Centralized services: risky business

By | April 23, 2012
Why centralized services and technologies detract from individual household resilience against economic collapse

I'm also a technologically affine person. But I don't agree with Boris on the paradigm he presents in this article. See, I'm also rather behind-the-times when it comes to relying on modern technology: most grandmothers enjoy a more modern lifestyle than me. And there's a reason for it: I'm not convinced that relying on centralized providers is a good thing.

Centralized services means that when that service changes it's conditions, you're still financially bound to it. If you use natural gas to heat your house, you're bound to natural gas prices from the local natural gas network. You're trapped. If you read on a Kindle, you're bound to the availability services and prices that Amazon provides. Your data is trapped.

Now consider what happens under hyperinflation: prices rocket faster than most salaries grow. Suddenly, the conveniences you've enjoyed under centralized provedence becomes a pest due to rocketing costs. You no longer have an 'out', because that would require more investment than you can afford (as your wealth has depreciated considerably under hyperinflation).

I'd argue that the innovation we consumers need in order to escape this trap – and one that companies are very hesitant to grant – is a decentralization mechanism for digital products and services. At least, that's the only thing that would convince me that digital goods are here to stay mainstream, and not wander into the category 'luxus goods' should a crisis break.

Before you start calling me a doomsday prophet – I'm not claiming that a doomsday crisis is necessarily going to break out. But I am claiming that we have, knowingly or unknowingly, moved to accept a direction which adds an additional insolvency risk factor to private households, and one that can be mitigated if consumers chose to apply pressure to digital goods and service deliverers to make decentralized delivery a reality.

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4 thoughts on “Centralized services: risky business

  1. John A Hardy

    Yes agreed. The "Greenspan Put" was the insurance scheme that the Too Big To Fail financial houses operated under and it was a disastrous shadow policy that while unstated was real and everyone knew it.

    The problem here those was a failure of regulation. Insurance works only when rules and expectations are clear and transparent. Nothing is like that in the murky world of shadow banking. The key point however is that what ever distributed and decentralised system you construct, government will still be there as insurer of last resort so the rules had better be written clearly if you don't want the unwritten rules to be activated.

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  2. Sophie Wrobel

    +John Hardy I agree that risk mitigation is an important part of modern government. However I'd also say its one of the biggest problems with government today: governments worldwide are passing policies that increasingly absorb risk away from large monopolistic companies and banks, without increasing their cash intake to account for the increased risk they are taking. And large companies are not lowering prices to reflect their decreased share in risk, but rather pocketing the profits. In order to cut costs, then, the government is passing policies to offload risk to private households… and you see where suffering would most adversely strike if a particular offloaded risk explodes.

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  3. John A Hardy

    Good point about the role of centralising roles such as insurance as a way of building robustness into systems. Risk amelioration through insurance could be described as the most important role of modern government.

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  4. David Vorriccelli

    This is a great argument in the spirit of Bill Joy, Wood burning stoves, the Gold/BitCoin standard, or joinDiaspora.com

    What I think it fails to capture is the feeling of added insurance we get from all being "in it together".

    Then, of course, we have to ask ourselves, do we really feel any more secure that we're in it together? Is that a real or imagined sensation of safety? And is the cost of real safety (physical bookstores, offline storage, etc…) all that much more expensive?

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