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Posts Tagged ‘dot-com 3.0’

Dot-Com 3.0 Collapse Continues As Social Media Statistics Collapse

Tuesday, November 14th, 2017

We have had several dot-com boom and bust cycles. Dot-Com 3.0 was born in 2007 with the rise of mobile devices and sustains itself on the tendency of American workers to do virtually nothing at their make-work jobs but keep scrolling through the fascinating “user-generated content” (read: human drama) on Facebook, Twitter, Instagram and Reddit.

It keeps the workers docile and grazing, and makes huge profits for those who had the wit to get in early and buy low, then sell high. But those days are over because the illusion of social media is falling as its statistics implode, mainly because people have realized that these are inflated and therefore, the advertisements they are buying are worth a lot less than anticipated.

The first stage in this drama comes to us from Twitter, which was revealed to be full of fake users who frequently pass along Russian propaganda — or America-based propaganda — as truth:

Twitter Inc. on Thursday said it overstated its number of users for the past three years and committed to take advertising off its site from two Russian media outlets, while reporting modest user growth for the third quarter.

…In the latest quarter, Twitter realized that it had been mistakenly including users of a service for third-party apps in the company’s tally of monthly users, a spokeswoman said.

…Twitter in the third quarter added four million monthly users—analysts were expecting just over one million—bringing its total to 330 million monthly users. For the second quarter, however, the adjusted numbers showed the company’s tally actually shrank for likely the first time since 2015, by one million users. Previously Twitter had said user growth was flat in the second quarter.

Despite extensive new censorship rules and taking the transparently obvious step of eliminating Russian state propaganda, Twitter has failed to attract an increasing userbase, which shows it going down the path of MySpace toward content entropy.

Not to be outdone, Facebook announced that many of its accounts are fakes, signaling honesty as a defense against future revelations as they dig deeper into the morass of spam content that is common on the site:

Despite months of talk about the problem of fraud facing Facebook and other tech companies, and vows to root it out, their sites remain deeply infected by obvious counterfeits. The Russian influence operation during the 2016 election, which occasioned the three congressional hearings this week, is only one especially consequential sample of a far larger problem, in which the services are gamed for profit or political influence.

…Facebook estimates that about 200 million of its more than 2.07 billion users may be fakes. Sean Edgett, Twitter’s general counsel, testified before Congress that about 5 percent of its 330 million users are “false accounts or spam,” which would add up to more than 16 million fakes.

Independent experts say the real numbers are far higher.

Witness the anatomy of a paper tiger being revealed. On paper, Facebook and Twitter reach billions. In reality, it is unclear that the numbers are nearly as high as these sites claim, that the people are paying attention, or that most of the activity is not generated by an overactive 8% of the internet population who like clicking on things, like people chewing gum or playing one-armed bandits.

Unfortunately for the world, much of the American economy is now based on the Dot-Com 3.0 wealth it anticipates, something which may be responsible for the recent rise in income separation between the masses and the elites. But as the partially-unintentional fraud is revealed, that wealth will disappear, taking down the American and then world economies.

Why The Dot-Com Collapse Will Doom The World Economy

Wednesday, October 11th, 2017

For those who are not familiar with our consumer society, it works like this: governments and large companies dump money on the working and middle classes so that they spent it buying essentially disposable goods, which makes the money used in those economies experience higher demand, which allows governments to keep borrowing.

Advertising drives this entire process by taking money from companies and using it to fund media, which in turn provides products that keep the workers occupied (“entertained”) and so neutralized from any other lifestyle, while compelled to buy more stuff and thus, drive the gears of the economy. It is Keynesian “pump-priming” in perpetual motion, at least until the debt bomb explodes.

Over the past ten years, the new Dot-Com 3.0 monopolists have taken over advertising, as this image from Visual Capitalist shows us. The internet has displaced television, but if the internet revenues are built on false promises, then the whole thing will crash.

If advertising goes, media goes; if media goes, our consumer economy will be irreparably damaged. This will further invalidate the age of ideology which promised a comfortable and stable life for the average person, and will have instead delivered them into an economy in permanent recession, since money that should have been spent on infrastructure and future planning was not.

The Dot-Com 3.0 bubble will burst as the truth of a 2009 report is revealed to be consistent, namely that 8% of the user contribute 85% of the ad clicks, meaning that all of internet advertising is based on false promises. At that point, the gig is up and confidence in online advertising will crash.

The updated results based on March 2009 comScore data, and presented by comScore chairman Gian Fulgoni and Kim McCarthy, manager, Research & Analytics at Starcom, at the iMedia Brand Summit in San Diego on September 14, 2009, indicated that the number of people who click on display ads in a month has fallen from 32 percent of Internet users in July 2007 to only 16 percent in March 2009, with an even smaller core of people (representing 8 percent of the Internet user base) accounting for the vast majority (85 percent) of all clicks.

Since that time, internet advertisers have attempted to transition to video, but are finding that these ads are less effective in a world of multiple windows where a user can simply click away from, close or mute video content. In particular, Facebook and Twitter have been caught inflating statistics, and Google remains vague on how many of its ads are viewed by bots and not real humans, or if those real humans actually intend to buy anything. In any case, the data suggest that most people are not paying attention to these ads.

