Connecting The Dots Of Big Data, Soaring Corporate Profits, And Trade Wars

Authored by Charles Hugh Smith via OfTwoMinds blog,

It's self-evident that we cannot possibly understand trade, soaring corporate profits, Facebook's data collection or the economy without understanding the core role played by Big Data in reaping outsized profits and pushing narratives.

Let's connect the dots between these two comments from longtime correspondents: the first is on the model of collecting and selling data (Big Data), and the second on trade:

GFB:

"If I had a lot of money, would I want to do:

A) --invest in the exploration forbidding areas of the globe for oil reserves with a 50/50 chance of no results
--negotiate leases for the areas of the planet I want to extract oil in and have to negotiate with corrupt and unstable governments
--Pay for the oil extracting and transportation infrastructure
--deal with the fluctuating market values - which may make my whole investment worthless

OR

B) set up a low cost trap that has millions of people handing me for free, and with their acknowledged permission, their preferences, tastes, beliefs, and aspirations . . . which I can re-sell at almost no cost to a long list of buyers, with a price that I can set as I have the data.

Why I keep thinking we’ve moved past 'the sky is falling' to 'the sky fell' with this is that we haven’t yet seen what happens when next generation AI gets a hold of this data and starts using it.

That’s no concern of anyone in the data mining, acquisition, or aggregation business now - as their goal is very simple: get as much data as possible from any kind of source that you can beg borrow or steal from - as the AI and algorithms of the future will find more and more uses for this data.

Data will only become more valuable. I don’t think there is an equivalent 'substance' in our universe, that no matter what happens, the data holder will be wealthier and wealthier.

Data doesn’t expire, rust, need maintenance, go in or out of fashion, need to fed, require medical care . .

I thought it was very telling that there were numerous reports recently that the Senators grilling Supreme Leader Zuckerberg clearly, by the nature of their questions 1) did not understand what Facebook does and why this is and issue, and 2) didn’t want to piss Zuck off as they are going to need to use Facebook's data in their next campaign, as their opponents surely will."

Mark G.:

"Perhaps one way to underline this for readers (i.e. that corporations have benefited from "free trade" far more than consumers and workers) is to see what wasn't outsourced and offshored. This is control of the product marketing and distribution channels. This is the sector the "Free Traders" have maintained a death grip on.

Even with Alibaba in place the Chinese have still made almost no progress in market penetration in North America, Europe or Pacific Oceania.

If we totaled up the proverbial '80%' of retail value in any class of products I'm certain we'd be staring at a series of oligopolies that generally have fewer than ten members in any category, and often fewer than five."

Here's how I'm connecting the dots of data collection/data mining and the new model for maximizing profitability: the entire model of "capitalism" (maximizing return on capital and labor) has shifted from getting rich making stuff/providing services to distributing/marketing goods and services in a cartel structure.

In this economy, the essential role is played by big data/data mining. Wal-Mart, Amazon, Facebook, Google et al have no interest in where the goods and services are made/generated; the big profits are in the distribution/marketing (i.e. exploiting large data sets) and gathering and selling these large data sets.

Let's stipulate that those corporations whose entire value proposition is manufacturing expertise will continue to extract profits from manufacturing. But this doesn't mean that this manufacturing remains exclusively in the domestic economy, or that Big Data isn't increasingly a core value-generator for manufacturers.

Boeing is a good example. In terms of trade, it's noteworthy that Boeing is careful to have major airliner components manufactured in major markets for its aircraft: Japan and China come to mind.

Since Boeing's value is increasingly based on how well it meets the needs of its airline customers (setting aside its government defense contracts for the moment), then the value proposition shifts to Big Data /data mining and analysis of passengers, routes, etc. by the airlines. Thus Big Data informs what they want from Boeing, and Boeing is thus as reliant on data mining as any politico seeking to exploit large data sets mined by Facebook.

GFB made an important point in one of our many email exchanges on these topics: small data sets are a dime a dozen. What's truly valuable is data sets covering tens of millions or hundreds of millions of individuals.

There are of course beneficial uses for large data sets: pharmaceutical and healthcare R&D is informed by large data sets about patients and their responsesto lifestyle changes, medications, etc.

