Category: Science & technology

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Books, essays and others Economics Politics & government Science & technology

[3027] The enshittification of the internet and the rise of technofeudalism

The internet was supposed to be a wonderfully liberating medium. A force for good that equalized power by circumventing gatekeepers of all kinds: information wanted to be free. Almost all internet-based companies was a social crusader out to right some wrong when it all started back in the day. Google’s motto was ‘Don’t be evil’. That was the promise of the late 1990s and the early 2000s when the internet was still new in its anarchic stage where almost everybody competed to do good. Nobody online had market power.

But anarchy is always a transient state. By the mid-2010s, it is clear many had placed too much hope on what is a tool that could either improve or hurt society. And that tool increasingly has been used to drag society towards worse equilibria.

For some time now, the internet is a shitty place to be in. We cannot live without it but we are miserable with it. More than anything, the internet collectively has inverted its promise. The cyberspace is now a surveillance tool masquerading as a crack designed to advertize and sell everything.

Enshittification by Cory Doctorow is a 2025 book that attempts to explain how we got here. The term enshittification as Doctorow defines it is a process of internet platform decay from the perspective of its users.

The concept itself could be used to describe other services off the internet although these days the internet has proliferated everywhere that it is not helpful to make the online/offline distinction anymore, as much as it is unhelpful to call any company a tech company. If Grab a tech company, or just a transport company? Is Stashaway a tech company, or just a financial service provider company? Is Amazon an internet and tech company, or just a retail platform?

The enshittification process

Enshittification is a 3-stage process.

It starts with platform operators (Twitter/X, Facebook, Amazon or Google etc), being good to everybody and that means generating massive consumer surplus to individual users. This is stage 1 (the so-called be good to users stage).

Once the number of users hits critical mass, stage 2 (the abuse users for businesses stage) begins with the platform treating individual users badly in order to attract business users. The bad treatment generally include targeted and intrusive advertisements utilizing personal and private data tracked by within the platform and elsewhere too. Here, the platform operators are draining consumer surplus and redirecting it to sellers. As a result, businesses flock to the platforms. Individual users feel and understand the abuse but most of them could not leave the platform because their social network is already entrenched on the platform. Only the determined would exit and seek social interactions via other means.

Stage 3 (the stage of abuse businesses for the platform) is when there is enough business users around with the platform becoming the essential marketplace where all the businesses’ customers are. To exit the platform is to lose a chuck of customers and revenue. Platform operators then proceed to treat businesses badly by draining producer surplus towards themselves. This is done via various platform fees and advertisement requirement (pay to be seen or we place your product on page 999 instead of page 1). At times, the platform itself competes with its business client by cloning the business and placing its products above the clients (similar to the cheatings that happened in various stock exchanges as told in Michael Lewis’s The Flash Boys). There are various details in the book showing that much of the advertisement is fraudulent (paying for ads that do not really exist or ads with no noticeable effects on earnings) but businesses could find no way to hold the platform accountable. And the fees are pure rentseeking and structured in a way that prevent businesses from selling elsewhere (and if businesses do sell outside, they are forced make it more expensive).

The end result is that everybody except the platform operators gets stuck in a shitty environment where most producer and consumer surpluses get channeled to the platforms.

For all the technological advancement we have seen in the past 2 or 3 decades, in the end, the whole internet gets boiled down to an age-old phenomenon: the middle men abusing their (dominant) position.

Generalizing an old competition problem

In many ways, enshittification appears to be the new term to describe an old problem reappearing in the digital world. It is an old-known problem in competition or anti-trust where the dominant player abuses his or her position to extract surpluses from consumers. It is what a monopolist/oligopolist does.

First, you dump into the market to kill off all competitors and once monopoly power is established, you engage in predatory pricing. In Malaysia, we have witnessed this with Grab that now charges exorbitant fares after all its effective competitors have been driven off the road due to aggressive discounts in the early days of the service.