This explains why dot-com companies are behaving like abusive monopolies, swallowing up any companies which compete with them or driving them out of the market, in order to keep the emptiness of their franchise from being revealed:

In an explosive new allegation, a renowned architect has accused Google of racketeering, saying in a lawsuit the company has a pattern of stealing trade secrets from people it first invites to collaborate. Architect Eli Attia spent 50 years developing what his lawsuit calls “game-changing new technology” for building construction. Google in 2010 struck a deal to work with him on commercializing it as software, and Attia moved with his family from New York to Palo Alto to focus on the initiative, code-named “Project Genie.” The project was undertaken in Google’s secretive “Google X” unit for experimental “moonshots.”

But then Google and its co-founders Larry Page and Sergey Brin “plotted to squeeze Attia out of the project” and pretended to kill it but used Attia’s technology to “surreptitiously” spin off Project Genie into a new company, according to the lawsuit… This week, a judge in Santa Clara County Superior Court approved the addition of racketeering claims to the lawsuit originally filed in 2014. Attia’s legal team uncovered six other incidents in which Google had engaged in a “substantially similar fact pattern of misappropriation of trade secrets” from other people or companies, according to a July 25 legal filing from Attia.

Much as Amazon consumes smaller companies in order to expand to all reaches of the market, and how other social media firms aggressively filter out links from competitors or promote their own paid advertising above that of others, the Dot-Com 3.0 surge itself represents a monopoly: crowding out old industry, such as brick and mortar stores, while concentrating power in itself, all without a business model that is transparent and therefore, likely represents illusory value which causes a consumer investment binge like the one that preceded the Great Depression:

The stock market, centered at the New York Stock Exchange on Wall Street in New York City, was the scene of reckless speculation, where everyone from millionaire tycoons to cooks and janitors poured their savings into stocks. As a result, the stock market underwent rapid expansion, reaching its peak in August 1929.

By then, production had already declined and unemployment had risen, leaving stock prices much higher than their actual value. Additionally, wages at that time were low, consumer debt was proliferating, the agricultural sector of the economy was struggling due to drought and falling food prices, and banks had an excess of large loans that could not be liquidated.

As reported here before in the past in depth, based on years of observing the internet economy, we face the same conditions now: arrogant pseudo-elites wielding excessive power, over-investment by clueless consumers trusting media hype, fake value, a mutually self-validating industry, un-hyped currency devaluation, signs of a fragile bubble, catastrophic government intervention, maturing technologies worth less over time, and a lack of awareness by those who should know that the market is unstable.

Consumer society has gone this way before, producing bubbles where early investors make out like bandits, and then transfer the money to actually functional industries, leaving the clueless herd to rush in and buy a lot of virtual properties that turn out to be worthless, in time. But this time, we are playing not just with our own economy, but with the new interlinked global economy.

We might view this as a tragedy of the commons. To investors, wealth is a zero-sum game, with more of it made at the drop of a hat. But when this value is not backed by something of actual utility, a bubble is created, and then we all wait to see what random event will trigger it and bottom out the economy.

Dot-Com 3.0 Empires Revealed To Be Inept And Declining

Tuesday, October 3rd, 2017

The personal computer age really kicked off in the mid-1980s when the machine became both affordable and effective for everyday tasks with the rise of programs like WordPerfect, Lotus 1-2-3 and dBase. In 1987, the internet opened up to commercial use, but it was only in the early 1990s when graphical operating systems became fast and complete enough that it started to take off.

In the mid 1990s, the Dot-Com 1.0 boom/bust bubble began, with a few salty entrepreneurs launching websites of a dubious nature with no real business model. It was unclear where the money would come from, other than selling tshirts and mugs. In the late 1990s, Google standardized the search engine and advertising format, and shortly afterward, the Dot-Com 1.0 bubble burst.

After a few years of digital recession, the market kicked back into play with Dot-Com 2.0, which introduced the idea of web applications instead of sites, meaning that just about everything was executed through interpreted languages and web sites acted more like programs on your home computer. This revolution fizzled more than busted, but was lagging by the mid-2000s.

In 2007, the Dot-Com 3.0 revolution launched with Web 2.0 application-style sites mated to new mobile technology and social media, introducing a new approach: content was no longer as important as interaction with other people. For the last decade, this market has been kicking around and has produced a few huge winners while everyone else follows their lead.

It owes its longevity to a simple reason: it controls the narrative. Like big media before it, the Dot-Com 3.0 world quickly took over how most people find news and as a result shapes their understand of the issues. As a result, the bursting of the Dot-Com 3.0 bubble has lagged but, as tech companies reveal their alliance with globalist interests, people no longer see the internet as a Wild West where the truth can be found, but another “managed garden” for giant monopolistic corporations.

Now the quest appears to take down these large monopolies, and simultaneously, to figure out what will replace them. For the latter, some have proposed nationalizing social media and search so that they are treated like utilities, while others hope for new market-based solutions. But for the former, competition is heating up.

Leaping into the fray comes a new breed of critic with a new approach to criticism:

“I think people are understanding just how poorly structured these institutions are, how sloppily they were built,” Lynn tells The Hill. “It’s not just a matter of the fact that these people have too much power, it’s also that they are sloppy in the use of their power.”

…“Perhaps the most pressing thing of all is that Google, Facebook and to certain degrees also Amazon have captured the flow of information and ideas between citizen and citizen,” Lynn said.

