Wall Street's internet darlings require an endless supply of victims

http://www.theregister.co.uk/Print/2014/08/23/internet_economy_needs_infinite_supply_of_idiots/

Sharing Economy? Mug Economy, more like
By Andrew Orlowski
Posted in Weekend Edition, 23rd August 2014 12:33 GMT

Last week Samsung announced the acquisition of a crowd-funded startup called SmartThings for $200m. USA Today wrote that the deal “has also once again validated the power of crowdsourcing platform Kickstarter, which helped bring SmartThings to market back in 2012. The startup originally sought $250,000 in funding to produce its smart hub, eventually raising more than $1.2 million from individual backers.”

SmartThing’s individual backers, who in conventional language are called “investors”, received nothing from the windfall. Nor did Kickstarter backers of the brilliant Oculus Rift VR headset, after Facebook acquired the team for $2bn. WiReD magazine glossed over this, mentioning “people who had ponied up to support the original Kickstarter campaign, only to see their investments made irrelevant by a deep-pocketed corporation.”

“Irrelevant” is beside the point. The conventional investment logic is that risk is rewarded when success arrives. Most startups fail, while a handful accrue enormous value. Yet Kickstarter investors receive no such reward: although they backed "the next big thing" in SmartThings and Oculus, they don't get the payout.

Here’s another example. Cabaret performer and former living statue (and Mrs Neil Gaiman) Amanda Palmer bypassed the music industry to fund an album and a tour, again using the pan-handling site Kickstarter. She was lauded on tech blogs and beyond for pioneering a new economy of music production. Having raised $1.2m on Kickstarter, however, Palmer decided she could only pay her tour musicians in “hugs” After unfavourable press coverage, Palmer was shamed into grudgingly remunerating them with a currency a little more convertible in the real world. Did her Kickstarter "investors" revolt? No, and they couldn’t; it took hugely unfavourable press coverage to change Palmer's mind.

Last week the New York Times reported how the euphemistically named "sharing economy" – which encompasses piecemeal labour - is creating its own "precariat". The freelance workers who provide the drivers for Uber or the accommodation for AirBnB pay a hefty chunk to the new intermediaries, must accept ever changing rates, and further accept that they’ll not see a penny of the payouts when value is accrued – when the company floats or is acquired. It’s a strange sort of "sharing".

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In short, you’ve been a mug.

And this seems to be the common thread. Strip away the language of "sharing" and "community" and you’ve got an economy that requires an endless supply of mug punters.

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