Macro trends: black box algorithms & the end of the middle class

A couple of days ago I was thinking through the question, what’s important now? Or rather, what is now – what are the currents shaping the way the world is going over the next 10 or so years?

Perhaps this was inspired by Jon Henley’s article on September 11th, which argued that it wasn’t actually the “day that changed everything”, and many of the geopolitical events seen as consequences of the attack may have happened regardless.

One key trend is clearly black box algorithms:

In a speech at the technology conference TEDGlobal this summer, computer scientist Kevin Slavin argued that a profound shift is taking place: maths is undergoing a “transition from being something that we extract and derive from the world to something that actually starts to shape it”.

The maths Slavin is talking about, and Harris is writing about, is algorithms. We are, he says, living in an “algo-world”. If Slavin is right, algorithms are shaping everything from the goods we buy to the value of the money with which we buy them.

[...]

The thing is, as systems of algorithms get more complex and take control of ever greater areas of everyday life, concerns are being raised over how much we’re able to track what they’re up to. The answer is: not all that much. As Slavin puts it: “We’re writing these things that we can no longer read.”

[Welcome to the algoworld, Sam Leith, Evening Standard, 12th Sept 2011]

Second, and bigger point – the stagnation and decline of the middle class standard of life.

Take a story that appeared in the Wall Street Journal Monday. The tale is nominally one about marketing strategy and it looks at how giant firm Procter & Gamble sells its household goods to its customers. But the picture that emerges is terrifying. P&G, it transpires, is cutting back on marketing to the disappearing middle classes, instead selling more and more to either high-income or low-income customers and abandoning the middle. Other big firms, like Heinz, are following suit. The piece reveals there is even a word for this strategy, helpfully coined by Citibank: the Consumer Hourglass Theory – because it denotes a society that bulges at the top and bottom and is squeezed in the middle.

The story contains some scary figures, such as the fact that the net worth of the middle fifth of American households has plunged by 26% in the last two years. Or that the income of the median American family, adjusted for inflation, is lower now than in 1998.

Or look at a story in the New York Times Tuesday. It starkly shows how the plight of the American working person has worsened. Solid jobs that once provided a secure grasp on middle class aims (a house, college for the kids, a retirement) have changed to become low-wage ones. It looks at the situation of some Detroit auto-workers, pointing out that new hires can find themselves working opposite long-term colleagues who do similar jobs yet earn twice as much. The system is called a “two tier” wage structure.

Perhaps that system can be justified as an emergency measure to keep Detroit’s auto-industry alive and help it survive the current tough times. But, like the Consumer Hourglass Theory, it actually looks far more like the permanent shape of things to come. American society is bifurcating, squeezing the middle class out of existence. The ranks of the poor and low-income earners are growing and the rich are doing just fine – and no one is talking about it, much less doing anything about it.

[The decline and fall of the American middle class, Paul Harris, Guardian, 13th Sept 2011]

More thinking on these later…