“Our ability to communicate freely with one another in this country, which is the primary basis for being able to protect our democracy, is now threatened in very real ways today,” he added. “This is not a theoretical threat; this is a threat that exists today.”

When our communications occur in private spaces, they can be regulated by the companies that own those spaces, which is why many are calling for the nationalization of social media. But what about when Google deprecates conservative search results or outright blocks them? What happens if Amazon starts removing Right-wing books? We know they want to, so it is only a matter of time until they do.

These large companies admit they have such filters in place. The only problem is that, while they are excellent at removing conservative and un-PC search results, they are less adept at filtering out mostly contrafactual and speculative “news” which has a negative effect when most people rely on social media for news:

In the crucial early hours after the Las Vegas mass shooting, it happened again: Hoaxes, completely unverified rumors, failed witch hunts, and blatant falsehoods spread across the internet. But they did not do so by themselves: They used the infrastructure that Google and Facebook and YouTube have built to achieve wide distribution. These companies are the most powerful information gatekeepers that the world has ever known, and yet they refuse to take responsibility for their active role in damaging the quality of information reaching the public.

Criticizing their search results will only give these companies more leeway to filter out sites that disagree with the mainstream narrative, and soon the internet will be as controlled as television was back in the 1960s when you had three VHF channels and another two fuzzy UHF ones to give you a viewport on the world.

Dot-Com 3.0 Bust Goes Mainstream As People Pull Away From Silicon Valley Services

Wednesday, September 13th, 2017

As mentioned here before, the Dot-Com 3.0 boom — the years after the iPhone when social media took over — is heading straight for collapse, even as efforts are being made to fight that inevitable end.

The recurring problem that Dot-Com 3.0 faces is tied up with SJWs: our new media overlords have cultivated an audience who fanatically uses their product, but this is not a particularly relevant or effective audience, being made up mostly of obese blue-haired baristas, financially insolvent food service workers, committed Leftist basement-dwellers and angry minorities.

Everyone else is gradually fleeing these services as they become increasingly toxic. In the meantime, in order to curry favor with their audience of SJWs, these giant internet corporations have become manipulative and are starting to resemble Soviet-style indoctrination in their relentless advance of narrative, leading to a growing movement to nationalize them as utilities to neutralize their bias:

The new spotlight on these companies doesn’t come out of nowhere. They sit, substantively, at the heart of the biggest and most pressing issues facing the United States, and often stand on the less popular side of those: automation and inequality, trust in public life, privacy and security. They make the case that growth and transformation are public goods — but the public may not agree.

The tech industry has also benefited for years from its enemies, who it cast — often accurately — as Luddites who genuinely didn’t understand the series of tubes they were ranting about, or protectionist industries that didn’t want the best for consumers. That, too, is over. Opportunists and ideologues have assembled the beginnings of a real coalition against these companies, with a policy core consisting of refugees from Google boss Eric Schmidt’s least favorite think tank unit. Nationalists, accurately, see a consolidation of power over speech and ideas by social liberals and globalists; the left, accurately, sees consolidated corporate power.

This distrust of Silicon Valley is expressed in a recent poll which found that 52% of respondents believe that Google’s search results are biased, and 65% do not want to be tracked. At the same time, Spain has fined Facebook for privacy violations in how it collects data on users.

In the meantime, others have discovered that Silicon Valley has been inflating its usage figures — sort of like a fake Nielsen rating showing more watchers than were actually there — to the point of absurdity, and they have been doing this for years in order to evade one crucial report that showed, two years into the reign of the iPhone and mobile computing, that display ads on social media were worthless.

Silicon Valley has been dodging that one for some time, and their solution has been to cultivate a fanatical audience of SJWs instead of a broader audience of normal people. That in turn has helped enforce a split: on the internet, you are either a fanatical Leftist or someone who is skeptical of the internet. That skepticism has fueled questioning about the value of social media and internet use as an activity, especially since it represents to this generation what daytime television did to the 1980s: people with no purpose, not much hope, and very little else to do.

It is possible that the “always on” nature of social media is making us miserable:

But in 2012, when the proportion of Americans who own smartphones surpassed 50 percent, she noticed abrupt changes in teen behavior and emotional states.

…Among other things, teens are: not hanging out as much with friends, in no rush to drive, dating less, having less sex, and getting less sleep. Most alarming, despite their continual connectivity, they are lonely. And rates of teen depression and suicide have skyrocketed since 2011.

…“Much of this deterioration can be traced to their phones. It’s not just the technology, I should stress, it’s really the social media, which is the most common risk they are facing.”

One factor in this is that social media is driven by Fear Of Missing Out (FOMO) which causes people to obsessively tune in many times throughout the day and night, with many users taking their phone to bed in order to consume more media. This leads to an inability to ever detach from the narrative, which means they are not at rest even when sleeping, and a lack of sleep, which increases delusionality, hallucinations and psychotic behavior:

The primary outcome measures were for insomnia, paranoia, and hallucinatory experiences

…Compared with usual practice, the sleep intervention at 10 weeks reduced insomnia (adjusted difference 4·78, 95% CI 4·29 to 5·26, Cohen’s d=1·11; p<0·0001), paranoia (−2·22, −2·98 to −1·45, Cohen's d=0·19; p<0·0001), and hallucinations (−1·58, −1·98 to −1·18, Cohen's d=0·24; p<0·0001). ...It provides strong evidence that insomnia is a causal factor in the occurrence of psychotic experiences and other mental health problems.

