Marc Andreessen made his first fortune writing the codethat became Netscape Navigator, the Internet browser. He is now a venturecapitalist who evangelizesabout the growing importance of software in business today. Indeed, heproclaims that software is taking over the world – that it will be the primarysource of added value – and offers the following prediction: the global economy will one daybe divided between people who tell computers what to do and people who are toldby computers what to do.
Andreessen’s aim is to shock his listeners – not just foreffect, but to get them to do something about it. To stop the world from beingdivided between a few alpha programmers and many drones, he wants the potential drones to stoptaking easy liberal arts courses in college. Instead, he wants them to focus oncourses in science, technology, engineering, and math (STEM), where the goodjobs will be. But will this solve the problem that he poses?
Perhaps not. Two attributes of software creation allow afew talented programmers to cornerthe market and take all the associated profits. First, software with aslight edge tends to get a significantly greater share of the available market;and, second, the available market is global, because it costs so little to makean extra copy and send it anywhere in the world. As a result, those who arecreative and competent enough to write that slightly better search engine willcapture the global market.
In this winner-take-all environment, only a small number ofthose who have taken programming courses will reap a majority of the rents.Completing the right preparatorycourses is no guarantee of receiving a share of the software jackpot. Differences inluck and talent among those equally prepared will ensure that the quality ofsoftware firms’ products lies on a bell curve, with only a few Googles and Facebooks and many morebored, moderately paid computer technicians helping the average confused persondeal with malware.
Put differently, in a winner-take-all world, raising theaverage level of skills or education does nothing to alter the skewed distribution ofincome. So, will anything prevent inequality from widening?
The obvious answer is yes. But how society responds willmean the difference between a prosperous world and a world torn apart by slowgrowth and resentment.
Property rights are ultimately sanctioned by society, and, to the extentthat they seem to be unfair, society has an incentive to change them. But willsociety see the software billionaire as having acquired her wealth unfairly, orwill it see that wealth as a fair reward for cleverness?
The more that everyone has access to the same educationalopportunities, the more society will tend to accept some receivingdisproportionate rewards. After all, they themselves have a chance to bewinners. Interestingly, software may itself reduce the cost of expandingeducational access – witness the massive open online courses (MOOCs) offered bycompanies like Coursera.
But equal access is probably an unlikely ideal. The otherextreme is very unequal access, made more unequal because the wealthy have thetime to help their kids with homework and the money to arrange for tuitions,while the poor leave their children watching TV while they work a second job.Will the resentful workers who must follow a computer’s instructions – say, inassembling an order in Amazon’s fulfillment centers – vote to tax theprogrammers who put them there until the software creators lose the incentiveto innovate, leaving society poorer? Or will the rich programmers all migrateto Monaco or Switzerland, taking the brains and rents with them, as societyfalls apart into barricadedand mutually resentful enclavesand ghettoes?
In reality, many intermediate possibilities exist. One isthat cultural norms may develop that encourage billionaires to share theirwealth, even if they are sparedtaxation. For example, the
GivingPledge is a commitment by some of the world’s richest people, WarrenBuffett and Bill Gates among them, to devote the majority of their wealth to philanthropy.
Economic competition may also play a role – if billions areto be made by innovators, more of the most talented get into innovation, sothat, even in a winner-take-all world, the winner captures the market for a fleeting moment beforesomeone else takes it away from him. The billions to be made today may only bemillions tomorrow.
And values also adjust. While a quartz watch keeps time more accuratelythan the most finely crafted handmade mechanical Swiss watch, the value of aquartz watch has plummeted, while Swiss watches’ value has climbed into the stratosphere. Even thoughthey are virtually indistinguishable in appearance, people seem to cherish theknowledge that someone has lovingly crafted their watch.
So it may well be that the demand for discussing, say,medieval French church music in small classes at a university will grow even asthe demand for MOOCs grows. Not everyone should heed Andreessen’s exhortation to quit liberal arts programs!
That is not to say that his basic concerns are unwarranted. Betteraccess for all to fundamental needs like quality education is necessary to makethe winner-take-all character of markets more tolerable. But societies may alsohave to change. If we are lucky, the changes will take place spontaneously.