To Mark's point: to identify what is most profitable, look at what isn't offshored, and what is most zealously guarded by political/regulatory moats.

Alternatively, to identify what's low-value and not very profitable, look at what's offshored. That would be manufacturing and assembly.

To GFB's point: given a choice between an intrinsically risky enterprise such as discovering and extracting oil in harsh landscapes and unstable nations (pretty much all that's left to explore/extract), and extracting the value from large data sets, which is more profitable and lower risk?

Mark invokes the 80/20 rule (Pareto Distribution) as a basic guideline to the concentration of wealth and power: 20% of the firms in any sector reap 80% of the profit. If we go one step further, and take 20% of the 20% and 80% of the 80%, we get the 64/4 Rule: 4% of enterprises/individuals reap 64% of the profits/income.

This extraordinary concentration of income and profits is reflected in the data on corporate profits and IRS income data.

 

This connects the dots linking trade, the value of Facebook's "business model," and the tremendous demand by corporations and political campaigns for large data sets that can be analyzed and exploited to market products, services and political narratives/candidates.

It's self-evident that we cannot possibly understand trade, soaring corporate profits, Facebook's data collection or the economy without understanding the core role played by Big Data in reaping outsized profits and pushing narratives--in Noam Chomsky's phrase, manufacturing consent.

Big Data, Big Government, Influencers / Marketers, Corporate America and politicos never had it so good. As for the rest of us--not so much.

*  *  *

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Comments

ken1990 Mon, 04/23/2018 - 10:46 Permalink

In the news

Chinese man invents smart robot cooker because of his wife's inability to cook: https://www.theflezz.space/2018/04/chinese-man-invents-smart-robot-cooker.html

 

New church celebrates booze in South Africa: https://www.theflezz.space/2018/04/new-church-celebrates-booze-in-south.html

This robot that plays basketball can challenge you: http://enternations.com/thread/614/robot-plays-basketball-challenge

Man Kills Himself And His Children Because His Wife Enjoyed Masturbating: http://enternations.com/thread/572/man-kills-wife-enjoyed

 

Airport staff member get punished for being too handsome: http://enternations.com/thread/528/airport-staff-member-punished-handsome

Girlfriend saves her lover’s life by cutting his throat: http://enternations.com/thread/522/girlfriend-saves-lover-cutting-throat

Woman dies after husband uses mortar bomb as sex toy:http://enternations.com/thread/499/woman-dies-after-husband-mortar

Father Joins Son To Rape His Young Daughter:http://enternations.com/thread/445/father-joins-son-young-daughter

 

Stuck on Zero ken1990 Mon, 04/23/2018 - 12:30 Permalink

I think what Charles Hugh Smith is saying is that the 1% have become very wealthy by treasonously selling out the country for quick wealth.  Boeing has transferred all US aviation technology to Japan and China for a quick buck. Facebook and Google steal everyone's secrets for sale. WalMart sells out the middle class by moving all manufacturing to Asia. None of this will end well.

In reply to by ken1990

The Ram Stuck on Zero Mon, 04/23/2018 - 13:33 Permalink

I wonder if 'Big Data' has picked-up on the fact that most Americans and many countries in the world are broke.  Ok, so they know what sized nickers you buy for your granny.  Does it really matter?  In the end, if consumption is cratering then the 'Big Data' will be looking for scraps along the way.  Hardly seems worthwhile.  But I guess you can always encourage a bankrupt company to go into the red even more to find out that it's customer base is buying less!

In reply to by Stuck on Zero

pigpen Mon, 04/23/2018 - 10:55 Permalink

Charles, I'm waiting for your piece that will encourage citizens to unite and with 3 clicks download mobile adblocker to destroy the economic oxygen and incentive of the digital advertising tracking surveillance goobook monopolies.

My preference for simplicity of install and default protection is Brave browser.

Brave blocks advertising malware and tracking by DEFAULT on any device and operating system rendering digital advertising model useless.

Whoever controls the browser controls the digtal advertising money.

We are a simple 3 clicks from destroying goobook - that easy. Download brave browser or equivalent mobile adblocker today.

Cheers,

Pigpen

thisandthat pigpen Mon, 04/23/2018 - 12:29 Permalink

"My preference for simplicity of install and default protection is Brave browser.