Paranoia might be understood as “inverse solipsism,” meaning that it assumes a focus on the individual by wide-ranging external forces. Both posit the individual as the center of all activity, or origin of all meaning, and as such, the individual assumes that any activity out there is directed at them, in a mild form of one of the symptoms of schizophrenia.

Social media can induce this by compelling the individual to constantly interact with a symbolic representation of the world, and this token quickly obfuscates actual reality, which is both wider and less clear-cut and therefore, more ambiguous and threatening. As one writer found, this creates a pathology like addiction:

The landscape of my days has come to resemble my computer screen. The constant stream of pings and swooshes is a nonstop cry for my attention, and on top of that, everything can be clicked on, read, responded to, and Googled instantaneously. I sense a constant agitation when I’m doing something, as if there is something else out there, beckoning—demanding—my attention. And nothing needs to be deferred. It’s all one gratifying tap of the finger away.

…I am a writer by profession, and about a year ago I found myself unable to produce. I attributed my paralysis to writer’s block, freighted with psychological meaning, when in fact what I suffered from was a frightening inability to remain focused long enough to construct a single sentence.

…My therapy, of my own devising, consists of serial mono-tasking with a big dose of mindful intent, or intentional mindfulness—which is really just good, old-fashioned paying attention.

Living a virtual life means that the real life is ignored, which is why so many people seem to live in neckbeard nests where the computer is the only functional object, a gleaming device of firm lines surrounded by the more detailed organic forms of crumpled clothing, discarded wrappers, cigarette butts, detritus and dirt.

Social media requires people buy into that online life, and while many normal people use it periodically, its compulsive users — mostly SJWs — have become its focus. For those it becomes compulsive, with them fearing to go more than a few moments without checking for updates. Facebook, Google, et al. have figured that if they cannot have everyone use their service, they want to cultivate the largest fanatical audience that they can, which is why politics, lifestyle and social media use converge.

In a broader sense, Dot-Com 3.0 mindlock reflects the conditions of modernity, which are defined by control. The individual demands to control nature, especially the nature within, by asserting his individuality through equality; this creates a herd which must be taught to boo the enemy and cheer the good guys; that in turn makes the individualists enforce those boos and cheers on each other, causing a spiral where the society gradually eliminates any notice of reality and focuses exclusively on symbols.

The cart goes before the horse, the tail wags the dog, the world is turned upside-down. While we chase the One True Ring of power and control, we sleepwalk into a Brave New World style society based on what people want, instead of their suppression. Democracy, equality, pluralism and tolerance encourage us to be as weird as we want to be, and we slowly drift farther from reality, becoming more miserable as we do so, until the end seems like a good thing.

Social media just tapped into our mania for control through symbolism. If you replace the complex knowledge of the world as whole with a single interface of symbols that claim to control it all, people — or at least some types of people — become addicted. This addiction creates a hive mind for the purpose of excluding anything but what it wants to believe, and reality is pushed far away.

At this point, the populist wave has brought a backlash against unreality, and the unrelenting defense of unreality from the social media crowd is what is pushing Dot-Com 3.0 into collapse. The audience they need, the normal middle class, is fleeing, and the legbeards and blue-hairs are taking over at the same time regulators close in and investors shy away. The carnage will be delicious.

Silicon Valley Sees The Pavement Approaching At Terminal Velocity

Tuesday, July 18th, 2017

As mentioned here before, the dot-com 3.0 and Silicon Valley economic miracle is about to come to a crashing end. The internet simply is not worth as much money any more, and instead of contracting, the market expanded, and now the economy will balance the ledger by destroying fake value.

The primary driver for this is the failure of internet advertising as it becomes clear that in addition to not paying much attention to internet ads, people of the sort wanted by advertisers are finding ways to avoid them or the internet entirely. Ad prices have been steadily dropping and now advertisers are ditching them for TV and radio:

“The major issues in digital is that the supply chain still has way too many touch points in it and it lacks transparency,” says Pritchard.

In January, Pritchard threatened to boycott spending with the digital ad behemoths (Google, Facebook, major ad networks etc.) unless they worked to make the system more transparent. He now says the ecosystem is about 40% of the way there, largely thanks to the pressure major advertisers (P&G, Unilever, etc.) are putting on the system.

Pritchard says radio and out of home (billboard) marketing have also been showing increasingly positive results.

The majority dollars don’t even make it to publishers:Citing industry studies, Prichard says that only 40% of dollars reach publishers after payouts to ad tech vendors, and up to another 25% of dollars could be wasted on ad fraud and problems with ad viewability (ads not loading right or ads that aren’t actually viewed by humans).

In other words, the dot-com companies are hiding how ineffective ads are, how much fraud there is and how much those big FANG — Facebook, Apple, Netflix, Google — companies are taking as middlemen. These are all signs of a failing ad regime.

The “Myspace effect” has kicked into full gear where the upper half of society — the desired group for advertisers, because they are responsive to advertising for more than low-end consumer goods — are fleeing Facebook, Twitter, Instagram and other social media and hiding out in messaging apps instead.

