Urban Leadership Foundation

End of an Era

As the disruptive capacities of technological innovations continue to advance at an exponential rate, it is increasingly clear that the capitalist economic model is unable to effectively manage resources and distribute wealth under the conditions of sustainable abundance now being brought forth. Vast increases in productivity and efficiency will be realized in the years ahead through an integrated network of smart-products (termed the Internet of Things, or IoT), accessible renewable energy harvesting technologies, energy sharing across a distributed smart-grid, the decentralization of manufacturing through 3D printing, open online education, the decentralization of finance, legal contracts and governance through Blockchain applications, and the progressive automation of the workforce.

Just as John Maynard Keynes prophesized nearly a century ago, “a point may soon be reached, much sooner perhaps than we are all of us aware of, when these [economic] needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes.”[1] Keynes foresaw such an economic state of abundance coming about through, what he first termed, technological unemployment which, he stated, “[we] will hear a great deal in the years to come;” the ultimate implication being “that mankind is solving its economic problem.”[2] Keynes looked expectantly to a future in which machines had progressed to the point of providing an abundance of freely available goods and services to humanity — liberating people around the world from menial labor, debt, and servitude for the first time.

Ironically, the operating principles of the capitalist marketplace are bringing us ever closer to this very state, while simultaneously the relevance of the competitive market is progressively undermined by the same emerging paradigm. Capitalist logic dictates that the entrepreneurial spirit of a competitive market will continually drive productivity increases and marginal cost decreases. Marginal cost — the cost of producing additional units of product — is the focus, as this is where entrepreneurs and businesses make their profits in a market-exchange economy (at the margin); and when marginal cost approaches zero, so too does profit. The effects of near zero marginal cost can already be seen wreaking havoc across several media industries, such as entertainment, communications and publishing, as more and more content continues to be shared and made freely available across digital, collaborative networks.

The newest technologies of today are now poised to push marginal cost to near zero across every major sector. As renewable energy harvesting technologies become more accessible and efficient, individual homes and buildings will increasingly produce their own renewable energy and have the ability to share it freely across a distributed digital smart-grid. Alongside the Energy Internet, a decentralized Internet of Things will connect our smart-products and optimize efficiencies, both within the home and across the economy, in real-time. Education is becoming freely accessible through open online learning environments, such as MOOCs — Massive Open Online Courses. Digital cryptocurrencies, such as Bitcoin, are enabling peer-to-peer finance options for a decentralized age, where instant transactions of any denomination to anywhere on the planet can be made with next to no transaction fee and without the involvement of a third-party (e.g., banks). Advanced robotics, data analysis, and artificial intelligence will increasingly take the place of humans across all sectors of the workforce. The automation of wage labor will lead to vast efficiency increases in the economy and ultimately liberate humanity from pecuniary tasks for the first time. 3D printing at scale promises to dramatically increase economic productivity and sustainability, using one-tenth of the material of traditional manufacturing, while eliminating the need for long-range shipping and logistics through the exchange of digital schematics over open networks. As these technologies continue their exponential rate of growth, an increasing number of products and services will be produced and exchanged across an unrestricted and free-flowing lateral Commons at near zero marginal cost.

Economists such as Keynes have long been aware that the most optimally efficient state of capitalism is at near zero marginal cost. Through the inherent competitive drive for lower costs and increased productivity and efficiencies, near zero marginal cost is an inevitability under capitalist defined principles. When the cost of producing an additional good or service is nearly zero, products become available at next to no cost, profits evaporate and the exchange of property in markets shuts down. Though this state represents the ultimate triumph of capitalism, it also marks its obsolescence and passage from the world stage.

As goods and services become more freely available, the sun will begin to set on the capitalist era. Capitalism is designed to manage resources within a closed system of scarcity, and it is thoroughly ineffective at organizing the economic life of a society in which access is valued over ownership, transparency over privacy, and collaborative co-creation over competition. The foundational principals and philosophies upon which the capitalist system is based — private property, wage labor, profit-driven competition and debt-based finance — are no longer relevant under such conditions. Empowered and driven by recent technological innovations, a new economic system is now emerging that is significantly better suited for organizing a society characterized by sustainable abundance rather than scarcity.

Technological Disruption

The Internet of Things

The Internet of Things is the foundational intelligent infrastructure of the new economy — integrating a Communications Internet, Energy Internet and Logistics Internet into a single IoT operating system. Hundreds of billions of consumer products will eventually be connected to the internet and to one another, feeding real-time data to an integrated global neural network. Corporations around the world are already beginning to develop and distribute “smart” appliances and products that are capable of being connected to the internet and controlled by consumers via Wi-Fi. One of the most powerful effects of this global network of things will be the comprehensive energy efficiency and productivity gains across society, largely afforded by big data analysis. According to Jeremy Rifkin:

“The Internet of Things will connect everything with everyone in an integrated global network. People, machines, natural resources, production lines, logistics networks, consumption habits, recycling flows, and virtually every other aspect of economic and social life will be linked via sensors and software to the IoT platform, continually feeding Big Data to every node — business, homes, vehicles — moment to moment, in real time. Big Data, in turn, will be processed with advanced analytics, transformed into predictive algorithms, and programmed into automated systems to improve thermodynamic efficiencies, dramatically increase productivity, and reduce the marginal cost of producing and delivering a full range of goods and services to near zero across the entire economy.”[3]

The IoT is inherently designed to be open, distributed, and collaborative, giving anyone the freedom to utilize this collective data, create applications, and contribute to increasing economic efficiencies. However, the IoT is not just about data analysis. One of its defining features is making possible the transition from carbon-based fuels to renewable energy sources through a distributed Energy Internet. Taken as the sum of its parts, the Internet of Things will enable humanity to use less of the Earth’s resources dramatically more efficiently and, ultimately, aid in re-integrating our species with the biosphere of the planet.