Brave blocks advertising malware and tracking by DEFAULT on any device and operating system rendering digital advertising model useless."

Brave spamming is really getting off the charts!

For a self-proclaimed pro-privacy/adblocking browser, being that sole one that keeps relentlessly spamming everyone everywhere with their ads, is ironical, at the very least...

In reply to by pigpen

Frilton Miedman Mon, 04/23/2018 - 11:07 Permalink

If total economic growth is, say, 5% and 90% of the income is the top 1% and they are growing at 6%, that extra 1% is shaved off the other 99%.

 

"The greatest threat to human freedom is the concentration of power, whether in the hands of government or anyone else. "

- Milton Friedman

 

Alexander De Large Frilton Miedman Mon, 04/23/2018 - 11:14 Permalink

I am sure if you study history, the numbers are far worse.  I am convinced that all those "OMG GUYZ, WERE LOOSING ARE FREEDUMBZ THE RICH ARE GETTING MOAR POWIRFULL THAN EVAR B4!!!" dudes are either Jews or goys paid by Jews to operate a honeypot.

We are talking about a world of ethnic cleansing, genocide, child labor, and slavery, for most of human history.

Clearly all this freedumb is just a fucking anomaly in need of correction.

In reply to by Frilton Miedman

Endgame Napoleon Frilton Miedman Mon, 04/23/2018 - 12:48 Permalink

Are these psychoanalytic tools—developed by CS data mining teams, and deployed by diverse teams of near-100% pre-childbearing-aged, female, recent-college-grad marketers or by frequently absentee teams of near-100% childbearing-aged mom marketers with flextime hours for kids—really so efficient and all-powerful? 

Are the targeted ads a success, even when so many miles of retail space have been eviscerated? In this era of targeted marketing, even when people buy things, most of them do it on credit, not just with substantial purchases, like homes, but even with cars and less expensive items. People are buying less, and despite all of this targeted marketing, they are buying things that are less appropriate for their budgets, hence the debt load. 

 

In reply to by Frilton Miedman

HenryHall Mon, 04/23/2018 - 11:21 Permalink

In other news - turmoil in the Aluminum market.

Rio Tinto has pulled the plug on it's joint venture with Rusal in Queensland and on Rusal Ireland. And probably more small players.

Aluminum is created by a process of steps (1) mine Bauxite (2) convert to Alumina (3) refine to metal.

And the consequence of Rio Tinto's actions is that there is a severe worldwide shortage of Alumina.

Except in China of course. Canada is OK too. But the Europeans and the Aussies are greatly damaged.

Let it Go Mon, 04/23/2018 - 11:22 Permalink

Want to increase profit per share? Just reduce the number of shares! As of 2015, just 30 firms accounted for half the profits of all publicly-listed U.S. companies, down from 109 in 1979. Only by accumulating debt have many laggards been able to afford the buybacks necessary to keep stock appreciation stable. The IMF warned last year that 22% of U.S. corporations are at risk of default if interest rates rise.

Below is the link to the second part of a two-part series. The first explored how stock buybacks have been instrumental in driving this market higher since QE fueled easy money starting in 2009. This part focuses on what is ahead and how the recently passed Trump tax plan has supercharged this trend just as it may have been reaching its natural conclusion.

 http://Stock Buybacks Driving Market-Where It Might Take Us!html

Endgame Napoleon Frilton Miedman Mon, 04/23/2018 - 13:06 Permalink

Twenty percent of it is going to make sure that the mom who is working—officially or unofficially—part time in a “voted best for moms job,” supplementing spousal income, child support that covers rent or monthly welfare that covers rent and groceries, gets a higher paycheck than the single, childless employees, struggling to cover rent that consumes more than half of earned-only income, even when the childless, single employees with higher withholding come to work every day, work all day and meet the quotas every month, while the absentee moms with lower withholding often do not. 

Even though the moms often frequently take off mornings, afternoons, days and weeks beyond PTO and pregnancy leaves, watching each other’s backs, they make more than the childless women in adjacent cubicles.

