The Growth Crisis of Internet and McLuhan's Lesson

The mistakes that governments and businesses should avoid. 

 Column by Francesco Grillo for the Italian newspapers Il Messaggero.

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Picture: Marshall McLuhan

“Computers are the most extraordinary invention in man’s technological sphere. They are an extension of our nervous system. The world itself, indeed, has turned into a digital nervous system to which we entrust our senses”

One of the main paradoxes of the history of Internet is that one of its biggest experts was a philosopher who wrote about this technology even before it was invented. Marshall McLuhan felt that something more than a simple industrial revolution was about to begin. We are, in fact, experiencing a biological mutation. A transformation of the ways we turn information into knowledge. We could never conceive a digital strategy nor we could understand the success of the Silicon Valley stars (and why they seem to be falling today) if we do not start understanding the nature of the changes that Europe is trying to regulate.

Last week, during a seminary held in Luiss Guido Carli University, the consultancy firm Vision & Value presented a report on the impact of the big transformation on the Italian and European economy. The huge success of the big, global digital companies is proven by data from financial markets - regarding their market capitalization, the value assigned by markets, the profits that could be generated, the foreseeable future for their shareholders. Apple alone is worth more than the entire German stock exchange, where 500 companies are traded - including the "queens" of European manifacture (from Siemens to Volkswagen). If we consider only five businesses - Microsoft, Alphabet/Google, Amazon, Meta/Facebook besides Apple - they were worth one quarter of the entire New York stock exchange in 2020.

REDUCTION OF THE MARKET CAPITALIZATION OF SOME OF THE MAIN DIGITAL COMPANIES (FROM 2nd JANUARY TO 4th DECEMBER 2022, %) 

Schermata 2022 12 05 alle 14.34.00

SOURCE: Vision on FT data 

And yet, the past months (and the graph accompanying the article) prove that they do not have long-lasting rewards of position (as the European Commission seems to believe). Meta and Netflix respectively lost 70% and 60% of their value in one year, and they both suffer the effects of competition. If Facebook was a person, it would just have turned 18 (it was founded in 2004), but the Chinese Tiktok, which is just 6 years old, is already stealing its users. A company does not necessarily have to be “young” to be competitive: Disney is turning 100 years old next year, but it is fighting back Netflix - which had undermined the traditional movie industry by distributing movies on the Internet.

The story of digital infrastructures defining this new century - which we use to exchange goods, services, ideas, friendships - is rapidly evolving. It is a story made of apparently unstoppable rises and of equally rapid falls. Today, we are going through a growth crisis which can lead us to a more balanced world. This can only happen if governments change their approach towards a phenomenon they can no longer control; that of big companies who triggered processes whose implications go beyond mere business matters.

Europe, for instance, cannot expect to compete for a global digital leadership only through monumental sets of rules, if it never really played in the first place. The European Union approved ten directives and regulations only in the past six years, for a total of 726 pages and 563 articles: the risk is that only the biggest multinational companies might have legal offices skilled enough to understand what to do. Instead, it would be more useful to focus on building a network of European digital companies able to compete with the American and Chinese ones, breaking the “State aid” taboo that the US and China normally use to promote the growth of their “champions”. This is what happened in the past and still happens with the huge project of industrial policies (as the law to lower inflation) on which President Biden is investing his own political future.

However, even the American multinational companies undoubtedly have to recognize the scope of the transformation they triggered and the fact that the goods they produce as infrastructures are public. For example, during the pandemic Google put its most important asset - data - at the disposal of Israel and South Korea to react to the sanitary emergency. Another example is how Airbnb and Expedia partnered with Italian cities and regions to better understand the needs of tourists to attract in their territory. It is also good that Amazon is giving 20.000 small businesses a digital showcase to enter global markets. Old competitions can also originate interesting exchanges: last week’s event saw Amazon and Messaggerie (Italy’s biggest books distributor) admitting they have been learning from each other. And yet, recognizing to have a public role opens inevitable questions that are not easy to solve: even Elon Musk will have to admit that his new creature - Twitter - influences the public debate even only through the algorythm, deciding the order of appereande of politicians’ and journalists’ tweets.

The biggest risk that McLuhan foresaw is in the numbness that might be induced by any kind of technology. We can only exit Internet’s growth crisis if Internet becomes a lever of development for everyone. In order for that to happen, though, we need a great intelligence. The one that perhaps we lost in an ocean of information.

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