When Doctorow offers a way out, the solutions he gives are more competition in the market along with more rigorous anti-trust actions by the state and greater labor power through unionization.

These are the typical suggestions against monopolistic power but of course, the difference between textbook solutions and the problems outlined by Doctorow is that the technological, political and regulatory challenges in the real world are many times more complex than what discussed in a competition university classes. Internet monopolists are more technologically competent than the regulators, which makes running anti-trust policy more difficult to execute when compared to more traditional sectors like aviation or steelmaking. Many times too, regulators do get captured by the monopolists.

An old condition in a new world: technofeudalism

All those platform fees are simply rent with another name.

The rise of rentseeking as a major source of revenue from internet giants causes Doctorow to digress and borrow Yanis Varoufakis’s concept of technofeudalism, explained in his 2023 book Technofeudalism.

It is a neologism describing a condition where an increasing portion of revenue gets derived from rent (revenue arising from just controlling some assets/resources) instead of profits (revenue arising from productive activities minus the cost of running those activites). Varoufakis insists this represents a new kind of economic condition more akin to feudalism where long ago, landlords exacted rents from the working peasants who largely had no other choice but to work as farmers on someone’s else land. The peasants had to pay rent in various form to the landlords, regardless of profitability/harvest. Varoufakis further insists that this is a post-capitalism age, as capitalism is less about rent and more about profits.

A major component of enshittification of the internet fits Varoufakis’s framework well. Varoufakis is of course famous for this:

He is also the former finance minister of Greece during the European debt crisis, the former economist for Valve, the owner of the gaming platform Steam and all around leftwing economist.

Gamers should recognize these technofeudal trends quickly, where instead of buying and owning the games, they have to pay for subscription to play. There are also microtransactions (the worst of it, pay-to-win), which I would take as a subset of this trend.

But internet platforms are not the only guilty parties. Subscription-based model is proliferating in other sectors. In Malaysia, Perodua is selling its electric vehicles but with the battery must be rented from the manufacturers. Battery-as-a-service, as it is called. And then there is the more established term: software-as-a-service. SaaS is the ultimate example of technofeudalism; SaaS is a fancy term for rent-based businesses.

Electronic locks and anti-circumvention law

Central to much of the rentier tech economy (tech is a very loose term here) is the cover provided by a defective but mainstream intellectual property law.

Instead of copyrighting a new way of doing things productively, companies are copyrighting electronic locks to various machines (computers, printers, cars, etc) that should be open in the first place. Since the lock is copyrighted, hacking or breaking the them amounts to a crime while using the machines itself in whatever way mostly is not.

For example, a printer should be able to use third-party ink cartridges but the printer manufacturing prevents so by introducing an electronic lock. The lock allows only the use of the manufacturer’s own cartridges. Without the electronic lock, any ink with the right configuration would work with the printer. In fact, the use of any ink for the printer you own is not illegal. But the lock itself is copyrighted and breaking the lock is a crime. The protection for the electronic locks is the anti-circumvention law.

Because of this, the manufacturer, upon selling a printer, gets to enjoy repeat business through future ink purchases. And this is a rent and the law protects rents while stifling innovation instead of protecting intellectual property in order to encourage innovation.

Printers and cartridges are simple and maybe petty examples. But if you start to think about your smartphones and the restrictions its manufacturers impose on the users (famously, this is Apple), then the whole thing starts to become a more serious matter.

And one of the solution Doctorow proposes to fight technofeudalism, and rentiers in general, is to reform intellectual property law so that it returns to its original purpose: encouraging innovation.

No longer a curiosity: first degree price discrimination

Finally, I want to visit a section of the book that discusses the ability to track customers through all the private and personal data collected and sold by internet platforms through apps and in general, cookies everywhere, along with the ability to change prices dynamically/instantaneously based on those data due to the availability of electronic price display connected to the clouds.