Aggregate energy efficiency is the “ratio of useful to potential physical work that can be extracted from materials.”[4]

“During the period from 1900 to 1980 in the United States, aggregate energy efficiency…steadily rose along with the development of the nation’s infrastructure, from 2.48 percent to 12.3 percent…leveling off in the late 1990s at around 13 percent with the completion of the Second Industrial Revolution infrastructure. Despite a significant increase in efficiency, which gave the United States extraordinary productivity and growth, nearly 87 percent of the energy used in the Second Industrial Revolution was wasted during transmission.”[5]

Further efficiency gains under the current fossil fuel-based infrastructure are limited, since the technologies designed for this system, such as the internal-combustion engine and the centralized electricity grid, have few productivity gains left to exploit. However, studies indicate that, through a transition to an IoT infrastructure, “it is conceivable to increase aggregate energy efficiency to 40 percent or more in the next 40 years, amounting to a dramatic increase in productivity beyond what the economy experienced in the twentieth century.”[6]

Distributed Renewable Energy

An Internet of Things infrastructure will incorporate an Energy Internet, in which prosumers (consumers who have become their own producers) are empowered to share excess energy across an open and distributed IoT enabled smart-grid.

Initially, smart appliances may increase energy efficiency in the home by simply communicating with one another to reduce energy use. For example, this could be accomplished by not operating at peak times on the grid, or not all turning on at once, or charging an electric vehicle (EV) during the cheapest and most efficient hours of the night. However, as technologies for renewable and free energy harvesting (e.g., solar, wind, etc.) become exponentially more efficient and accessible to the average consumer it becomes possible for every household to harvest their own free and renewable energy, and share any excess (which may initially be done by selling it back to the utility company for a reduction in costs) across a decentralized smart-grid, or Energy Internet. It is even possible to utilize EVs as an energy storage device and to distribute this stored energy back into the grid during peak times.

Numerous sources of clean and renewable energy are already available, including: solar, wind, wave and tidal action, ocean currents, temperature differentials, falling water, geothermal, electrostatic, hydrogen, natural gas, algae, biomass, bacteria, phase transformation, fresnel lenses, and thermionics, amongst others. Geothermal energy alone can supply more than five hundred times the energy contained in all of the world’s known fossil fuel resources.[7] Additionally, every hour the sun radiates more energy onto the earth than the entire human population uses in one year.[8] Harnessing just one-tenth of 1 percent of the sun’s energy that hits the Earth would give us six times the energy that the global economy now consumes.[9]

Just as Moore’s Law applies to computing technology, solar and wind harvesting technologies are now experiencing exponential growth curves of their own, with geothermal, biomass and hydro expected to follow. For solar photovoltaic cells, the same “doubling” phenomenon as seen with computer chips has been observed, and price has tended to drop 20 percent for every doubling of industry capacity.[10] The price of crystalline silicon photovoltaic cells has fallen from $60 per watt in 1976 to $0.66 per watt in 2013, while efficiency of triple junction solar cells has reached 41 percent in the lab.[11] According to industry analysts, “the harvesting technology for solar and small wind power will be as cheap as cell phones and laptops within 15 years.”[12]

Within 10 years, it is projected that every building in America and Europe will be equipped with digital smart-meters that will be capable of optimizing the efficiency of devices and appliances within the home,[13] as well as continuously feeding and receiving real-time data from the IoT network. In the coming years, prosumers will be empowered to harvest and freely share their own clean and renewable energy across a distributed Energy Internet on an IoT infrastructure.

3D Printing and the Decentralization of Manufacturing

3D printing is the technology behind the manufacturing model that will accompany an IoT infrastructure. As with wind and solar harvesting technology, the development of 3D printers is on an exponential growth curve where the first “low-cost” Stratasys printer entered the market at $30,000 in 2002, while today’s entry-level 3D printers start at just $300. Already, 3D printers are producing a wide range of products, from jewelry and artwork, to car and airplane parts, human prostheses and bionic implants, bioprinted cells and tissue (with the first 3D printed transplant-ready organ scheduled to be printed in 2015[14]), functioning mechanical devices (including weapons), to furniture, to full-scale buildings and parts of infrastructure; even food is now being 3D printed, along with replacement parts for the International Space Station that are currently being printed out in zero gravity orbit.

To increase printing efficiencies, companies are currently exploring the use of abundant and locally available feedstock to create the printer filament. Mcor recently introduced a 3D printer that uses cheap paper as its feedstock, and prints out 3D products in full color with the consistency of wood at 5 percent of the cost. Other such projects include a 3D printer that uses sand to create glass objects, and the Filabot printer which grinds up and recycles plastic objects to produce its own filament. Sand, rock, and virtually any type of discarded waste material have the potential to be used for 3D construction and in 3D printed buildings. The European Space Agency has even designed a printer with the potential to use lunar soil as its feedstock to construct buildings on the moon.[15]

Though 3D printing may still be a niche area of manufacturing, its future disruptive potential is vast. Of most significance, the designs or schematics for 3D printed products are downloadable digital files that are able to be instantaneously shared online to any point on the planet, just as any type of digital media file. As with other online networks, 3D printing communities, such as Thingiverse or Youmagine, are doing away with intellectual property protection and are instead opting for open-source sharing, making their products freely available for anyone to use and modify. In this way, printed products can be made instantly available worldwide at a fraction of the cost and eliminate the need for long-range shipping. Additionally, 3D printers use just one-tenth of the material of traditional manufacturing,[16] can print their own spare parts, require very little human labor, and can create single customized products or large batches designed to order at virtually the same unit cost and without the need to retrofit an entire manufacturing facility, giving 3D printing immense advantages in efficiency and productivity.

3D printing will drive the decentralization of manufacturing as it scales. Embedded in an Internet of Things infrastructure, anyone on the planet is enabled to become a prosumer and create products for use or sharing over global networks. By allowing anyone and everyone access to a highly efficient means of production, 3D printing will reduce marginal costs to near zero for the majority of consumer products while circumventing and undermining traditional markets of exchange.

