The Internet Is Not the Answer (14 page)

But Kodak—or, at least, its carcass—still existed in Rochester. And after driving around for a while, I did manage to find a company office. The building was at the intersection of State and Factory Streets in the old industrial part of town, a few blocks from the visitors center.
KODAK: WORLD HEADQUARTERS
, a dull corporate plaque advertised outside a sixteen-story building that, when it was constructed in 1914, had been the tallest place in Rochester. It was constructed from a similar sort of industrial brick that made up the old Musto marble factory in downtown San Francisco. But that’s all it had in common with the reinvented 58,000-square-foot Battery club. A desultory American flag flew outside this former skyscraper. On the corner of Factory Street, there was a row of stores that had all been shuttered.
SAMBA CAFÉ
:
IT
’
S JUST SENSATIONAL
, a faded neon sign claimed above a boarded-up Brazilian restaurant.
FLOWER CITY
, another derelict store advertised over a scratched-out sign that said
JEWELERS
.

This palimpsest of industrial life was a picture worth at least a thousand words. And so, parking my rental car in the building’s empty driveway, I took out my iPhone and began to photograph the desolation. The scene was so real that I didn’t even need to switch on the camera’s “noir” and “tonal” filters that had been designed to give my amateurish pictures more authenticity. But my shoot didn’t last long. After a few minutes, an ancient security guard shuffled out of the old brick building and told me that photography wasn’t permitted. I smiled sadly. No snaps allowed in Snap City. It was like outlawing email in Palo Alto or banning driving in Detroit.

I returned to the old woman at the empty visitors center. She brightened up when she saw me. “You’ll find people at the Eastman House,” she said after I described my people-less drive around Innovation Way and Creative Drive. “That’s the only reason anyone comes to Rochester.”

It was a good reason—particularly for anyone seeking to make sense of Kodak’s fate. Located a couple of miles away from downtown Rochester, the Eastman House was the most meretricious mansion on a wide, leafy street lined with the sprawling trophy homes of Gilded Age industrial magnates. Built by George Eastman between 1902 and 1904, it was declared a National Historic Landmark in 1966. Housing more than 400,000 photographs and 23,000 films as well as a collection of antique Kodak cameras, the Eastman House is now one of the world’s leading museums of photography and film.
⁴⁸

In “Kodachrome,” Paul Simon sang about being able to read what had been written on the wall. And the writing about Kodak’s fate was certainly written with a vivid, Kodachrome-like clarity on the Eastman House wall.

On a long white wall at the entrance to the museum was a timeline of the history of photography. Beginning in fifth-century BC China, with the first record of an optical device designed to capture light, the timeline on the wall included the creation of the first image from a camera obscura in 1826, the invention of the modern Zoetrope in 1834, Kodak’s introduction of the first mass-market camera for children in 1900, Tim Berners-Lee’s formal proposal to develop a protocol of the World Wide Web in 1992, Kodak’s decision to stop producing cameras in 2004, and the fact that 380 billion photos, a remarkable 11% of the total photographs ever taken, were snapped in 2011.
⁴⁹

The timeline ended in 2012 with four entries that could have been grouped under the headline
REALLY
CREATIVE DESTRUCTION
:

— Eastman Kodak company files for bankruptcy under CH 11

— Instagram has over 14 million users and hosts about 1 billion photographs

— There are over 6 billion photographs on Flickr

— There are over 500 billion photographs on Facebook

And that was it. The timeline concluded there. The writing was indeed on the wall for Rochester and Kodak. Silicon Valley sledgehammers like Flickr and Facebook had smashed old Rochester into smithereens
.
The Kodak economy had been replaced by the Facebook economy with its 500 billion free photographs. No wonder the Eastman House, as a memorial to a now-extinct analog industry, had been transformed into a museum. No wonder the only people who now visit Rochester come to gaze nostalgically at its past rather than imagine its future.

The Broken Center

“So what?” apologists of radical disruption like Tom Perkins will ask about Kodak’s usurpation by Internet companies like Instagram, Flickr, and Facebook. Tragedy in Rochester, they will say, equals opportunity for West Coast entrepreneurs. Nostalgia, the determinists will remind us, is a Luddite indulgence. And the writing on the wall, they will remind us, eventually appears for everyone.

In some ways, of course, they are right. For better or worse, technological change—especially in our digital age of creative destruction—is pretty much inevitable. Paul Simon himself once described this to me with a bittersweet regret. “I’m personally against Web 2.0 in the same way as I’m personally against my own death,” he said about the damage unleashed by the Internet upon the music industry—a hurricane that has flattened both the traditional labels and the economic value of recorded music.
⁵⁰
“We’re going to 2.0,” Simon predicted to me. “Like it or not, that is what is going to happen.”
⁵¹

“There will be no more Kodak Moments. After 133 years, the company has run its course,” Don Strickland, the Kodak executive who had unsuccessfully encouraged the company to pioneer the digital camera, thus concluded in 2013.
⁵²
“Kodak was caught in a perfect storm of not only technological, but also social and economic change,” added Robert Burley, a Canadian photographer whose work memorializes Kodak’s decline.
⁵³