Imagine two persons visiting an aisle just minutes apart. The first person would see a set of price different from the second person, because the retailers now have the technology to know a specific person’s preference (the tracking is so precise that you would think the apps are listening to you) and change prices based on that preference. By the way, this is already happening online where changing any price is a technological a trivial thing.

This is first degree price discrimination, where the seller is able to discriminate individual customers so effectively and completely that all consumer surplus gets extracted.

The concept itself is not at all new but 20 years ago when I was an economics undergraduate, such a thing was taken a did-you-know theory but with impossible application in the real world. It was a curiosity much like how the demand curve could slope upward. Today, it is not just a possibility. First degree price discrimination is becoming common and in all likelihood, the standard way of pricing if no regulation is forthcoming.

Perhaps this is the point of overly long book review: rapid technological advancement in the past 10 or 20 years is forcing a rethink of what we know of the world.

Categories
Books, essays and others History & heritage Politics & government Science & technology Society

[3009] Reviewing The Peasant Robbers of Kedah 1900-1929 and then a modern thought

Central to Cheah Boon Kheng’s 1988 book The Peasant Robbers of Kedah 1900-1929: Historical and Folk Perceptions is the idea of theft as an informal wealth redistribution mechanism during a time of distress in rural Kedah. The thefts are framed as a guarantee for some kind of minimum welfare standard for the rural folks in general and in important specific cases, as a response by the weak against those in authority.

The result of 12 years of research and writing actively influenced by James C. Scott (the author of Weapons of the Weak), Cheah (who died in 2015) painted a picture of petty crimes being a constant concern in the 20th century rural Kedah. The historian reconstructed the conditions of Kedahan kampongs through interviews where written records failed. Written records are wholly inadequate because the Kedah Sultanate, both under first Siamese and later British influence, had limited effective control beyond major towns: the state elites had worries other than recording the lived experience of peasants, at least until they began to exert greater control throughout the state.

In that reconstructed picture, I get the idea that almost everybody engaged in petty crimes. Chickens reared regularly disappeared without a trace. The prevalence of theft however did not mean the lack of shame. In one page, the author wrote that the offending party would quickly slaughter the birds they had stolen, had it cooked immediately and then consumed as soon as possible so to not get caught. Proving such crime was next to impossible while reporting it to the authority was such a hassle that it was not worth the effort to do so. In a rural setting where the jungle was nearby, everybody was a suspect, policing was absent, the state was non-existent and the border was porous, the criminals might as well be a snake or a ghost with an appetite for white meat. The spread and frequency of petty crime worsened during difficult economic periods as distressed households resorted to pilfering for survival. Or as Cheah put it, it was a system of self-help.

Crucially, all this was an intraclass conflict. The rich lived far away from the kampongs in towns and protected by law and order. But the rural normality of crime set the stage for organized banditry at the state level and soon, interclass conflict.

The rising banditry was fueled by a weak state capacity, a changing power structure (from distributed native power to colonial centralized control) and general corruption among rural leaders.

Kedah then was more a mandala than the state we know today: strongest at the capital center but its influence dropped disproportionately fast the farther away a person traveled into the jungles. But even in that weak state structure, Kedah still had representatives in the form of village heads or similar positions. As the British expanded its bureaucratic reach outward beyond towns and centralized all authorities in the state capital Alor Setar, these local rural actors lost power and wealth.

To preserve their influence amid a feudal society, they resorted to criminal activities. They fought the erosion of their power by recruiting local thugs who carried out theft in a bigger way. In this way, the rural elites amassed muscles and capital.

But the local elites needed the local thugs as much as the latter needed the former. The thugs needed the local elites as a shield from Alor Setar, or at least some kind of legitimacy within a feudalist framework.

Here, the idea of wealth redistribution from the rich to the poor becomes tenuous as the local rich preyed upon the poor even as the rural elites did this in rebellion against growing colonial authority (and it should be mentioned, against the sultan too).