Cryptocurrency, Peer-to-Peer Finance and Blockchain 2.0

Though cryptocurrency and its underlying Blockchain may be several of the newest disruptive technologies (the Bitcoin whitepaper having been released in 2008, with the currency coming online the following year), their underlying applications are easily the most widespread (many of which are only now beginning to be explored), and their ultimate potential for disruption is likely yet to be realized.

Cryptocurrency, such as Bitcoin, is the mode of financial exchange that has been painfully absent from an increasingly interconnected world of instant digital communications. The digital currency is built upon an open-source protocol (its code is available for anyone to view), is secured by cryptography, and enables peer-to-peer transactions to take place over a decentralized global network without the need for any sort of intermediary third party (e.g., bank, government, etc). Essentially, it is a global decentralized digital currency, outside the realm of control of any centralized governing authority or entity.

Cryptocurrency transactions can be instantaneously sent anywhere in the world, in any denomination, with next to no transaction fee. This characteristic alone gives cryptocurrency the ability to reinvigorate and revolutionize the world of micro-payments, micro-lending, and remittance payments. With digital cryptocurrencies, foreign workers around the world are able to transfer remittance payments back to their families without having to pay exorbitant fees, often upwards of $30 USD per transaction, charged by companies such as Western Union. The micro-lending model, used to fund startup businesses and humanitarian projects around the world, has similarly been hindered by high global transfer fees on small sums and can now be reinvigorated through free-flowing cryptocurrency transactions.

Furthermore, cryptocurrency presents an opportunity to circumvent the ad-based revenue model for online digital content creation. Currently, user created content posted to YouTube, for example, takes in revenue through short advertisements that viewers are forced to watch, while the third party host (in this case Google) assumes a percentage of revenue from each creator. With the ability to send direct peer-to-peer micro-payments, it is possible to support content creators directly, without the need for any sort of third party intermediary. In the same way, small denominations of cryptocurrency could be attached to social media “likes,” empowering users to directly support one another for content creation and sharing— further incentivizing the creation of quality content and online initiatives. Even if just five or ten cents worth of cryptocurrency is attached to a “like,” if a video has one-hundred thousand views and half of those people send a five cent “like,” the content creator will directly receive $2,500 for their content, without the need for any corporate advertisement or third party fees.

The underlying technology that enables these secure peer-to-peer transactions to take place over a decentralized network is called the Blockchain. Cryptocurrency protocols, like Bitcoin, were simply the first widespread application of this technology. Numerous Blockchain 2.0 applications are now in development, many of which could be used to help manage an IoT infrastructure.

Smart contracts are computer programs that can automatically execute the terms of a contract once the agreed upon conditions are fulfilled. These could include simple transactions such as an online shopping purchase, or executing the terms of a will. Moreover, as smart devices and products continue to proliferate across an Internet of Things infrastructure they will increasingly integrate and register with the Blockchain and be able to be bought, sold and operated in line with the terms of smart contracts. For example, a car could be programmed to only operate for its rightful owner, or a house could be rented out whose doors will unlock via the tenant’s phone for a pre-determined length of time.[17]

The applications of the Blockchain are far-reaching, and largely beyond the scope of this article. The final application that will be mentioned here, that may be useful in a Collaborative Commons, is the potential to decentralize governance. Over the Blockchain, it is possible to conduct cryptographically secure and anonymous digital voting across the globe, where a unique crypto-token could be issued to the pool of voters that could then be used to cast a digital vote. Given the simplicity of conducting a crypto-vote, it is possible that democracies could become more secure, liquid, and less centralized, such that individuals would be able to vote directly on major issues themselves, rather than having to rely on elected representatives who are often under the influence of partisan politics, corporate lobbyists and politically motivated short-sightedness.

Though cryptocurrency and the Blockchain are relatively recent technologies, it is likely that both will be integral to the IoT infrastructure and play a significant role in facilitating and managing the new economy.

Automation and the End of Wage Labor

By now it is no secret that robotics, artificial intelligence (AI), big data, advanced analytics and algorithms are increasingly replacing human labor. Between 1997 and 2005, “manufacturing output increased by 60 percent in the United States while 3.9 million manufacturing jobs were eliminated during roughly the same period.”[18] Labor that was once outsourced to cheaper work forces overseas is now being repatriated with advanced robotics that are cheaper and more efficient than their foreign counterparts. Beyond manufacturing, logistics is becoming increasingly automated, from autonomous robots and storage systems in warehouses to driverless vehicles that are already beginning to be seen on public roadways, increasing efficiency and decreasing marginal cost at every step of the logistics value chain. Similarly, many white-collar and service industry positions are being transferred to machines just as quickly, eliminating the need for secretaries, phone operators, travel agents, bank tellers, cashiers, etc. The online retail sector is growing by 15 percent per year and is expected to double by 2020.[19] With much higher costs and payrolls, it is likely that many brick-and-mortar retailers will ultimately succumb to their virtual equivalents.

Professionals and knowledge workers are equally expendable, as advanced algorithms and AI are increasingly utilizing big data to recognize patterns, advance hypotheses and implement solutions. Many formulaic news and sports articles are now being written by AI, which have been capable of passing the Turing test online for some time, and can be published within minutes of an event.[20] Professionals from lawyers, to accountants, to middle managers and marketers — all are facing replacement by innovative big data algorithms.

The complete automation of the workforce has the ability to free humanity from wage labor and for the first time in history allow individuals to pursue their true passions, free of any sort of debt or servitude. There is no task that could not ultimately be carried out by machines or managed by sophisticated artificial intelligence. Computers will eventually be able to design their own programs, improve and repair their own circuitry, and update information about the social needs of humanity. Autonomous machines and self-erecting structures could excavate canals, dig tunnels, construct bridges and dams, and efficiently build advanced infrastructure on a global scale. Human participation would consist of selecting the desired ends.