No, nothing lasts forever. And certainly the Kodak tragedy can be seen, at least in part, as a parable of a once-mighty monopolist, a Google of the industrial age, that couldn’t adapt to the digital revolution. Yes, Kodak failed to become a leader in digital photography, in spite of the fact that the company actually invented the digital camera, back in 1975.
⁵⁴
Yes, Kodak is, in part, a victim of what Harvard Business School professor Clayton Christensen calls, in his influential 2011 book about why businesses fail,
The Innovator’s Dilemma
,
⁵⁵
the challenge of a once-dominant incumbent having to disrupt its own business model. Yes, a string of myopic executives failed to reinvent Kodak, with the result that a great company that up until the 1990s was often listed among the world’s top five most valuable brands
⁵⁶
has now become synonymous with failure. And yes, tragedy in Rochester spells economic opportunity elsewhere, particularly for West Coast entrepreneurs like Jeff Bezos, who has made Christensen’s
Innovator’s Dilemma
required reading for all Amazon executives.
⁵⁷

“Maybe a fire is what’s needed for a vigorous new growth, but that’s the long view,” Paul Simon said to me about the Internet’s disruptive impact on creative industries like recorded music and photography. “In the short term, all that’s apparent is the devastation.” But what happens if the
devastation
is not only permanent, but also the defining feature of our now twenty-five-year-old digital economy? What happens if the tragedy in Rochester is actually a sneak preview of our collective future—a more universal perfect storm of technological, social, and economic change?

Welcome to what Joshua Cooper Ramo, the former executive editor of
Time
magazine, calls “the age of the unthinkable.” It’s a networked age, Ramo says, in which “conformity to old ideas is lethal”
⁵⁸
and predictability and linearity have been replaced by what he calls an “epidemic” of self-organization where no central leadership is required. This is an age so destructively
unthinkable
, in fact, that Clayton Christensen’s theory of the “Innovator’s Dilemma,” which suggests an orderly cycle of disruptors, each replacing the previous economic incumbent, now has itself been blown up by an even more disruptive theory of early-twenty-first-century digital capitalism.

Christensen’s ideas have themselves been reinvented by the bestselling business writers Larry Downes and Paul F. Nunes, who’ve replaced the “Innovator’s Dilemma” with the much bleaker “Innovator’s Disaster.” “Nearly everything you think you know about strategy and innovation is wrong,” Downes and Nunes warn about today’s radically disruptive economy.
⁵⁹
In their 2014 book,
Big Bang Disruption
,
⁶⁰
they describe an economy in which disruption is devastating rather than creative. It’s a world, they say, in which Joseph Schumpeter’s “perennial gales of creative destruction” have become Category 5 hurricanes. Upheavals from big-bang disruptors like Google, Uber, Facebook, and Instagram “don’t create dilemmas for innovators,” Downes and Nunes warn, “they trigger disasters.”
⁶¹
And Kodak is the textbook example of this kind of disaster—a $31 billion company employing 145,000 people that, as they note, was bankrupted “gradually and then suddenly”
⁶²
by the hurricane from Silicon Valley.

“An entire city,” Jason Farago wrote about the impact of the Kodak bankruptcy on Rochester, “has lost its center.”
⁶³
But the real disaster of the digital revolution is much more universal than this. In today’s networked age, it’s our entire society that is having its center destroyed by a “perfect storm” of technological, social, and economic change. The twentieth-century industrial age, while far from ideal in many ways, was distinguished by what George Packer, writing in the
New York Times
, calls the “great leveling” of the “Roosevelt Republic.”
⁶⁴
For hard-line neoliberals like Tom Perkins, Packer’s “great leveling” probably raises the specter of a socialist dystopia. But for those not fortunate enough to own a $130 million yacht as long as a football field, this world offered an economic and cultural center, a middle ground where jobs and opportunity were plentiful.

The late industrial age of the second half of the twentieth century was a middle-class world built, Packer notes, by “state universities, progressive taxation, interstate highways, collective bargaining, health insurance for the elderly, credible news organizations.”
⁶⁵
According to the Harvard economists Claudia Goldin and Lawrence Katz, this was a “golden age” of labor in which increasingly skilled workers won the “race between education and technology” and made themselves essential to the industrial economy.
⁶⁶
And, of course, it was a world of publicly funded institutions like ARPA and NSFNET that provided the investment and opportunities to build valuable new technologies like the Internet.

But this world, Rochester’s fate reminds us, is now passing. As Sequoia Capital chairman Michael Moritz reminds us, today’s information economy is marked by an ever-increasing inequality between an elite and everyone else. It’s a donut-shaped economy without a middle. Moritz thus describes as “brutal” both the drop between 1968 and 2013 in the US minimum wage (when inflation is accounted for) from $10.70 to $7.25 and the flattening of a median household income that, not even accounting for inflation, has crawled up from $43,868 to $52,762 over the same forty-five-year period.
⁶⁷

According to the
New York Times
columnist David Brooks, this inequality represents capitalism’s “greatest moral crisis since the Great Depression.”
⁶⁸
It’s a crisis, Brooks says, that can be captured in two statistics: the $19 billion Facebook acquisition of the fifty-five-person instant messaging Internet app WhatsApp in February 2014, which valued each employee at $345 million; and the equally disturbing fact that the slice of the economic pie for the middle 60 percent of earners in the US economy has dropped from 53 percent to 45 percent since 1970. The Internet economy “produces very valuable companies with very few employees,” Brooks says of this crisis, while “the majority of workers are not seeing income gains commensurate with their productivity levels.”
⁶⁹

In his 2013 National Book Award–winning
The Unwinding
, George Packer mourns the passing of the twentieth-century Great Society. What he calls “New America” has been corrupted, he suggests, by its deepening inequality of wealth and opportunity. And it’s not surprising that Packer places Silicon Valley and the multibillionaire Internet entrepreneur and libertarian Peter Thiel at the center of his narrative.