As events would have it, the alliance between the rural elites and the thugs employed and protected would not last. Quarrels happened for whatever reasons and the latter turned against the former, stealing for rural and urban elites alike. The victimized peasants celebrated this and this is what Eric Hobsbawm called social banditry: actions taken as illegal by the law but carried out by the oppressed groups as a form of resistance. Some in fact shared their spoiled with poor, making them as Cheah Boon Kheng called them as the Robin Hood of Malaya. Such appears to be the case with the peasant robber Panglima Nayan (and several others) who was eventually killed by the British-Kedah authorities.

But not all cases (in fact most cases) could be labelled cleanly as Robin Hood kind. Stories about these individuals are contradictory and there are forgotten aspects about their cruelty to their own, with their benevolence exaggerated. It is a complicated truth, unlike popular folk tales told in Kedah.

Cheah the historian understood this but still came out to defend his thesis: it does not matter what the truth is. What matters is the perception of the peasants. That perception and stories from the peasants told are their way of rebelling against the authorities. These stories are the weapons of the weak.

Cheah’s defense of the thesis is acceptable and solid in fact. But I am troubled with the brushing off facts in favor of perceptions, if we transport this lens to analyze contemporary issues. Here, I am referring to social media which has inundated everybody with information (regardless of truth) so much that everything become perceptions with increasingly no bearing to facts. Would the employment of perceptions regardless of truth by fringe extremist groups (by definition non-mainstream and so… ignored/oppressed/suppressed/disenfranchised?) qualify as weapons of the weak?

I have not read Weapons of the Weak and I will try to read it soon with that specific question in mind.

Categories
Books, essays and others Politics & government Science & technology

[2983] Reading Chip War and some questions for Malaysia

I had expected it to be a technical reading but I was pleasantly surprised at the ease I read through Chris Miller’s Chip War: The Fight for the World’s Most Critical Technology. It is a 400-page book published back in 2022 at a time when chip availability was still a big problem that caused delays in delivery of everything that had semiconductors in it. Those goods included small electronics like cell phones and gaming consoles as well as large items such as cars. I had to wait for almost two years for the delivery of a new car from Japan. Even as the semiconductor market conditions improved by 2023, the issues discussed by Miller in his book remain relevant as the China-US tech war heats up further and as the use of AI among the public spreads.

For most parts, Chip War goes through the history of semiconductors and it is less so about contemporary contest between China and US. In this sense, I feel the title is a slight misnomer. When I first thought of the book title, I had imagined a little bit of reading notes from my work place: supply chain, industry interlinkages, international trade, policies, tariffs, war. While the author discusses these topics, they are all subsumed under the historical narrative that covered industry development during World War II and right up to the present day. And the historical narrative, in many ways, is written around multiple personalities (scientists, engineers, military men and politicians) who played (and still play) a role in the development of semiconductors. Contemporary issues are covered in a few chapters close to the end.

The author does provide brief technical description for things like early transistors, modern chips, and advanced equipment needed to make those chips. But that does not affect the readability of the book negatively, which is good thing. It is just not that technical. Some may find the non-technicality as a negative, since more than one engineer in multiple reviews have criticized Miller for oversimplifying various processes.

The United States is the main focus of the book, given its centrality in developing and the marketing semiconductors. Several other countries are mentioned extensively too. Soviet Union/Russia for its failure. Taiwan, South Korea and Japan for their successes. And China for being the new kid on the block and how the country is challenging US technological supremacy in a way the Soviet Union never could.

Malaysia has two or three mentions throughout the book, as the country plays major roles in testing and packaging of semiconductors. Those roles are not as sexy as designing or fabricating chips, but it is still essential in keeping the industry running.

Here, I want to touch something discussed in the book that has a direct impact on a specific Malaysian policy: the development of Malaysia’s 5G infrastructure within the context of China-US tech war.