Over the coming decades, wage labor and the means of production will be increasingly handed off to intelligent technologies. Simultaneously, however, the build-out of an IoT infrastructure (which will also contribute to one final surge of wage labor) will usher in a new organizational model, characterized by distinct values that can already be seen emerging.

The Collaborative Commons

Throughout history, major economic transitions have come about with the development of new energy regimes paralleled by new communication mediums to manage such systems. In the years ahead, the internet will increasingly be used to manage a distributed renewable energy regime and automated infrastructure, within a decentralized global Commons.

As disruptive technologies advance and expand, powerful social forces are being unleashed that are transforming the way in which we view our place in the world.

“Markets are beginning to give way to networks, ownership is becoming less important than access, the pursuit of self-interest is being tempered by the pull of collaborative interests, and the traditional dream of rags to riches is being supplanted by a new dream of a sustainable quality of life…While the capitalist market is based on self-interest and driven by material gain, the Commons is motivated by collaborative interests and driven by a deep desire to connect with others and share. If the former promotes property rights, caveat emptor, and the search for autonomy, the latter advances open-source innovation, transparency, and the search for community.”[21]

One of the defining features of a Collaborative Commons is its distributed and decentralized nature. As society increasingly transitions to Collaboratism, the centralizing nature of both the capitalist free market and the socialist bureaucratic state are undermined. The once dominant hold of these economic regimes is circumvented through a combination of decentralized networks of collaboration and the automation of economic infrastructure. The very operating logic of the IoT infrastructure optimizes peer-to-peer exchange across lateral networks while promoting universal access, transparency, inclusion, co-creation and innovation. An open and distributed nature is what allows the Collaborative Commons to break the monopolistic holds of centralized corporations on capitalist markets, and enable peer-to-peer production to scale across lateral global networks at near zero marginal cost — for example, the sharing of distributed renewable energy across a decentralized smart-grid.

On the Collaborative Commons, a new type of incentive is driving creativity and innovation. The expectation of financial reward loses relevance when prosumers begin to produce their own products for use and exchange, and marginal costs approach zero. In the Commons, the expectation of financial reward is quickly being replaced by the desire to advance the social well-being of humanity. In other words, “economic welfare is measured less by the accumulation of market capital and more by the aggregation of social capital.”[22]

Millions of people are already beginning to participate in a Collaborative Commons, sharing everything from cars and bikes, to homes and toys, to tools and skills, and even food, medical data and DNA profiles in patient-driven health care and research networks, while prosumers are producing and sharing their own green energy, 3D printed goods, open online courses, news and entertainment.

Car-sharing is becoming increasingly popular, with memberships projected to grow from “seven-hundred thousand to fifteen million in less than seven years.”[23] While car-sharing frees users from the burden of ownership and operating costs including maintenance, insurance, taxes, etc., it also lowers the number of cars on the road and reduces carbon emissions. In 2009, for example, it was found that “each car-share vehicle eliminated 15 personally owned cars.”[24] With the average vehicle in the United States sitting idle for 92% of the time,[25] Lawrence D. Burns, professor of engineering at the University of Michigan and former corporate VP of research, development, and planning at General Motors, has concluded that “about 80% fewer shared, coordinated vehicles would be needed than personally owned vehicles to provide the same level of mobility…[and] could be more than 70% cheaper.”[26] With the advent of driverless vehicles in the years ahead, it is likely that the shift in personal transport from ownership to access in a shared Commons will quicken.

As the IoT infrastructure continues to develop, the collaborative economy will become increasingly disruptive as it progressively undercuts profit margins and ultimately drives marginal costs of consumer products to near zero.

Privacy and Intellectual Property

In an economy that is largely defined by transparency, inclusivity and accessibility to free-flowing goods across open networks, the layers of past enclosure are quickly being dissolved.

“For a younger generation growing up in a globally connected world where every moment of their lives are eagerly posted and shared with the world…freedom is not bound up in self-contained autonomy and exclusion, but rather, in enjoying access to others and inclusion in a global virtual public square. The moniker of the younger generation is transparency, the modus operandi is collaboration, and its self-expression is exercised by way of peer production in laterally scaled networks.”[27]

The question then becomes, how to protect certain types of personal information and data without compromising the transparent and accessible nature of open networks. The European Commission has already established several principles which aim to address this issue and help guide the development of an IoT infrastructure, such that: “it should be ensured, that individuals remain in control of their personal data and that IoT systems provide sufficient transparency to enable individuals to effectively exercise their data subject rights…[and] that no unwanted processing of personal data takes place.”[28] However, enforcing such principles over decentralized networks may be easier said than done, and it may prove that much of the onus for protecting one’s privacy could largely fall to individuals themselves (e.g., turn off GPS tracking if you don’t wish to be tracked, use private or encrypted messaging for secure chat, etc.).

In terms of intellectual property, new licensing options have been developed to protect the collaborative, shareable and “remix” nature of the Commons where cutting, pasting, modifying and expanding upon the past works of others is permitted, and even encouraged. The “Creative Commons” (CC) license is free of charge for content creators, with which rights such as the freedom to share the work, to remix or modify the work, to use the work for purely non-commercial purposes, or a combination of all three can be attached. Similarly, the “General Public License” (GPL) is a free license that is widely used for software-specific purposes, whereby the freedoms to use, study, share and modify the software are granted to the end user. As more and more content is integrated and registered on the Blockchain, it is possible for such licenses to be directly programmed into the content itself and autonomously enforced.

In recent years, Creative Commons licensing has gone viral as companies such as Flickr, YouTube, SoundCloud and Wikipedia have all adopted CC content licensing, as well as numerous record labels, public policy networks and open online education programs. Scientific and research communities are increasingly abandoning traditional copyright laws and patents, which often discourage collaboration, slow research and hold back innovation. Instead, more and more scientists, universities and foundation-sponsored laboratories are “uploading their research in open-source networks to be shared freely with colleagues in managed Commons.”[29] Patenting in general is largely irrelevant in an economy of open abundance.