Internet companies told us that television and radio were dead, but this was wishful thinking. In actuality, television and radio have a better chance of reaching their audience because they are linear formats, so people are less likely to navigate away from ads. In addition, they tend to be local, instead of spammed across the internet, and people can keep their privacy with them.

Newspapers are the only real losers here, since people read those online, but it is unclear how much people even care anymore. The news content is light and the headline usually tells the story, so skimming Drudge or Real Clear Politics provides most of what these consumers need.

In the meantime, Google has become a victim of its own success. Its PageRank algorithm, which gives massive preference to popular sites, effectively disenfranchised people from putting content on the web to have those sites — including Wikipedia — simply scrape it. All the good content is going behind paywalls. This means that Google searches are less effective these days.

While all this is crashing down, the savvier investors are noticing that this looks a lot like a bubble right before a crash and bailing out:

It’s a bubble that is different — but the same — as the last time. In 2000, start-ups like pets.com were able to go public and jack up share prices even as they were losing hundreds of millions of dollars.

…Venture capitalists and private equity investors keep the bubble going by buying into it at higher and higher valuations. The smartest ones guarantee their own success by taking rich advisory fees along the way and exiting before disaster via the secondary market for private shares. And this is, as behavioural economist Peter Atwater recently pointed out to me, unusually liquid thanks in part to central bank-enabled easy money.

…These days, a glut of money eager to bolster gains in a low-return world has lifted the economy of Silicon Valley to ridiculous heights. Yet the real winners are likely to be the small number of platform groups such as Amazon, Google, Facebook and Apple that can use their network effect to capture and control the data, which have become the new oil in our digital economy.

The middleman effect is revealed: large companies take the profits, and everyone else is using Silicon Valley as an investment for the purpose of sale, not as a long-term investment. A pyramid of hype rises from the sweaty, neckbearded wasteland of digital royalty, and other than a few who got in early, everyone is going to lose.

As the mom and pop investors figure out that digital is a ruin, they are going to shatter the value of those stocks which are purchased merely to speculate and resell them, and this will in turn create a domino effect of closures in Silicon Valley. That in turn will have consequences for America’s economy, built in part on anticipation of more easy wealth from the digital demesne.

That leaves us with a country top-heavy in debt, built on top of false expectations, that has sacrificed its productivity for this dream because by claiming it was an “ideas and services economy” it could justify globalism to itself. After the first set of dominoes fall, another larger set will begin its collapse.

Dot-Com 3.0 Collapse Is Here And Will End Western Economies

Thursday, July 6th, 2017

As mentioned frequently here before over the past few cheerfully oblivious years of manic investment in technologies of dubious value, the great collapse has finally gone mainstream:

Last month Robert Bouroujerdi, chief investment officer at Goldman Sachs, and most definitely someone who does remember the last dotcom boom, published a report in which he cautioned of the growing risks presented by the meteoric rise of the Big Five tech behemoths: Apple, Amazon, Facebook, Alphabet and Microsoft.

Bouroujerdi noted that in the year to the start of June, these companies added a total of $600bn of market capitalisation – the equivalent of the gross domestic product of Hong Kong and South Africa combined. Parallels to the 1999-2000 crash are becoming increasingly evident, he said.

…Tech companies are deeply intertwined: when one falls it often takes scores of others down with it and often psychology dictates that the more a stock falls the more likely it is to fall further. Imagine rats scuttling for the exit on a sinking ship. No one wants to be caught inside a cabin and sink.

In other words, it is like a really successful strike when bowling: you hit the middle pins hard enough that they knock the outer pins down. Already we are seeing second- and third-tier tech companies quietly shutting the doors and sending everyone home, and a resulting mass exodus of those who lost the employment lottery in California to other states. But that is nothing compared to what is coming.

Bubbles in the market — huge wealth booms created between the time when the herd becomes fascinated with a New Thing and the time when they realize it is worthless — are classically compared to houses of cards. If any structural piece is removed, or the top crumbles, the whole thing falls in the classic domino effect where the fall of each piece triggers the instability of others.

On the other hand, bowling is an invisible dependency. There is no obvious link between the other pins and the central four. Yet when those pivotal pins go flying, the others go down like bystanders hit by shrapnel during a suicide bombing. Silicon Valley is a giant invisible dependency, not only within itself, but because much of our interlinked economy depends on Silicon Valley:

In 2014, Silicon Valley innovation workers produced $225,000 in added value per employee annually, according to an analysis by Collaborative Economics of federal data. The next closest in productivity was New York City, where tech workers produced an average of $205,000 in added value per year.

This creates tragic conditions where the economy cannot sustain a massive loss in value in Silicon Valley:

As a proportion of GDP, American corporate profits are higher than they have been at any time since 1929. Apple, Google, Amazon and their peers dominate today’s economy just as surely as US Steel, Standard Oil and Sears, Roebuck and Company dominated the economy of Roosevelt’s day.

…The McKinsey Global Institute, the consultancy’s research arm, calculates that 10% of the world’s public companies generate 80% of all profits. Firms with more than $1 billion in annual revenue account for nearly 60% of total global revenues and 65% of market capitalisation.

…The number of listed companies in America nearly halved between 1997 and 2013, from 6,797 to 3,485, according to Gustavo Grullon of Rice University and two colleagues, reflecting the trend towards consolidation and growing size.

