There was an intriguing new book published this year by Jeremy Rifkin, The Zero Marginal Cost Society: the Internet of Things, the Collaborative Commons and the Eclipse of Capitalism. The book is well written and engaging and is packed with interesting ideas. It takes a look at our economic and technological future and makes some bold predictions.
First, Rifkin says that we are headed towards a time when there will be zero, or near zero marginal cost of producing many of the goods we need. Marginal costs refers to the cost of producing the next unit of something, be that a consumer good or a kilowatt of electricity (while ignoring fixed costs). He provides numerous examples of how the cost of many goods have already decreased or disappeared.
An example would be an electronic copy of a popular song. Once the song has been digitized it costs nothing extra to get that song onto the hands of hundreds, or millions or billions of consumers. We have already seen the entertainment and publishing industries be devastated by the dissemination of electronic copies of songs, books and videos. There are now millions of people worldwide getting college credits from courses that were recorded one time by distinguished professors. And we see the start of a 3D printing industry that can make a huge variety of consumer items from recycled materials (including making new 3D printers).
But Rifkin looks into the near-term future and says that within fifty years that this phenomenon will have spread to more of the economy. For instance, he foresees technological breakthroughs that will allow for the nearly free production of green electricity locally where people need it. He foresees solar cells and other technologies being produced by 3D printers, with the net results that people will not have to be reliant on a centralized electric grid. But he thinks the biggest breakthrough that will reduce the costs of production is the Internet of Things. He says that as big data becomes available to everybody that productivity will increase so significantly as to transform our society.
Second, the books says that we are headed towards a society of the Collaborative Commons. He says that since the onset of the industrial revolution that we have thought of the capitalist market and the government as the only two ways to organize economic life. But before the industrial revolution most things were done cooperatively. Families, neighborhoods and towns all worked together to satisfy the basic needs for people. If a new building was needed, people got together and built it. If infrastructure like a water supply or grain storage were needed, it was handled cooperatively.
But with the industrial revolution came capitalism which was the most efficient way to pay for and organize costly factories and the supply chains that fed them. But Rifkin believes that as marginal costs approach zero and profits are largely removed from the picture for many good and services that we will see a resurgence on cooperatives and other collaborative ways of getting things done locally.
Cooperatives have never died and today cooperatives and non-profits represent about 5% of the GDP production in the US and 10% of the workforce. He sees that increasing significantly as cooperatives (collaborative commons) become a normal way for society to work together absent the profit motive. One of the biggest issues with Rifkin’s ideas is that somebody has to supply the basic infrastructure. There will still be a need for government to take care of the basic things like roads and water systems. But he foresees collaborative commons eventually taking over much of the rest. As an example, I am currently working with a new start-up cooperative in Minnesota that is building a fiber network – because the capitalist system has failed to bring them the infrastructure they want.
Rifkin’s third idea in the book is that capitalism will decline. He says that as the profit motive is reduced that there is a reduced incentive for capitalists to enter markets for goods that can be produced collaboratively. There will always be a need for capitalism because some things are too complex to produce locally. Somebody is still going to have to make the jet planes and the robots and somebody will have to mine and process the raw ingredients needed for our technological future.
Rifkin tackles the idea that only capitalism can bring about innovation. He points to such things as open source software as an example that collaboration can produce a better product than capitalism. Open source software has been demonstrated to have fewer bugs and can respond more quickly to user needs by having thousands of programmers looking at a piece of code rather than a small team.
I don’t know if Rifkin is right, but I do know that he has recognized and made a coherent story out of a number of trends that I write about in this blog all of the time. We have already seen technology completely transform industries like music and entertainment. We are on the verge of the widespread use of robots tied into big data analytics and artificial intelligence that is going to transform large swaths of our economy. Rifkin has painted one possible picture of the end game of all of these changes and he has posed dozens of really good questions in this book that are well worth thinking about.