However, a recent issue has been with the flow of big data that is increasingly used to recognize patterns, increase efficiencies and generally solve societal problems. Progressively this data stream is being concealed, restricted and privately controlled by a minority of centralized corporations through traditional intellectual property rights and patents. Big data is a collective information source that is contributed to by millions of individuals and should be open and accessible for the benefit of all. “Just as information wants to be free, Big Data wants to be distributed.”[30]

Governance and Management

The term Commons describes a form of governance, and defines the way in which humans manage the Earth’s resources and make decisions. Specifically, the Earth’s resources are held in common and their distribution is collectively managed.

One form of collective management of a common resource has already been attempted with the internet itself. The internet is inherently designed to be an open, universally accessible and distributed network held in common. As such, a global collective management approach has governed the principles and standards upon which the internet is developed, made up of three primary stakeholders — the government, the private sector, and civil society. A United Nations multi-stakeholder body has been established for these groups to regularly meet and deliberate on policy, with networked regional and national bodies around the world to help maintain a more lateral and collaborative management approach.

Recently, however, this tripartite management structure has run into problems. National governments are increasingly moving to enact their own legislations, citing sovereign rights, which threaten to undermine the open and accessible nature of the internet. The private sector is also moving away from the collective alliance, instead seeking to gain greater profits through more centralized control over how content is delivered. Similarly, large controlling companies on the web such as Google, Facebook and Twitter are increasingly “selling the masses of transmitted Big Data that comes their way to commercial bidders and businesses that use it for targeted advertising and marketing campaigns.”[31] In essence, vertically scaled profit-seeking corporations of the capitalist era are exploiting a laterally scaled and distributed Collaborative Commons for their own private ends. In other words, “companies are operating a social Commons as a commercial venture.”[32]

As dominant companies continue to expand control over major sectors of the internet — “Google ‘owns’ search; Facebook, social networking; eBay rules auctions; Amazon, retail; and so on” — the internet looks “increasingly like a Monopoly board.”[33] Some advocates contend that as these types of corporations begin to resemble natural monopolies (i.e., they become an essential facility by providing a required universal service), they should be regulated as a public utility in order to ensure transparency and objectivity in their operations. The major problem with being regulated as a public service is that potential competition is driven out, thereby, these services become risk averse, resulting in a deterioration of innovation.

Beyond this sort of tripartite hybrid approach to governance of the internet, the most applicable model for collective management in a Collaborative Commons is a cooperative. Cooperatives are inherently designed to operate as a Commons, where resources are equally held in common for all and whose distribution is managed by the collective members. Cooperative logic is based upon collaboration over competition, equity over self-interest, and sustainability over endless growth at all costs. The International Cooperative Alliance (ICA) defines a cooperative as:

“an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise…[further explaining that] cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity.”[34]

Several rules and standards have been formally ratified as the governance model for cooperatives by the ICA, paraphrased below, to “epitomize the vision and practice of Commons management:”[35]

· Any individual is welcome to become a member.
· Cooperatives are democratically run associations in which each member enjoys a single vote. Elected representatives, drawn from the membership, are responsible for management of the association and accountable to the membership.
· Members contribute equitably and democratically to the capital of their cooperative. Capital becomes common property and members jointly decide how it should be used.
· Cooperatives provide education and training for their members.
· Cooperatives are expected to broaden the networked Commons by providing an ever-expanding and ever-integrating space for collaboration and cooperation across all regions of the world.
· Cooperatives are tasked with promoting sustainable development through the policies and programs they engage in.

Cooperatives already play a large role across many economic sectors, from agriculture, to banking and finance, to retail and health care. More than “1 billion people are currently members of cooperatives…[while] more than 100 million people are employed by cooperatives, or 20 percent more employees than in multinational companies.”[36] In the US, cooperatives account for “more than $3 trillion in assets, over $500 billion in annual revenue, $25 billion in wages and benefits, and nearly 2 million jobs.”[37] It is the coupling of the cooperative model of Commons management with an IoT infrastructure, however, that will enable more efficient production and equitable distribution than ever before.

The cooperative management model offers a means to collectively manage the common resources produced in a highly efficient Collaborative economy, both equitably and sustainably. An Internet of Things infrastructure empowers highly efficient prosumers and distributed manufacturing models. However, these distributed producers must join together in sector-specific cooperatives to fully optimize the lateral power behind them, and to distribute resources in the most equitable and sustainable manner.

Already, cooperatives around the world are beginning to develop foundational IoT infrastructures for the establishment of a sustainable economic paradigm across collaborative decentralized networks. Green energy cooperatives are progressively generating and sharing renewable energy across regional microgrids. Germany is now producing “more than 23 percent of its electricity with renewable energy, much of it generated by local cooperatives…In 2011 alone, 167 new green energy cooperatives [in Germany] were created.”[38] In Denmark, green energy cooperatives have transitioned a tiny island community of 4000 inhabitants to 100 percent renewable energy, where community members were able to join with the cooperatives and assume an active role in the development and management of the wind turbines that were built just offshore.[39]

As a potential enhancement to the cooperative management structure for a decentralized Commons, it is worth noting the very recent development work being done on Blockchain enabled “Decentralized Autonomous Organizations” (DAOs). It was already explained how the Blockchain could be utilized for instant, secure and anonymous crypto-voting, which could lead to a more liquid democratic process. DAOs, in parallel with crypto-voting, could play a more direct role in the management structure itself.

DAOs are essentially open-source and autonomous computer programs that could be used to incentivize and manage participation and resources across a decentralized Commons, such that “decentralized Blockchain technologies bring trust and coordination to shared resource pools, enabling new models of non-hierarchical governance, where intelligence is spread on the edges of the network instead of being concentrated at the center.”[40] A DAO can be thought of as a corporation run “under an incorruptible set of business rules, [and where] these rules are typically implemented as publicly audited open-source software.”[41] Essentially, the collective Commons selects the desired end-goals (and conditions for achieving these goals), while the DAO would then calculate the most efficient means to bring about the determined goals with the resources that are available.

