resource transition and social media

[...] “The sacred cow is the belief that Facebook and Twitter are the premier platforms for this revolution,” writes Phil Johnson in an adage.com transmission titled Facebook Is Too Crowded and Your Analytics Aren’t Up to Snuff; Examining the Current Herd of Sacred Cows in the Advertising World

Johnson continues:

As those platforms become mainstream, marketers like us turn them into forms of traditional paid media and they become less valuable as social networks. Facebook is already starting to resemble a tacky mall cluttered up with unwanted advertising and promotional noise. As time goes on, I predict that people will want to protect their closest community of friends and will find ways to block out everyone else. They will leave mega networks for smaller, more focused communities. If you really care about the principles of social media, start looking for the next generation of platforms because as far as Facebook and Twitter go, the neighborhood is getting too crowded [...]

Cyclical time has always been a concern of rhetoric construed as a traditional science, e.g. Vico, Longinus. What you say, and what gets said, has everything to do with the historical moment. Moral: know the system, know how the system develops, know the properties of the system at every phase of its development. Know the life-cycle of the sysem, particularly if you want to do anything useful with it. To e.g. brand yourself on Twitter 6 months ago would be a very different task than it will be 6 months from now.

Here would be one account of system transition in the form of various responsa to Johnson’s argument:

(1) What Johnson describes are systems in transition relative to their resource or resources. Systems that draw on high- or higher-gain resources—i.e. resources that return a higher marginal yield—organize differently than systems that draw on low- or lower-gain resources. The differences are predictable.

(2) High-gain systems are less organized or closely coupled. They support rapid development based on innovation. Low gain systems are highly organized, steeply hierarchal, and closely integrated. Low-gain systems support development of a different character. Low gain systems develop based on fierce competition that trends in one direction: toward more, and more expensive, complexity.

Tainter in his Resource Transitions and Energy Gain: Contexts of Organization puts it this way:

[...] High-gain systems capture large amounts of energy at little cost. EROI is high. Although these systems produce impressive organization, they are notable primarily for high-quality energy flow. Low-gain systems may capture even more energy, but, because they must capture it from more extensive sources, organization is required to aggregate resources. The Roman Empire exemplifies this. Late in its history, the Empire greatly expanded its organizational control to amass the dispersed resources needed to survive, as described below [...]

One of Tainter’s examples is the Roman empire. The empire transitions from its republican to its dominate phase of organization because its primary resource transitioned from high gain tribute and the spoils of conquest—liquidating the accumulated capitals of subject peoples—to low gain taxing of the land:

[...] The late Roman Republic is a paradigmatic example of a high-gain phase in which the seizure of accumulated surpluses produced the wealth to finance further campaigns. Nevertheless, this steep gradient so disrupted the political system that republican government was soon terminated with the establishment of a new level at the top of the hierarchy, i.e., that of a permanent emperor and his court. This development signaled both the dissipation of the high-gain gradient and the start of the low-gain but more prolonged imperial phase (hypotheses 1–4, 6, and 8–11).

Once the phase of conquest was complete and the accumulated surpluses spent, the Roman government was financed by agricultural taxes that barely sufficed for ordinary administration. The early empire was administered more by available income than by a planned budget [...]

[...] Diocletian established Rome’s first budget, and each year a tax rate was calculated to provide the revenue. The tax was established from a master list of the empire’s people and lands, tabulated down to individual households and fields. In an era when travel and communication were slow, expensive, and unreliable, it took substantial organization and personnel just to establish and administer a tax system so minutely detailed. Taxes continued to rise, apparently doubling between 324 and 364. Villages were liable for the taxes on their members, and one village could even be held liable for another. Tax obligations were extended to widows, orphans, and dowries. In spite of this colossal effort, the government still had to conscript men for the army and requisition services from guilds to meet its needs. Occupations were made hereditary and obligatory. Positions that had once been eagerly sought, such as in city senates, became burdensome (Jones 1964, 1974, Williams 1985) because leading citizens were held responsible for tax deficiencies (hypotheses 4, 6–8, and 12) [...]