And so we come to the ugly word consolidation. This happens when markets are dying, not thriving: the margins on what is being produced shrink as time goes on and the newness of the product fades, and since the big profits are no longer there, companies merge and acquire one another so that a few market-dominant firms can absorb whatever wealth is left in using ten-year-old or twenty-year-old ideas to churn out a product by rote.

We have seen radical compression of the markets over the past few years. The closing of American malls. The domination of the internet by Google (and technically non-profits that serve Google goals like Wikipedia). The tightening up of supply chains like Sysco. Grocery store mergers, and the simultaneous reduction in the number of big box store brands and increase in their territory. Everything is Walmart or Costco now.

With consolidation comes the bowling-pin effect. Hit any one of these sectors of the economy hard enough, and odds are that it will careen into another, and that into another. Hit a big enough sector and they all go down. Are you scared yet? Let us travel down memory lane to the last time that a giant bubble popped, namely the government-created housing crash of the early 2000s:

His most successful effort was to impose what were called “affordable housing” requirements on Fannie Mae and Freddie Mac in 1992. Before that time, these two government sponsored enterprises (GSEs) had been required to buy only mortgages that institutional investors would buy–in other words, prime mortgages–but Frank and others thought these standards made it too difficult for low income borrowers to buy homes. The affordable housing law required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.

At first, this quota was 30%; that is, of all the loans they bought, 30% had to be made to people at or below the median income in their communities. HUD, however, was given authority to administer these quotas, and between 1992 and 2007, the quotas were raised from 30% to 50% under Clinton in 2000 and to 55% under Bush in 2007. Despite Frank’s effort to make this seem like a partisan issue, it isn’t. The Bush administration was just as guilty of this error as the Clinton administration. And Frank is right to say that he eventually saw his error and corrected it when he got the power to do so in 2007, but by then it was too late.

…By 2002, Fannie and Freddie had bought well over $1 trillion of subprime and other low quality loans…As a result, in 2008, before the mortgage meltdown that triggered the crisis, there were 27 million subprime and other low quality mortgages in the US financial system. That was half of all mortgages. Of these, over 70% (19.2 million) were on the books of government agencies like Fannie and Freddie, so there is no doubt that the government created the demand for these weak loans; less than 30% (7.8 million) were held or distributed by the banks, which profited from the opportunity created by the government.

There are two parts to this disaster: the bowling ball, which was a relatively minor mortgage meltdown, and the pins, which were the vast investment by government and the many for-profit companies helping it. That ball was going to hit hard regardless, but the pins were set up to fall and so they took down other parts of the economy as well, stalling out the whole thing.

Imagine if that recession were a multiple of the one that is coming.

Just for fun, let us look at a true disaster scenario, the Great Depression:

This was a period when the American public discovered the stock market and dove in head first. Speculative frenzies formed in both the real estate markets and on the New York Stock Exchange (NYSE). The lead-up to October 1929 saw equity prices rise to all-time high multiples of more than 30 times earnings, and the benchmark Dow Jones Industrial Average (DJIA) increase 500% in just five years.

The NYSE bubble burst violently on Oct. 24th, 1929, a day that came to be known as Black Thursday. The following week brought Black Monday (Oct. 28) and Black Tuesday (Oct. 29); the DJIA fell more than 20% over those two days. The stock market would eventually fall almost 90% from its 1929 peak.

In other words, it was a typical bubble. The markets seemed to take off, and the herd rushed in for an orgy of rampant speculation just like they did in the California Gold Rush in 1848. But just like in that feeding frenzy, most people were losers and only a few walked away with the gold, and the ones who did best were the ones who got out early and transferred that money to other investments.

In the new California digital Gold Rush, you will most likely see the same thing: the 1% of 1% who are real winners here will be the people who got in early, grabbed the easy money, and then got out and put that money into something tangible and self-renewing like real estate, industry or agriculture. They do not mind that these new investments are not high yield; they are stable, and Silicon Valley is not.

The old Gold Rush made San Francisco a major city; the new Dot-Com mania has made it the center of the world, or at least its inhabitants think so.

Now let us consider some of those outer pins. There are several debt bombs looming. The first is the welfare/consumerism debt bomb, followed by the pension debt bomb, the entitlements debt bomb, the government debt bomb, the education bubble, the consumer debt bomb and the demand-side economics bubble.

With the “Me Generation” set to clock out and trigger a 50 megaton airburst of retirement obligations for government, there is no way our economy will survive. The wealth boom of the victorious Allies in WWII is going to come home to roost in 2020-2040 as the Baby Boomers die off, and since all of our wealth since has not matched it, the markets are going to re-adjust the value of the false wealth through a recession.

Add to that the fact that we are dependent on debt, both in public and private, to international banks and foreign nations, many of which are unstable, and you can see how there is a layer of bowling pins behind the bowling pins of our economy. When we go, they go. When they go, everything goes.

The best part is that almost no one understands how our society works, and so they are all oblivious to the actual risk we face:

It seems that that never have so many known so little about so much. In areas where most of America resides, no one gives much if any thought to the seamless integration of so many moving parts that allow them to transport themselves to the grocery store, and get food – to utilize a myriad of appliances, utilities, technologies, and conveniences independent of their skills, education, resources, etc.

Most people, it seems, do not ever think about what would happen to their ideology and lifestyle after about ten days if the trucks, trains, and airplanes were unable to deliver untold tons of everything like clockwork. Look at the behavior of the people in the face of a few days’ disruption because of a snow storm.