Governance and management tasks that are undertaken by elected officials or corporate boards of directors could in many cases (e.g., the elected representatives in a cooperative) be handed over to a Decentralized Autonomous Organization that would manage according to the democratic will of the Commons, effectively allowing collective communities to operate in a more decentralized and collaborative manner. As in a cooperative, becoming a member of a DAO would enable democratic rights to participate in the management of the DAO and equally share in its collectively managed resources. Both cooperatives and DAOs flatten and democratize, or even invert, the traditional hierarchical pyramid of management such that, instead of a tiny minority dictating actions to the collective below, decision-making power rests with the collective Commons as a whole.

DAOs largely fit a cooperative framework, but take cooperatives one step further in terms of decentralization, democratization, transparency and collective management. Ultimately, DAOs may prove to be an integral component of managing cooperatives on a decentralized Collaborative Commons.

As a final point on Commons management, the significance of reputation systems should be noted. Reputation rankings will play an important role in ensuring compliance with norms and regulating activities. These systems are designed to rank an individual’s social capital in the Commons. With the growth of the Commons, “expect social-capital ratings to become as important to millions of participants on the Collaborative Commons as credit ratings were to consumers in the capitalist marketplace.”[42]

From Scarcity to Sustainable Abundance

Build-out and Financing of an IoT Infrastructure

The build-out of an IoT infrastructure will be carried out and phased in over the next several decades. According to one study, carried out by the Electric Power Research Institute (EPRI), a US based non-profit energy think tank, the cost of phasing in a national Energy Internet over 20 years is estimated between $17 to $24 billion per year, or about $476 billion in total[43] — roughly equivalent to the $470 billion annual revenue of Royal Dutch Shell for 2011.[44] However, the EPRI estimate is a no-frills approach to the smart-grid, consisting of smart-meters and power line improvements. When energy storage and additional hardware components are taken into account, along with the intelligent communication management infrastructure to coordinate the flow, storage and exchange of renewable energy by millions of prosumers — including IT management and big data feedback nodes — total cost for an Energy Internet is estimated at $1.2 trillion.[45]

According to the initial EPRI study, the estimated energy savings for consumers that would result from the installation of an Energy Internet is $2 trillion.[46] This savings alone is justification for the up-front infrastructure costs, however, this figure does not begin to account for the aggregate energy efficiency gains that result from an intelligent IoT infrastructure — a rise from 14 percent efficiency to 40 percent, as previously discussed — and accompanying productivity gains.

Financing and construction of a smart-energy infrastructure is already underway in many countries, most notably throughout the European Union. Fourteen countries are currently implementing smart-grids, financed by slight increases on consumer energy bills with the remainder absorbed by local, state and federal governments in the form of subsidies, incentives and allowances.[47] This is the same mode of private/public financing that has been used to fund national scale infrastructure development in the past.

Energy and utility companies are anxious to profit off of the smart-grid and have, in the past, sought to force a centralized and proprietary architecture of control onto the infrastructure. The European Union has already taken steps to require these companies to unbundle their power generation from electricity transmission, effectively allowing small energy producers to connect to the main grid and ensure the open nature of the Energy Internet.[48] Increasingly, energy corporations seem to be acquiescing to the new energy reality and are changing their business models as a greater number of prosumers are encouraged to produce their own green energy by governments. As more people begin to generate their own renewable energy, the future income of these companies will “increasingly rely on managing their customers’ energy use, reducing their energy needs, increasing their energy efficiencies and productivity, and sharing a percentage of the increased productivity and savings.”[49]

Another important platform in supporting many of the new startups involved in the IoT build-out is crowdfunding. Instead of small startup businesses having to seek out and pitch ideas to venture capitalist investors, who would usually assume some percentage of ownership over the company, startups can now post proposals online and collect small donations from thousands of individual donors that want to support the project. Crowdfunding donors emphasize that it is not so much about the money as it is about “being intimately involved with helping others pursue their dreams and feel that their small contribution…really counts in moving the project forward.”[50] Online social lending and crowdfunding are expected to play an important role in establishing millions of renewable micropower installations as they become more accessible and demand begins to surge.

To help advocate the benefits of an intelligent energy infrastructure social entrepreneurs, such as the Cleanweb Movement, are using social media to “cluster like-minded people together to create lateral economies of scale in the implementation of energy efficiencies and the introduction of renewable energy harvesting technology.”[51] Similarly, a US government initiative called Green Button is encouraging power and utility companies to provide access to real-time energy usage data that is now available with the installation of millions of smart-meters. In less than one year, the number of customers with instant access to their personal energy use data increased to 31 million.[52] Apps are now in development that will allow users to easily share and compare this data with friends over social networks and incentivize increased efficiencies — perhaps ranking user’s homes against one another or comparing the energy use of different brands of appliances, etc. More advanced applications are also being created that will allow people to co-generate and exchange renewable electricity across an Energy Internet.

In February 2013, the US Federal Communications Commission (FCC) published a proposal that would create “super Wi-Fi networks across America, making wireless connection free for everyone.”[53] The plan would reemploy unused television station frequencies that are capable of penetrating walls and buildings. This would allow people to make free calls from their phones over the internet, provide free internet access to homes and businesses across the US, and could help spur the introduction of millions of smart devices on a connected Internet of Things. Fundamentally, “the harnessing of near zero marginal cost communications to manage near zero marginal cost renewable energy gives society the critical operating platform to build out the Internet of Things infrastructure and change the economic paradigm.”[54]

The Revolution will not be Centralized

With the build-out of an IoT infrastructure a decentralized Collaborative Commons will continue to strengthen and expand across lateral networks as ownership gives way to access, competition is superseded by cooperation, buyers and sellers transition to prosumers, and markets yield to networks as the marginal cost of producing goods and services drops to near zero across all sectors of the economy. As this new economic paradigm unfolds, a hybrid economy will emerge where some industries based on the Commons will operate at near zero marginal cost, while other industries will continue to cling to capitalist consumer markets.