Malaysia through its state-owned entreprise Digital National Berhad (DNB) is building the country’s 5G network with equipment and expertise supplied primarily by Ericsson. The selection of Ericsson is not without controversy, with the other contender being Huawei of China. The current government under Pakatan Harapan however appears unhappy with the DNB-Ericsson arrangement and has hinted that Malaysia should have a second network built by Huawei.

Of relevance here is that Huawei has come under strict restrictions imposed by the US, restrictions which have deprived the company from the latest chips needed to run 5G network. This has forced China to hasten the development of its own indigenous chip industry and indeed since 2020 when the US first tightened export controls on Huawei, the company and the general Chinese semiconductor industry have made progress in advancing its own chip design and manufacturing capability. Yet China is behind that of the US and its allies in terms chip technology. These allies include Taiwan that run the world’s most advanced chip manufacturing facilities (TSMC’s), and the Netherlands that makes the world’s most advanced chipmaking machinery (ASML’s). China is now able to design and manufacture 5nm chips (as of 2023?) but struggles to close the gap with 2nm chips that US-centric supply chain is now focusing on.

In more general terms, China might be 3-5 years behind the US chip technology. The 3-5 years gap might sound small, but for an industry governed by Moore’s Law, it is not something someone could shrug off.

Under these conditions, my question is, would it make sense to turn to Huawei for Malaysia’s 5G infrastructure (assuming building a second 5G network makes sense at all)?

From the way Miller described it in Chip War, Huawei faces difficulties in securing advanced chips needed for 5G equipment, unlike Ericsson.

And if Malaysia does get a second 5G network to be built by Huawei, would that 5G infrastructure be inferior to the first one due to restrictions faced by Huawei ?

Or is Chinese chip technology, wherever it is on the trailing edge, good enough for Malaysian purposes?

From Malaysian perspective, this does not sound like a geopolitical concern (Sinophobia?) that some in government make it out to be. Rather, it is a practical technological concern.

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Economics Science & technology Society

[2917] Urban life will not go away with WFH and digital technology

Last week, I participated in a discussion panel on urban poverty and urbanization. Over the course of the session, a fellow discussant highlighted the potential of working-from-home phenomenon in reducing the need for urban centers.

I am unsure if I could agree with the suggestion.

First off, such decentralization is possible. It is not out of this world. The COVID-19 pandemic has prompted discussions on living away from cities. We could work from everywhere now. Some have even thought perhaps it is time to go rural altogether. There is a logic behind it.

Beyond the panel, there is a rethinking about high-density area. As it goes, maybe we should spread it out a little to make our society more resilient against future outbreaks. WFH is one of the ways that could be achieved. We can work remotely, and therefore we do not need a place in the city. Ditch the city, the slogan might sound.

If pandemic is the only thing to worry about, sure. Decentralizing the population into many smaller low-density towns would be the way forward.

But cities are not just about working culture, and pandemic is not the only thing that concerns us.

If I remember my lesson back in university, there is such a thing as agglomeration. If enough companies—and indeed people—gathered together, they would enjoy some kind of economies of scale in more than one way.

In terms of services, the more people there are in a place, the cheaper it is to deliver those services. This is relevant to both public and private services. Think of mass transit, or better city trains. Super-expensive to build and operate. Having it in Kuala Lumpur might make sense with its 2 million-4 million people depending on the definition used to define the city along with its satellites. Less so in smaller cities such as Kuantan that does not even hit one million population mark. Malacca Town with its low population city has a monorail, but we all know it is a bad, expensive joke.

And it is not just mass transit. Think about utilities. Think of roads or better in these days of interconnectivity, fiber optics network. It is cheaper to lay the cable for city use, like in Kuching, than in the interior of Sarawak. Indeed, communication tower is generally the preferred cheaper method of expanding internet services into rural areas.

There are plenty of examples across many sectors. Cost consideration alone make cities capable of providing services rural areas struggle to provide.

