Small Is Beautiful

45 years ago, German economist E.F. Schumacher published his influential Small Is Beautiful.

Schumacher’s magnum opus isn’t so much of a manifesto as a book of teachings. In a collection of essays, he argues that an economics that emphasizes wealth maximization as its primary measure cannot, by design, give to resources the necessary and appropriate consideration they deserve.

For Schumacher, there are three categories of resources: (1) natural resources, (2) environmental resources, such as the quality and resilience of the natural world, and (3) human substance.

In the digital age, the concept of resources is an interesting one. Today, some of the world’s richest companies have maximized their wealth (read shareholder wealth) without producing a single tangible product. Social network service providers are a particularly illustrative example. For the purposes of argument, I’ll point to Facebook as the most topical and visible case, but similar cases abound.

In March, the Guardian revealed that a company, Cambridge Analytica, was able to indiscriminately collect account data from Facebook users — data those users had assumed was private at least in relative terms, and which those users had assumed would not be passed to third parties — and developed profiles for political microtargetting. The message many users took away from this incident was that Facebook was not protecting the data users had willingly, if unwittingly, given the company.

Just a week later, media reports indicated that Facebook had performed some of its own indiscriminate data collection. The company’s Messenger app was logging the details of users’ calls, including and with whom users were speaking and for how long.

Combined, these two events created a headache for Facebook that continues today and threatens to persist for some time. Facebook’s share value — its wealth, in a manner of speaking — also took a hit.

There are a few plausible explanations for the hit Facebook’s value took as a result of these two incidents. Theories could include potential new government regulations on data privacy, which could restrict how and what kinds of data Facebook can collect from users and how it can use that data. Given that data is Facebook’s core product, shareholders may have sensed headwinds against the company’s revenue in the out quarters.

Schumacher is instructive in this case particularly in his argument that a wealth-focused economy confuses income and capital. In other words, and to simplify, firms in a contemporary economy don’t treat resources in the natural world as capital, and so risk depleting the totality of resources on “Spaceship Earth.”

Facebook’s data, by virtue of being intangible requires very little capital inputs, such as servers to store and protect data. There are obvious external capital costs, in the Schumacher sense, as well, such as the impact on climate change of powering data houses.

An overlooked resource cost for Facebook, though, may fall into Schumacher’s third resource category, human substance. In the context of the two incidents discussed here, it could be argued to be the dissolution of privacy and the vulnerability of users’ personal data are human substance costs. This is not quite human substance as Shumacher would have defined, but I think it’s something similar.

What would Schumacher make of the digital economy, which grows its wealth on 1s and 0s? As the title references, for Shumacher, the economic future rests in a “A Question of Size.” Namely, “In large-scale enterprise, private ownership is a fiction for the purpose of enabling functionless owners to live parasitically on the labour of others.” Furthermore, in explaining the contradictions between income and capital, Schumacher argues the modern person is “inclined to treat as valueless everything that we have not made ourselves.”

If the data we provide to Facebook is the sum of our relationship, creative, and intellectual output, then it may be accurate to treat this as the product of our labor. Until the Cambridge Analytica and Messenger incidents, it’s fair to assume the overwhelming majority of Facebook users treated this data as valueless because, from their perspective, Facebook created and owns it. Indeed, without Facebook, or a similar market alternative, storing photos, displaying your leisure activities and political leanings, and so on would require the user to create a personal website.

Users who concede to Facebook their data ownership and decisions about its use have an exceedingly fair argument. If you accept its premise, however, then using Facebook is a question of values. Namely, does my data belong to me or to the entity that aggregates it (e.g., Facebook)? If the latter, what restrictions can I reasonably expect to place on the aggregator?

For those who fall in the “my data is mine” camp, perhaps the answer in the digital economy is to move away from big data, and toward a kind of small data model. However, there are very clear trade-offs to that decision. The universe of services available to people who #DeleteFacebook is a lot narrower. These people have to make decisions about where to store their memories, how to stay in touch with the people who matter, and where to feature their creative or intellectual output if not on a “wall.”

I recently joined this community of data reclaimers when I made the decision to remove my data from Facebook and “own” it on a hosting service provider. I store my memories — photos and the like — on a hard drive, manage my contacts in an address book, and use this personal website for my creative content. To me, these things have value beyond what Facebook is willing to pay for them.

Would Schumacher have been a part of the #DeleteFacebook crowd? It’s hard to say. The service provides real benefit to small business owners, political activists, and other groups and individuals for whom renting space on a server is impractical and sharing information is vital. Maybe instead of a book of essays, Small is Beautiful would have been a 15-year series of wall posts.

In the final analysis, Schumacher probably would have avoided Facebook altogether. He seems more like a Twitter guy.​