Companies such as Uber and Airbnb will attempt to bridge the gap between the two economies and take advantage of both. However, as truly decentralized peer-to-peer networks begin to take over at near zero marginal cost these hybrid companies will not last. Hybrid companies like Uber, Airbnb and YouTube, while facilitating lateral networks of exchange, continue to operate around a centralized third-party profit making company. Truly decentralized networks of exchange on the Commons will allow for direct peer-to-peer transactions without the need for third-party intermediary trust or involvement.

In the years to come, an increasing emphasis will be placed on decentralizing and democratizing everything. Already, Blockchain 2.0 communities are working to decentralize the internet itself, where websites, social media and stored data would be hosted across a distributed network rather than on any one set of centralized servers, similar to the way that Bitcoin operates, making censorship, data loss and corruption a near impossibility. Decentralized networks essentially eliminate third-party trust, such that control over the use of personal data is placed back into the hands of the user and is unable to be accessed or sold without their personal consent.

In “decentralizing everything” capitalist markets of exchange will be increasingly eclipsed by collaborative decentralized networks and a foundational infrastructure for a Collaborative Commons will be developed that will propel fresh organizational characteristics and social values in society.

Universal Basic Income

As previously discussed, big data analysis, advanced analytics, AI and robotics will increasingly replace human workforces across all sectors of the market economy as an IoT infrastructure is developed, and the marginal cost of labor drops to near zero. Transitioning to that point, however, will require one final surge of mass wage labor to build-out the infrastructure of the new economy over the next several decades. Millions of workers will be needed to transition from a centralized fossil fuel and nuclear power energy regime to a decentralized intelligent network of renewable energies. Millions of homes and buildings will need to be converted to micropower plants, the electricity grid will need to be reconfigured into a digital smart-grid, hydrogen and other energy storage technologies will need to be developed and installed, and transportation infrastructure will have to be re-configured to accommodate electric and fuel-cell vehicles. These opportunities will fuel the growth of “energy-saving companies, smart-construction companies, green appliance producers…[and] give birth to thousands of clean web app startup companies.”[55]

As this infrastructure is developed, however, and as automation continues to advance, an increasing amount of employment in the capitalist economy will inevitably be handed over to an intelligent automated infrastructure, and human capital will progressively migrate to the Collaborative Commons.

In order to prevent a sudden and catastrophic collapse of the capitalist system, a Universal Basic Income (UBI) will be required to stabilize a transitional hybrid economy as it moves towards a Commons. A UBI is an unconditional income provided to every member of society, regardless of age, working status or level of income. The idea is to maintain a functional market economy that is faced with increasing technological unemployment, wealth inequality, and a hollowing out of the middle class.

Through a Universal Basic Income, every citizen would be provided with enough income to cover the costs of their basic needs. Bettering one’s situation beyond those basic needs is then left to the individual, and in this way, as numerous studies have proven,[56] would have no meaningful effect on incentive to participate in the workforce. Economic activity is also spurred through the eradication of poverty: more people will be participating in the market economy, there will be fewer burdens on health care, less crime, and ultimately an increase in economic productivity and consumption of resources.

There are numerous methods for financing a UBI, including taxation, redistributing existing social welfare payments, and revenues from public resources — such as the Alaska Permanent Fund, which invests 25 percent of oil revenues and issues yearly dividends to all residents. Any existing social welfare programs such as unemployment insurance, social security, Medicare and old age security would all be eliminated and their funding could be put towards a Universal Basic Income. A 14 percent value-added tax (VAT) alone on goods and services would yield an annual UBI of $10,000 for every citizen in the United States.[57] Several less conventional methods to finance a UBI include instituting a capped maximum income level, and paying out wages to “virtual” or automated workers which would go directly into the UBI fund.

Politically speaking, a Universal Basic Income can be viewed as an investment towards the eradication of poverty, with the aforementioned economic benefits, paid for with the dividends of progress. In actuality, a UBI will be required to prevent the sudden systemic collapse of market capitalism.

Sustainable Abundance

When the cost of producing goods and services shrinks to near zero the entire operating rationale of capitalism becomes meaningless. Capitalist markets are based around scarcity and dependency, such that when resources are scarce they have exchange value and can be priced beyond what it takes to bring them to market. When marginal costs of production approach zero “it means that scarcity has been replaced by abundance…[and] the capitalist system loses its hold over scarcity and the ability to profit from another’s dependency.”[58] When scarcity is replaced by the abundance of nearly free goods and services, “products have use and share value but no longer have exchange value…because everyone can secure much of what they need without having to pay for it.”[59] Economies of abundance are already beginning to emerge. In the digital media space, for example, much of this content no longer has significant exchange value but plenty of use and share value across distributed networks.

As scarcity is increasingly uprooted and supplanted by an abundance of resources across the economy through efficient technologies, a new economic indicator is required — one that does not measure growth, but sustainability. While the term abundance is subjective and in the eye of the beholder, the biocapacity of the planet is not. Sustainability is defined as:

“The relative steady state in which the use of resources to sustain the human population does not exceed the ability of nature to recycle the waste and replenish the stock.”[60]

This can be measured by comparing the ecological footprint of a population to the Earth’s total carrying capacity, or biocapacity. Ecological footprint is defined as:

“The amount of biologically productive land and water that is required to produce all the resources an individual or population consumes and to absorb the waste they generate, given prevailing technology and resource-management practices.”[61]

This can then be compared with the Earth’s biocapacity, that is:

“The amount of productive area that is available to generate these resources and to absorb the waste.”[62]

These are all measurable indicators, such that:

“In 1961 our species’ [ecological] footprint was approximately half of the planet’s biocapacity…By 2008, the ecological footprint of 6.7 billion human beings alive at the time was equivalent to 18.2 billion global hectares…on a planet with only 12 billion global hectares of biocapacity available…[meaning that] we were consuming the Earth’s biocapacity faster than it could be recycled and replenished. The United States alone, with only 4 percent of the world’s population, was using 21 percent of the Earth’s available biocapacity.”[63]

To transition to an economy of sustainable abundance, the disparity between humanity’s ecological footprint and the carrying capacity of the Earth must be addressed.

