Posted by: Dirk | March 26, 2010

(Book review) The Big Switch

Rewiring the world, from Edison to Google is the subtitle of Nicholas Carr’s book, which has been recommended to me by someone working in IT field. Carr starts his book by explaining how some inventions changed the way business was conducted. He describes the rise of electricity and the subsequent turning of electricity production into a utility. This is a very clever step, since the analogies to computing will be made explicit later in the book.

Computers have started as huge machines, which were expensive and could be rented for use. When they turned smaller, the PC evolved and the machines were bought by the companies that used them. Decentralization of computers was the result, with incentives arising to connect these machines and form a network. This finally happened with the introduction of the WWW, giving computer users access to a network they could use to build websites.

By now, computing is turning into a utility just like electricity is. Huge server farms employ thousands of computers, which can be divided into virtual machines and rented by customers. Also, computer software can be rented, like that of Amazon or Google. Since the marginal costs for additional users are close to zero, many of these services are free. Companies that incorporate these services need additional competitive advantages, since the SOTA infrastructure is available to all competitors for free.

In chapter 7 Carr wonders whether the internet destroys more jobs than it creates. He argues that with youtube everybody can be a star. These are rewarded with wealth and fame, but for every start there will be many, many losers. Also, sometimes people generate content on websites for free and the owners sell their site for profit, like the youtube owners did. Even Google benefits a lot by its users which help to improve their rankings. As an economist I discover a lot of external effects here, both positive and negative ones.

The internet will also change our culture, and not always to the better (ch. 8). The internet has changed prices and incentives, old business models like that of newspapers come under pressure while online news have different incentives. Ads can be linked to articles, therefore these are much more commercial than before. Also, online users tend to cluster around certain ideological issues and probably stop listening to other views than their own. Carr does a good job in connecting some dots to show that the internet can be a force for the good as well as a force for the bad.

I recommend this book for people with an interest in IT and business. The other book I recommend is Wealth of Networks by Yochai Benkler.

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