[...] The Roman Empire illustrates a trajectory common among historic empires. The phase of high returns in an imperial system is the immediate postconquest phase during which accumulated surpluses are appropriated, funding extravagant expenditures (hypotheses 1, 2, and 6). This phase is always transitory, quickly replaced by a longer period of low-return, hand-to-mouth existence based on taxes (hypothesis 9). Peasant agriculture produces little surplus per capita, and taxes based on it must be collected and aggregated. Taxes are a low-quality resource, because only a relatively small amount can be extracted from each household (hypotheses 1 and 5). Taxes are hard to collect and demand a large infrastructure, but in an agrarian landscape there are a lot of people to tax (hypotheses 6, 8, and 12). Because taxes must be collected from many production units, peasant taxation systems tend to be elaborate and costly (hypotheses 8 and 10). Once an empire enters this phase, the only way to increase revenue quickly is to increase taxes, which may undermine the productive system [...]

This has been the story of the nation-state system since the supply-shocks of the 1970s according to Van Creveld in his Rise and Decline of the State. The cash value of taxation—i.e. the marginal return on taxation—has been in decline for nearly a generation. So has the cash value of manufactured goods. Our principal high-gain resource, petroleum, also continues its long decline as oil fields become increasingly costly to discover and develop and new users and consumers come online in the Global South and other regions.

When an economy is productive the distribution of incomes is flatter. An economy in decline produces stratification and arrests social mobility: the rich get richer, the poor get poorer. Pareto efficiency predicts this. The U.S. economy produces more wealth than it ever has—conclusion: the U.S. economy grows ever more productive. Right? The opposite is the case: (a) the U.S. economy is simply bigger than it ever was, hence, more wealth, and (b) the amount of wealth in the aggregate belies how increasingly costly it is to develop that wealth. Yes, there is more wealth. But wages are flat, purchasing power continues to decline, and debt accumulates everywhere.

Tainter, from his Resource Transitions :

[...] Low-gain phases depend on resources that have a shallower gradient of potential degradation. In a low-gain phase, resources are scarce, and, if the demands on the system are great, it will be vulnerable to instability or will require higher organization. Although net output per capita is low, it is great in the aggregate. Whereas high-gain phases are impressive in their dissipation of energy, low-gain phases are more impressive for their organization [...]

(3) Libertarians want a smaller state. Progressives want a bigger one. Both sides miss the point. What delivers less organization is a high-gain resource. What delivers more organization is a low-gain resource. It’s the system, stupid. No innovation of statecraft nor act of policy can reverse the laws of physics.
(4) Back to Johnson. What Tainter argues about energy gain is the same for any resource. The resource in the case of Facebook and Twitter is the network and the value that can be drawn from it.
(5) Consider users. Each new participant in twitter or facebook adds value to the network because each new participant extends the network. The classic example used by network theorists many years ago was the fax machine. Say you are the only person with a fax machine. What is your fax machine worth? Nothing. With every new fax machine user in the network, however, your fax machine gains in value. So new users add value to the network. But new users also add density, complexity, and especially noise to the network as they develop new links among users and the system registers their new activity. Example: It is harder to find someone to talk to in a milling throng of millions than it is at a dinner party. Think of every new user as an additional input. At some point the value that accrues to the network for every new user begins to decline.
(6) Consider third party developers. They too add value. But as they begin to multiply they also increase the noise and complexity.

(7) Consider the costs of the system itself, the servers, the developers, the payroll, the maintenance costs, the administrative costs. These costs can rise exponentially as the system extends and complexifies. Hence, the increasing advertising and promotional noise, and the diminishing returns on that activity too. All of this, 5-7, constitutes a complexity tax. As the tax goes up, the ROI for participation goes down.

(8) Hence Johnson’s verdict on Facebook and Twitter:

[...] I predict that people will want to protect their closest community of friends and will find ways to block out everyone else. They will leave mega networks for smaller, more focused communities [...]

I agree. When confronted with lots of noise, users resort to only 2 techniques to sift and sort in search of signal. They either impose a structure, as in the structure of business letters or resumes that help readers scan to find the information they want. Or they set decision rules whether tacit or explicit that they use to filter out the noise of the world. This can be as simple as dropping a noisy friend from your Facebook friends list. In other words, the network balkanizes. Also, the rich get richer as the poor get poorer. Early top performers accumulate more and more friends and followers even as it grows more difficult for newcomers to get heard among the din.

(9) At some point Facebook and Twitter will reach the point where further growth and development yields a negative return. Sort of like the global banking system. We are overbanked. At this point some innovator or innovation will emerge—it may have been there all along—and the cycle will begin again.

yours &c.
g.