The welfare moms work part time, strategically, to stay below the earned-income limits for monthly welfare, getting an EITC refundable child tax credit up to $6,431 on top of welfare, while the moms with plenty of spousal income use their non-refundable child tax credits to fund copious, excused vacations, often out of the country in the case of the affluent working families. So, US businesses get zero benefit out of their tax windfalls.

All of this progressive-tax-code pay for sex and reproduction, linked to work, facilitates part-time employment and concentrates the rewards for work—i.e. the spending power—in fewer households, dis-incentivizing hard work, whether for the retained mom employers who are above firing except in cases of all-day / every-day absenteeism in management positions and for America’s mammoth group of out-of-the-workforce and underemployed citizens who know that hard work and production does not pay in most cases. 

In reply to by Frilton Miedman

JibjeResearch Mon, 04/23/2018 - 11:33 Permalink

Yes, exactly!

The Corporations cared less about where to make stuffs so long as getting it back to the market makes great profit; thus, you see free shipping.

This free shipping makes physical stores less attractive, not completely useless.

Technology makes nation-state less powerful and give employees at the bottom better chance of good living while marginalizing employees at the higher end.

It has been this way , at least, the last 10 years.

The people who can recognize the trends such as the blockchain techs took risk and make big money.

The savers and less risk takers don't do so great.

These are the games in town.

Endgame Napoleon JibjeResearch Mon, 04/23/2018 - 13:29 Permalink

In the USA, the non-womb-productive employees at the bottom—i.e. the employees whose part-time wages are not bumped up by thousands in monthly welfare and refundable child tax credits to reward sex and reproduction in single-earner households of citizens and noncitizens—most certainly have not benefited from the high-tech economy, quite the opposite.

Americans who must live on earned-only income from bottom-level jobs have not benefited since most of the jobs, deriving from technology developed in the USA, were shipped to Asia because of the cheap, non-diverse labor force there. Over 2 million jobs were shipped there, along with the SS contributions that would have been made if those jobs had been kept in the USA, bolstering the SS fund before the giant Boomer retirement.

Nothing prevents the US government from taxing American-owned companies for the employer’s part of SS—7.65%—on every offshored and outsourced foreign worker. That would be better than cutting the Social Security that Americans paid into on every dime they earned up to the $127,200 SS taxation cap, with the self-employed, including the gig workers of the high-tech economy, paying twice as much into SS at 15.3%.

The over-taxed modestly self-employed workers are almost never the womb-productive citizens and noncitizens, enjoying the range of 100%-non-contributory freebies from government, like free rent, EBT groceries, free electricity, free monthly cash and refundable EITC child tax credits up to $6,431.

The highly paid have taken nearly one-hundred percent of the benefits from the high-tech economy in America, concentrating the rewards in fewer households due to assortative mating.

In addition to more non-contributory monthly welfare and progressive-tax-code welfare for womb-productive citizens and noncitizens—i.e. for those working part time to stay below the earned-income limits for welfare—the solution of the highly paid is to call for ever more absenteeism privileges for working parents at the top to lock in the benefits for the top 20% even more.

Without assortative mating, the college-educated, white-collar middle class would be twice as big in America. Without offshoring, welfare-supported single motherhood and welfare-aided legal / illegal immigration, the blue-collar middle class in the USA would be twice as big. It is not really all about tech. It is about greed and womb privilege, sold by packaging it as feminism and tolerance.

In reply to by JibjeResearch

Md4 Mon, 04/23/2018 - 11:34 Permalink

The "FRED" chart says it all.

Western corporate outsourcing IS the culprit in this race to the bottom. And, it began as a trickle four-plus decades ago.

It is also fatal.

The hilarity of it all, as is the case with much of corporate and Wall Street strategy, is that the ultimate endpoint lies in a handful with everything...

...and what lingers of the vast majority, with mostly nothing.

The Boeing example is a prime one.

The strategy reportedly relies on making aircraft parts in places where demand for their products are high.

Without, apparently, understanding that their customer base of support is ultimately limited by that strategy.

Boeing will sell planes to customers as long as those customers have customers who can afford to buy tickets.

Boeing...either does NOT understand, or does NOT care about that cardinal fact of economics...at, ultimately, YOUR financial future's expense.

Yet...their future relies on you being able to support THEIR customers with ever-declining income.

