We are just beginning to glimpse the bare outlines of an emerging new economic system,
the Collaborative Commons. This is the first new economic paradigm to emerge on the world
scene since the advent of capitalism and socialism in the early 19th century. So it's a remarkable
historical event. It has long-term implications for society. But what's really interesting
is the trigger that's giving birth to this new economic system. The trigger is something
called zero marginal cost. Now, marginal costs are the costs of producing an additional unit
of a good and service after your fixed costs are covered. Business people are all aware
of marginal costs, most of the public isn't. But this idea of zero marginal cost is going
to dramatically intimately affect every single person in the world in the coming years in
every aspect of their life.
There's a paradox deeply embedded in the very heart of the capitalist market system previously
really undisclosed. This paradox has been responsible for the tremendous success of
capitalism over the last two centuries. But here's the irony, the very success of this
paradox is now leading to an end game and a new paradigm emerging out of capitalism
is collaborative commons. Let me explain. In a traditional market, sellers are always
constantly probing for new technologies that can increase their productivity, reduce their
marginal costs so they can put out cheaper products and win over consumers and market
share and beat out their competitors and bring some profit back to investors. So business
people are always looking for ways to increase productivity and reduce their marginal cost,
they simply never expected in their wildest dreams that there would be a technology revolution
so powerful in it's productivity that it might reduce those margins of cost to near zero
making goods and services essentially free, priceless and beyond the market exchange economy.
That's now beginning to happen in the real world.
The first inklings of this zero margin cost phenomenon was with the inception of the World
Wide Web from 1990 until 2014. We saw this zero marginal cost phenomenon invade the newspaper
industry, the magazine industry and book publishing. With the coming of the World Wide Web and
the Internet all of a sudden millions of people, then hundreds of millions of people, and now
40 percent of the human race with very cheap cell phones and computers they're sending
audio, video and texting each other at near zero marginal cost. So what's happened is
millions of consumers became prosumers with the advent of the Internet. And so they're
producing and sharing their own videos, their own news blogs, their own entertainment, their
own knowledge with each other in these lateral networks at near zero marginal costs and essentially
for free bypassing the capitalist market, in many instances altogether. This zero marginal
cost phenomena, as it invaded the information industries, wreaked havoc on big, big industries.
Newspapers went out of business; they couldn't compete with near zero marginal costs. Magazines
went out of business. And my own industry publishing has been just wracked by free e-books
and free knowledge and information.
But, you know, the strange thing about it is at first a lot of industry watchers said
this is a good thing because if we give out more and more information goods free and people
are producing and sharing it free, these freemiums will stimulate people's appetite to want premiums
and then upgrade this free goods and information by getting more customized information. I'll
give you an example. Musicians give away their music free when they started to see this happen
hoping that they would get a big loyal fan repertoire and then their fans would be enticed
to go to their concerts and pay premium in order to be there in person. And then, of
course, we saw this with newspapers. The New York Times will give you ten free articles
a month, freemiums, hoping that you'll then upload upgrade to premiums and by their subscription
service. It didn't happen on any large scale. This was very naïve by industry watchers.
Sure, some people have moved from freemiums to premiums but when more and more information
goods are out there nearly free shared with each other, music, film, arts, information
and knowledge, attention span is not there to then want to go to the premiums when you
have so much available already in the freemiums.
So, economists have come back recently and said all right, we understand that information
goods are moving towards near zero marginal cost devastating the newspaper industry, magazines,
book publishing, et cetera, but there's a firewall here that this new year zero marginal
cost phenomenon on the Internet it won't pass the firewall into the physical world of physical
goods and services, the brick and mortar world; the world of energy and physical products.
That's no longer the case. There's a new technology revolution coming online that's making it
possible for millions and soon hundreds of millions and eventually billions of people
to not only produce and share their own information goods but now energy and physical goods. And
it's called the Internet of Things. This is the expansion of the Internet and it's all
happening in the last 12 months. Now this is a pretty new phenomenon.
What's going on here is the traditional Internet that we're all so familiar with is now converging
with a very fledgling energy Internet and a nascent logistics and transport Internet.
And as these three Internets come together they're creating a single operating platform,
a nervous system, a sort of intelligent brain. And they're taking this brain and they're
attaching sensors now across the entire value chain of the economy to feed into this three
Internets, energy, communication and logistics. So right now we have 13 billion sensors out
there connecting appliances and things with human beings. We have sensors connecting resource
flows in nature. We have sensors at warehouse and distribution centers. We have sensors
on the smart roves monitoring traffic. We have sensors on the factory floor constantly
keeping up-to-date information on the flow of production in the factories. We have sensors
in the front and back office, sensors in retail stores. We have sensors all across the system
feeding big data back.
What's interesting is 13 billion sensors now, IBM says in 2020 we'll have 30 billion sensors
connecting everything with every being. And by 2030 the most recent forecast we'll have
a hundred trillion sensors connecting all of us in one vast lateral neural network made
up of three operating engines. A communication Internet converging with an energy and a logistics
Internet. And let me say one more thing about these three engines. When you look back at
every society, their economic platforms always contained three elements, a form of communication,
a form of energy to power a society and a form of mobility to move economic activity.
For example, in the 19th century the first Industrial Revolution their communication
was steam power printing and later the telegraph to move economic activity. The form of energy
was coal and steam power. The form of mobility was the locomotive and the railroads. And
that platform allowed us to build out a first industrial revolution.
In the 20th century we had these three as well, these components, communication, energy
and mobility. The communication was centralized electricity and especially the telephone and
later radio and television. The form of energy was oil, and the mobility was the internal
combustion engine. And that platform then allowed us to have a great advance of economic
opportunity in the 20th century with the second Industrial Revolution. This expanse of Internet,
this Internet of Things brings us to a third Industrial Revolution. And the form of communication
is the Internet. The form of power is renewable energy, distributed renewable energy. And
the form of mobility is driverless automated vehicles, logistics and automated drones.
So what we're seeing is just the first inklings of this new platform, these three Internets
in one. And what this allows us to do is any consumer can become a prosumer just like we
did with information goods on the old Internet, access this new Internet of Things and have
available to us a complete stream of data from every part of the economy. That means
you and I, small cooperatives, small businesses, large companies, if it keeps its network neutrality
we all have equal access like we did with the Internet.
So we can go up on this Internet of Things now and we can take that big data flowing
through the system from the devices all the way to these three Internets and any of us
with our own apps and our own mobile technology will be able to use the big data and combine
it with analytics to create our own algorithms just like the big guys at Google. And it won't
be rocket science because those apps will be programmed for us. So we can create our
own apps with our mobile technology, using that big data to dramatically increase our
productivity, reduce our marginal cost in the production of physical things like energy
and 3-D printed products. That's already begun.
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