So we have prime conditions for an apocalyptic market endgame. Our debt was borrowed to fund worthless stuff, just like the housing bubble. Our products are aging and no longer good for high margin returns. Markets are consolidating to a few big actors, and they are often dependent on government. Individual consumers have over-invested in these scheme and taken on a huge debt load. The entire structure is propped up and waiting for just the right strike to disintegrate entirely.

On the plus side, we have known for years that modernity was not sustainable. Modernity began with our notions that we as individuals were more important than social, natural or divine order. That creates the groundwork for the trends, fads, and panicked stampedes that create this market boom-bust cycle just like in the Great Depression. Not to mention consumerism, vapidity, mountains of landfill, environmental holocausts and a growing sense of existential dread. The death of modernity will be painful, but a blessing in disguise.

Let’s go bowling!

Why The Dot-Com Collapse Is Rushing At Us

Tuesday, June 13th, 2017

You have probably heard too much of it already: the internet industry is beginning its collapse. But until now, few have mentioned that it also suffers from monopolistic tendencies which will make this collapse even more devastating.

Some are picking up on a small group of companies have become as powerful as government and threaten to savage our industries, then fail and leave us with no alternatives to the services they provided:

Many elements of Taplin’s case are familiar. Newspaper ad revenue has declined by roughly $40 billion between 2000 and 2014, recorded music revenue has dropped $10 billion in the same period, and over 5,000 independent book and record stores have closed in the last two decades. Facebook’s covert experiments in manipulating the emotions of hundreds of thousands of users, Amazon’s atrocious treatment of workers at its distribution centers and Google’s cavalier disregard for copyright laws are also well-documented.

Taplin, director emeritus of the University of Southern California Annenberg Innovation Lab, argues that the major tech companies are fundamentally monopolistic and parasitic — they exploit positions of market dominance to ignore legal regulations, extract inflated prices from advertisers and rely on content produced by others, often without their consent or knowledge.

…Because Amazon can deny publishers access to its enormous customer base, it can force them to accept artificially deflated prices. Google and Facebook can do something similar with advertisers by threatening to deny them access to billions of users. Taplin cites the Herfindahl-Hirschman Index, a widely used measure of market concentration in antitrust law that allows regulators to determine whether markets are becoming monopolistic. A score of 2,500 is considered highly concentrated. The HHI for internet search markets is 7,402.

Industries which behave in this way are ones near the peak of their life cycle. They have grown too far and become too big to manage themselves, and now they need more money just to survive. Instead of admitting that its product was search and advertising, and downsize to fit that need alone, Google expanded to conquer nearby industries and now is a towering behemoth that must constantly expand to feed its own bulk.

As a result, its profit is no longer based on delivery of product alone; it manipulates its own product to make it more profitable, without offering a competitive advantage. This self-cannibalization is leading to the implosion of all internet media, since they have outpaced what the market can offer and now are treating consumers like piggy banks:

The decline of the establishment industries has led to the increased quality of the alternative industries; but the alternative media has been relying upon advertising dollars, and it’s the establishment media which pays for advertising. The establishment industries have effectively been paying to destroy their consumer base. Furthermore, the technology itself undermines advertising. Why pay for a $6 million advertising campaign, when for a few hundred dollars you can advertise on Tom Leykis, and the algorithm will do the rest?

So, the companies which sell algorithmic content – Twitter, YouTube, Google, Amazon, and Facebook – are undermining the establishment industries whose advertising campaigns are bankrolling their algorithms. Thus, to maintain profitability, they need to destroy the very algorithms they offer. They’re currently subsisting off of their First-Mover Advantage, but that’s a foundation which is quickly eroding away.

This means that the industry as a whole is overvalued, and the market will have to correct for this value, which means huge losses inbound. Like all other industries based on consumerism itself, or popularity instead of function, this one too will face the knife, and leave in its place a gaping void where functional business used to be.

Looking Forward To The Dot-Com 3.0 Crash And Recession

Saturday, May 27th, 2017

Without strong leadership, humans act as a herd. They constantly look for what is new so that they can participate, and as soon as that becomes clear to them, they rush toward it.

Nature however is not binary because it has introduced time. What is new is recognized by a gradually increasing group of people, and as they crowd it, the original participants get out and watch the formerly new thing crash as the herd converts it into the same old stuff.

You can see this with monkeys in the wild. One monkey finds a tree with lots of fruit, and starts screeching. The others then rush over, afraid of missing out and hoping to capitalize on this new popularity, and strip the tree bare.

In the meantime, some of the monkeys who found that tree earlier have moved on to new trees, and are keeping mum about it. The monkeys who screech depend for their popularity on being recognized as those who find new things, even if they find them after the really good opportunities are gone. They get their power from introducing the clueless to better options, not good ones.

Humans play the market the same way. Whatever succeeds immediately finds a whole herd of people who are very excited about it, and they invest in it, bloating it to the point where the consequences between intelligent acts and repetition of the past is blurred, so it repeats itself until it crashes and then the herd moves on to a new fascination, like a crowd at an amusement park.

As mentioned here before, our current economy is a fragile mess based on tech companies selling gadgets to morons who are subsidized by the state, in order to make our current appear “in demand” so that we can borrow and tax even more.