In no realm, save the western corporate boardroom and their Wall Street handler's offices, does such strategy make logical sense.

It is neither good business, nor is it good social partnership.

Business models which rely on ruthlessly reducing costs for profit growth are NOT sustainable, regardless of how that approach looks on paper.

Automating a labor force, wherever it is, GREATLY accelerates the customer obliteration too, and ultimately, destroys social stability.

Extraordinary Fed "brakes" were the ONLY thing which slowed our free-fall, sharply triggered in 2008. Those "brakes" are badly worn, and now, mostly glazed and ineffective.

We are at the point where popular uprisings to combat the continued decline, illustrated in this story, are urgently needed if we ever hope to avoid a full-on Mad Max scenario.

The western corporation that brought you here...

...must be shut down, and radically redesigned, before it's stategic endpoints are reached.

There is very little time left to do so too...

Scaliger Mon, 04/23/2018 - 12:06 Permalink

FALSE conclusion of this foggy-minded article.

The ONLY reason for rich-only growth is FINANCIALISATION.

i.e. absent of any real-economic value.

This is in essence discorrelated from any technology or logisitics.

hannah Mon, 04/23/2018 - 12:19 Permalink

companies today make a 'profit' by hiding their real debt. it is all a charade....if there isnt a middle class in the usa, there arent any profits. they killed the middle class decades ago....so they fake everything with printed money....that isnt an economy

DipshitMiddleC… Mon, 04/23/2018 - 12:27 Permalink

yea the powers that be are realizing that owning physical assets is a liability and is capital/labor intensive

 

these big corporations are starting to act like hedge funds

snblitz Mon, 04/23/2018 - 14:18 Permalink

I worked in big data at fortune 500 company.

It is pretty much all lies.

Long ago an advertiser would run two commercials on TV with different 800 numbers to call in on.

The commercial that got more calls, leading to more sales, was the "better" commercial.

I do not know why, though I watched it happen, the industry moved from simple A/B testing to "views and clicks".

They unlinked ad presentation from sales.

Certainly "views and clicks" could leverage the A/B testing methodology and no doubt does in some areas.

But the mass are competing just for views and clicks and ever better "targeted" views and clicks using big data. 

It is almost as if the people running the companies do not know anything about market and sales.  After all, the A/B process is not difficult and had been going for decades.

Though perhaps sales is no longer important in a world where the investor no longer cares if a company is profitable or will ever be profitable.

It is almost as if companies compete on stock price rather than on any other basis.  Wouldn't this make Amazon and Tesla pump and dump schemes?

cougar_w snblitz Mon, 04/23/2018 - 14:47 Permalink

You clearly do not understand what Big Data is at all.

The analysis taking place on Big Data is not sequential two-dimensional A/B testing. It's 64-dimensional PCA. With the analysis running in real-time in some cases. The computational throw required to pull this off boggles the mind.

In reply to by snblitz

Md4 snblitz Mon, 04/23/2018 - 15:36 Permalink

"Though perhaps sales is no longer important in a world where the investor no longer cares if a company is profitable or will ever be profitable."

This is the end-stage of naked capitalism.

The profoundly absurd idea that return on investment, and the infantile notion that shareholders value are the only drivers of an enterprise's efforts...has to be fundamentally reengineered to include the health of the consumer (labor), which is ultimately, and directly, related to the legitimate health of the enterprise.

Otherwise, what can be the outcome?

It is not socialist, nor communist, to urgently suggest that it's time a new, much more responsible capitalism emerges.

Remember, at one time, the corporate hacks and Wall Street racketeers fumed at being held responsible for legitimate damage to the environment, and to consumer health.

The same drive to hold accountable industry for the damage they cause to the economic wellbeing of the working consumer, when shareholders and "investment" returns are the chief objects of an enterprise, must be advanced with the same vigor and the same resolve.

We can correct overreach.

We CANNOT much longer endure inaction, nor apathy.

Capitalism, as we know it, cannot remain in such narrow minded hands. Your future, whether in the rackets, or not, matters too.

We either advance the concept of responsible capitalism...

...or most of us ain't gonna make it. 

It's that clear, and time is short.

In reply to by snblitz