Large population is also a theme central to growth theory. As one growth theory puts it, beyond capital accumulation and technological progress, population growth is really the ultimate driver of growth. With population, comes new ideas. Edmund Phelps long ago wrote the following that pretty much summarizes mainstream growth theory:

One can hardly imagine, I think, how poor we would be today were it not for the rapid population growth of the past to which we owe the enormous number of technological advances enjoyed today… If I could re-do the history of the world, halving population size each year from the beginning of time on some random basis, I would not do it for fear of losing Mozart in the process. [Edmund Phelps. Population Increase. Canadian Journal of Economics. August 1968. Page 511-512]

To put it simply, technological progress itself is a function of population growth.

Good stuff tend to be created when people congregate in a place. New observation, innovation, idea exchange and all that happen more often among large population located in a dense area than in a sparsely populated space. The residents of large cities also make sophisticated demands arising from urban life. Without these demands, nobody would think of the solution and no progress would be made.

There might be an optimal population size. But for Malaysian cities, I think we could make it denser. I prefer denser cities not just because of the factors mentioned above and more, but also because the toll sprawls exert on the environment. Big cities tend to share resources better.

Finally, it is true that the pandemic lockdown has proven that we have the technology to work from home.

But it also proves we do not enjoy being stuck at home.

We do not just live within the space of our four walls. It is the culture, the connections and the values that matter as well. We yearn society. I yearn the city.

Many options available in the cities are available on the internet not because online services are taking over those services previously provided physically. Rather, the internet accommodates the provision of those services. It does not make cities irrelevant. Ultimately, those very services are made possible by cities.

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Economics Science & technology

[2897] Two-tier regulations to enhance ridesharing as a shock absorber in the Malaysian labor market

The gig economy can be many things but within the realm of ridesharing, I see it primarily as a shock absorber in the labor market. That means ridesharing is a temporary fall back plan if you have trouble in the formal market or in between jobs.

Here is an example of ridesharing as a shock absorber: if someone lost an income through job loss, he or she would not suffer 100% immediately because he or she could go to ridesharing without much cost. This shock absorber can be a minor alternative to unemployment benefits, except it comes as no cost to the government.

Because of this, I prefer to have flexibility in the ridesharing sector. Regulations could reduce the flexibility and reduce the effectively of the ridesharing sector as a shock absorber.

Yet it is quite clear that there is a need for labor protection. Regulations do have a role, especially since there is an asymmetry of bargaining power between those driving and the owner of the platform, driving by technology. In the case of food delivery, which is also a part of the gig economy, Foodpanda has market power over its food delivery workers and that market power was only matched with its deliverers’ union-like organizing successes.

When it comes to ridesharing, it does seem current regulations are reducing such flexibility and hurting the role of the sector as a labor market shock absorber. This inflexibility is caused by the need to register with the government if a person wants to participate in the ridesharing economy by driving.

Grab certainly blamed the new ridesharing regulations for reduced number of drivers on the road. This seems to be backed by complaints made by passengers over longer waiting time and higher fares. I personally I have suffered longer waiting time and higher fares, compared to before the regulations came into place. Talking to former drivers have also convinced that there are those who chose to cease becoming participants in the ridesharing sector. These point towards greater barrier to entry and hence, reduced flexibility.

I think as a compromise between the need for regulations and flexibility, perhaps there should be a two-tiers regulation:

  • For those earning below a certain threshold per month over x months, they could be exempted (partially?) from registration.
  • For those surpassing that threshold, they should be covered by current regulations fully .

The threshold is there to differentiate those doing ridesharing as a part time job and those doing it full time (or simply heavy participate of the gig economy). The shock absorber factor is more relevant to the part-timers than to the full-timers.

Admittedly, this will make implementation more complex and open the grounds for some non-compliance. There will be grey areas but I think in making the gig economy as a shock absorber, we should be tolerant of such non-compliance within some margins.

Implementation issues aside, theoretically this should be improve the role of ridesharing as a shock absorber in the labor market. It allows part-timers to join the gig economy without much cost, and making ridesharing sector as a temporary fallback.