information as possible. The problem is that they don’t want to pay you a cent for it. Just as European colonists did the last time around, the new digital colonists want to expropriate from you your most precious asset in a digital world; your personal data, and turn it into algorithms that will allow them to correlate, predict and manipulate your behavior (and everyone else’s) to their advantage – and ultimately your ruin.

Getting hold of masses of data is a laborious and costly process. Its not something that either governments or corporations can do on their own, so just as they did in the past, these two parties are colluding in a massive digital “land grab”. Letters of Marque, in the  form of trade agreements like the TPP and TIPA are provided to corporations by governments. These trade agreements formalise the rights of corporations to collect, store, analyse and sell all manner of information about you. The provide a bewildering array or legal protections for corporations in the form of copy-write, patent and intellectual property protections, while stripping individuals of any ownership or control of their personal data. Legislation like CISA is passed which pre-emptively exonerates corporations from sharing data they’ve collected for commercial advantage. Given the financial stakes involved we shouldn’t be surprised to see the rise of a massive and intrusive surveillance apparatus where both governments and corporations collude to spy on everything everybody does.

The name of the game in this new digital world is network dominance. There are a number of characteristics about digital technologies which make them unique but perhaps the most important one is the ability of digital networks to scale almost infinitely. What we’re seeing now is a mad scramble on the part of global corporations (and their government backers) to commandeer as much of the digital landscape as possible, as quickly as possible, in order to position themselves for network dominance both now and in the future. This is done first and foremost by data harvesting – because establishing network dominance requires masses of data.

As soon as something is networked its concentration effect and scale begin to grow exponentially. This concentrating quality comes from the power of the ‘network effect’ – the propensity of the biggest networks to attract the most customers and improve their market intelligence and efficiency on a compounding basis. Once a company has a dominant position in a digital marketplace it tends to increase its dominance exponentially. In a nascent market the first player to achieve any form of dominance tends to leverage that small initial advantage into a position of total dominance. The winners keep winning until they have a total monopoly and the losers tend to disappear. Think Myspace vs facebook, or Amazon vs ‘nobody anyone can remember’. The network effect has the gravitational pull of a black hole, sucking all network activity within a specific domain into itself.

The process goes something like this: once you have a mass of high quality raw data you need to fashion it into knowledge of some sort; knowledge about a market, a customer, a supply chain, or customer/supplier relationships – whatever. Once you’ve distilled some unique knowledge from your data set you can offer it as a service to your customers. This generally involves the establishment of service platform or an information portal and this is where the network effect really kicks in: the more transactions you have on your network, the more you learn about your customers, your suppliers and your market. If managed correctly, your network becomes a recursive self-learning machine that just gets better and more effective with every iteration.

Once you set up a digital network of any kind, its operating costs tend to be fairly fixed. You can scale up the number of transactions by many orders of magnitude without a commensurate increase in operating costs. The more transactions you have, the cheaper they all become as your fixed costs are amortized across a wider base. As a result, dominant networks begin to devour all the less efficient and smaller scale operations in the same field because they are both cheaper and more effective. Eventually, like an economic black hole, they suck up all of the gains in efficiency they managed to achieve by transitioning this particular component of economic activity from the analogue world into the digital world as well as all of the profits of their (now) defunct competitors, and all of this wealth tends to go to the tiny group of people that own the dominant network server.

While this might be extremely effective from a macroeconomic perspective, it’s a disaster for small businesses and the economic system that gave rise to the middle classes. It seems that digitization, automation, hyper efficiency and income inequality all go hand in hand. The new class of digital colonists are well aware of this, but they don’t care. Just like the colonists of old, they’ve managed to exclude the contemporary indigenous population from their moral universe. You & I simply don’t count. All that matters is how much they can make for themselves. Instead of colonizing territories and expropriating land and resources from indigenous peoples, technology companies (and the governments that act as their agents) are colonizing the digital world and dispossessing the middle and working classes in developed societies of their most precious asset in a digital world: their personal data.

There’s not one indigenous population that prospered as a result of European colonialism. If you think that you might somehow profit from digital colonialism, think again. Right now we have the opportunity to guide the transition we are making from an analogue economy to a digital economy but we need to act fast if we want to protect ourselves. We need to establish a legal framework that recognizes raw data as the exclusive, enduring property of those who generate it. We should have a legal and economic system that ensure that no one’s personal data can be collected, stored, analyzed or correlated without some form of (micro) payment being made to the natural owner of that information; the individual. We need legal precedents that protect individuals from corporations that seek to plunder our personal data and aggregate it for profit without compensation. We need to design our fledging digital economy in such a way that the intrinsic economic worth of every participant in the economy is recognized. We can do this by ensuring that every individual has control over every element of their personal data. If we succeed in doing this, we’ll avoid repeating the very worst aspects of the last round of colonization. If we fail, at least we all know what we’re in for.

Alan Hamilton

Alan Hamilton is technology advocate and commentator on the future of work. He has spent over 25 years working in multinational corporations in sales, management and human resources. His primary interest is the future of work in a digital economy. He holds a Bachelor’s Degree from La Trobe University and a Master’s Degree in Philosophy from the University of Sydney.