Increasingly, humanity is discovering its true nature — something which greatly differs from what we have been brought up to believe. In the 1990s, mirror neurons or “empathy neurons” were discovered in the human brain, which allow us to experience another’s feelings as our own. For example, when we see another person in pain we similarly have a sense of what that person is feeling and experience an inherent need to help. We largely take these feelings for granted, but are now discovering that these fundamental empathic experiences are what make humanity the most social of creatures and drives our yearning for companionship and social interaction. This is in stark contrast to the autonomous, materialistic and self-interested picture that has been painted of human nature for the last several hundred years.

Studies indicate that the millennial generation is the “most empathic of any generation in history…less interested in keeping up with materialistic trends and less invested in obsessive consumerism as a way of life…the focus on helping others is what millennials are responding to.”[64] These findings coincide with the sharp expansion of a collaborative sharing economy, where access and use value are favored over ownership, exchange value and status. In addition to being less materialistic, millennials are also far more committed to environmental sustainability and stewardship. A 2009 survey conducted by the Center for American Progress found that “75 percent of the Millennial Generation favors a shift out of fossil fuels and into renewable energies — surpassing all the other adult generations.”[65]

Millennials, more than any other generation, seem to be embracing their true empathic nature and are realizing that the path to happiness lies in affection, cooperation and belonging much more than autonomy, competition and rampant materialism. As such, an economy based around scarcity and its associated characteristics is much more likely to breed overconsumption than one based around the characteristics of sustainable abundance. Millennials are now spearheading the co-creation of “a shareable economy that is less materialistic and more sustainable, less expedient and more empathic, [and where] their lives are being lived out more on a global Commons and less in a capitalist market.”[66]

However, bringing humanity’s ecological footprint into balance will require more than just curbing the overconsumption of the rich - it will also require stabilizing the population of the planet through a reduction in the fertility rates of the poor. In industrialized countries today, the fertility rate “has fallen to 2.1 children per women, the rate at which children replace their parents.”[67] In developing nations, much higher fertility rates and larger families exist to ensure that enough children will survive to work the land and provide income for their families.

It is now becoming apparent that access to electricity is the key to lifting people out of extreme poverty and stabilizing population growth. Twenty percent of the human race is currently without electricity, while a further 20 percent has unreliable access.[68] The United Nations has now committed to the installation of renewable energy infrastructure for 1.5 billion impoverished people, with the goal of making electricity universally available by 2030.[69] As nations across the planet are empowered to bring themselves out of extreme poverty through universal access to electricity, it is expected that fertility rates will stabilize at 2.1 children per family worldwide by midcentury — marking a slow decline in human population and an eventual stabilization estimated at roughly 5 billion people, a number that would allow every person on Earth to enjoy a high standard of living in a sustainable economy of abundance.[70]

Conclusion

The productive efficiencies and disruptive capacities of new technologies will increasingly drive the marginal cost of producing goods and services towards near zero. As traditional markets are circumvented, a new economic paradigm will progressively emerge that is built upon decentralized collaborative networks.

An Internet of Things infrastructure will propel aggregate energy efficiency from 14 percent to 40 percent across society. An Energy Internet will empower prosumers to harvest, store and exchange clean and renewable energy across a distributed smart-grid. 3D printing will decentralize the manufacturing process, opening the means of production to anyone and everyone, while generating immense gains in productivity and efficiency. Blockchain applications will eliminate the need for third-party trust and allow for the decentralization of everything from currency and finance, to legal agreements, licensing, social media, data storage, voting and governance.

With the development of advanced robotics, artificial intelligence, big data analysis, and advanced analytics and algorithms, human wage labor and the economic productive activities of the capitalist era will increasingly be handed off to intelligent technologies.

As capitalist markets and wage labor becomes less relevant, an economy built upon new principles and social values will progressively emerge: decentralized networks will take the place of markets; access to an abundance of shareable goods and services will reduce the significance of ownership and private property; open-source innovation, transparency and collaborative co-creation will replace the pursuit of competitive self-interest and autonomy; a commitment to sustainable development and a reintegration with the Earth’s biosphere will redress rampant materialism and overconsumption; and the re-discovery of our empathic nature will drive our pursuit for community engagement and social belonging in a rising Collaborative Commons.

The foundations of this economy will rest upon the principles of democracy, equality, diversity, transparency, universal access and sustainability.

If there is an underlying theme to the emerging paradigm, it is the decentralization of everything.

Further Reading

This article is meant to provide background information and spur discussion on the decline of capitalism and the economic paradigm that is emerging in its wake. For a more in-depth investigation into the topics discussed, Jeremy Rifkin’s latest book, which was used as the primary source material for this article, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, is highly recommended.

Donation

As always, the articles that I publish are made freely available to the public and are encouraged to be shared. Self-publishing means that I have no marketing machine behind me, so please, if you have enjoyed the article and wish to continue the discussion please share with your own respective social networks, and of course any donation of any denomination is greatly appreciated!

· Paypal (email)
cj_dew@hotmail.com

· Bitcoin
1BcYWBnMHpqNWpL5CCj74VNRcAM17ukiZU

· ChangeTip (twitter)
@cjdew

Download

A print friendly Word .doc is available for download here.

Contact

Christopher J. Dew
cj_dew@hotmail.com