Now it becomes clear that the post-1990s Silicon Valley boom may be fragile and ready to pop:

During rising stock markets you can use an indicator like the advance-decline line to confirm that the uptrend is still in place. When the overall stock market is rising but more individual securities are declining than rising,, that can be a signal that the market is not “acting right” and the uptrend could be in trouble. It could be signaling that there could be a change in direction coming.

…The advance-decline line was crashing beginning in early-1999, while stocks continued to rise for another year or so. The fact that so few stocks were carrying the market higher with a falling advance-decline line was a big warning sign for the coming dotcom crash.

As we watch the leaders of the market separate from the rest, it becomes clear that we live in a house on stilts where a few of those stilts are carrying most of the weight. If anything happens to them — as seems likely as history repeats itself — we are in for a big crash.

Rumors Of Dot-Com 3.0 Implosion Spreading

Wednesday, May 24th, 2017

You may have heard it here first, but rumors are starting to spread about the collapse of the Dot-Com 3.0 bubble which is based on social media and other entertainment products. Unfortunately the Obama economy was based upon it, so expect rough times ahead.

Others are starting to notice that the market is totally overvalued, which is a precursor to crash:

What truly puts the stamp of reality on what it says today, is the fact, that even as the “markets” have since (once again) risen to never before seen in history all time highs since that post some 3 months ago. The above have done nothing but either vacillate right where they stood, or worse, have lost even more value.

…Isn’t it funny when it comes to anything involving “The Valley” it always seems it’s about the next big “buy” that’ll be the reason why some insane P/E or valuation will be, “So worth it!” Never the core product that is/was supposedly its raison d’être. And it’s always just around the corner, or as close as the shareholders checkbook. Funny how that works.

Social media is dying primarily because its audience consists of people who are not responsive to advertising. It also suffers from a scourge of bots, fake accounts, manipulative SEO technicians and generally, the bad behavior of the “daytime television” audience that Dot-Com 3.0 salvaged in order to overcome the mass exodus of people when the second internet trend boom ended.

In addition, people are wary of the visibility of social media and the manipulative nature of these companies. Who wants employers looking through a Facebook profile, or to be shown only what the filters allow? With European states demanding that Facebook and Twitter censor controversial topics, social media is no longer the Wild West it once seemed to be.

The result is a shift that the numbers do not reveal. There may be just as many people using social media, but who are they? These are no longer the middle class brand-conscious consumers, but an army of baristas and cubicle slaves who have no money and would not spend it on advertising products anyway. No wonder the dying trend shows signs of instability.

Anatomy Of A Fragile Market Bubble

Wednesday, May 17th, 2017

Modern society possesses a fragile duality: people depend on its power and wealth, but simultaneously are existentially miserable.

Their existential misery comes from the fact that civilization is in decline, social order is failing, and so all meaning and purpose is removed from their lives because whatever they do is futile and will be destroyed once the raging herd gets ahold of it. At the same time, we all must survive, and so they are dependent on this abusive system for paychecks and enough stability for grocery stores.

What happens if the money runs out? All Western governments are heavily in debt, consumers are heavily leveraged, and our industries are massively interdependent.

On top of that, we have the makings of a brutal tech bubble:

Yesterday afternoon, the S&P 500 closed at a record high, and is up over $1.5 trillion since the start of 2017. “And the companies doing the most to drive that rally are all tech firms,” reports The Verge. “Apple, Alphabet, Facebook, Amazon, and Microsoft make up a whopping 37 percent of the total gains.” From the report:

All of these companies saw their share prices touch record highs in recent months. This is in stark contrast to the rest of the U.S. economy, which grew at a rate of less than 1 percent during the first three months of this year. That divide is the culmination of a long-term trend, according to a recent report featured in The Wall Street Journal: “In digital industries — technology, communications, media, software, finance and professional services — productivity grew 2.7% annually over the past 15 years…The slowdown is concentrated in physical industries — health care, transportation, education, manufacturing, retail — where productivity grew a mere 0.7% annually over the same period.” There is no industry where these players aren’t competing. Music, movies, shipping, delivery, transportation, energy — the list goes on and on. As these companies continue to scale, the network effects bolstering their business are strengthening. Facebook and Google accounted for over three-quarters of the growth in the digital advertising industry in 2016, leaving the rest to be divided among small fry like Twitter, Snapchat, and the entire American media industry. Meanwhile Apple and Alphabet have achieved a virtual duopoly on mobile operating systems, with only a tiny sliver of consumers choosing an alternative for their smartphones and tablets.

As mentioned here before, the tech sector is primed for a crash because it is overvalued and yet is selling a product that is increasingly less relevant to middle America, the group that forms the base of the conventional consumer economy.

To counter this, the tech companies are trying to cultivate the conventional media audience, who lean Left and consume more media than others but may not actually be as relevant as consumers except for luxury goods.

In order to bolster that process, Western governments have created a capitalism-socialism hybrid which consists of heavily taxing citizens and corporations, and then dumping that money on the working classes so that they can purchase more consumer goods, creating a circular Ponzi scheme which will eventually run out of money.

On top of that, Western governments have accumulated enough debt that when their taxes fall short, they will be in a tough position where they will be unable to acquire new debt cheaply enough to justify it, and these governments will head toward default at the same time their economies cave in and the social consequences of Leftist policies culminate in crashes.

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