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Economic alternatives

This page was created on May 17, 2009 and was last updated on April 10, 2011  
The new information technology gives individuals the ability to coordinate their efforts in order to produce value, and to exchange freely among themselves. It also enables the emergence of economical alternatives.


We need to transcend the 
socialism/capitalism dichotomy!

For the first time in history, hierarchical institutions with easy access to resources, like corporations and governments, have lost their monopoly on the creation and distribution of value. The new technology enables the emergence of powerful decentralized economical entities. Hard evidence shows that open and decentralized collaborative organizations can be more creative and more productive than their hierarchical counterparts. How can we explain this? 

First, we need to realize that hierarchy is NOT necessary anymore. In a world deprived of effective means of communication hierarchy (built on power relations) is the organizational answer to coordination and decision-making, for a large group of individuals. The Internet enables real time peer-to-peer exchanges with no geographical barriers. Moreover, the same Internet acts as a smart repository of information, giving access to the present and to the past. This makes decentralization of value systems not only possible, but also preferable.   

Individuals and small independent organizations have access to very effective and affordable tools for communication, collaboration, coordination and logistics. Skilled individuals, who are also keen on sharing and collaborating, can form massive global networks, capable of gathering tremendous amounts of resources and to channel them towards well-defined goals. On the other side, individualistic behavior is incompatible with the social aspects of the new technology. All other things being equal, it seams that the new digital technology creates an environment in which openness, sharing and collaboration are rewarded more than closeness, selfishness and competition. GNU/Linux and Wikipedia are now classic examples. Windows, produced by the most successful corporation on the planet, a hierarchical organization, is competing with Linux. These new modes of production and distribution now moves to material products. The global open hardware market was estimated in 2011 to be circa 2 bill $, and growing exponentially.   

Some say that Wikipedia and Linux have no economical relevance, hence they cannot instantiate an economical revolution. They state that Wikipedia, for example, doesn't produce jobs, nor profits. Wikipedia produces value, it is widely used, hence it adds to the economy. The very fact that value can be produced within open environments, through collaboration, should make us pause and think if we can turn these models into for-revenue operations, to allow people who contribute to them to get something more tangible in return, other than just satisfaction or reputation. I don't see an impediment to that. New modes of innovation, production and distribution are actually emerging, and have the potential to transform our society. See the SENSORICA open enterprise.

Aside from the emergence of open, decentralized, and self-structuring value networks as important economical agents, we are also witnessing the crumbling  (opening and decentralization) of hierarchies. Outsourcing is in fact part of this same tendency, although in some cases it leads to centralized networks, dominated by a large entity, like General Motors for example, surrounded by a constellation of suppliers/contractors more or less dependent on GM. In the past, in order to keep the assembly line moving, almost everything had to be done under the same roof. The digital technology makes possible tight coordination between many entities, therefore large organizations can separate into many smaller ones, which can become super specialized, increasing the efficiency of the group once reassembled again as a network. With the advent of the Internet, which brings powerful and affordable tools for communication, collaboration and coordination in the hands of every person, this tendency can be extended in some cases to its ultimate limit, the individual. Wikipedia is a form of encyclopedia produced by individuals. 

Smaller organizations have access to logistical tools which enable them to grow fast, to rapidly expand their activities and handle very complex processes. A very small company today can handle more materials, coordinate the assembly of very complex products, and sell on the international markets. Economical expansion is not limited anymore by the capacity of structures that support logistics. Before the computer era and the Internet, size was an undeniable advantage of large vertical organizations, which could support logistically complex operations. But today, the costs associated with logistics are dropping through the floor. Small organizations can rapidly reach the advantages of the economy of scale, with very little resources needed. Moreover, these same small organizations can now get together to form highly complex collaborative networks. We can now understand why large, vertically integrated and well-established corporation are threatened. 

In short, the new technology introduces new possibilities (communication, coordination, etc.) which lead to the expansion, at massive scales, of collaboration and commons-based peer production. Values like openness, sharing, and collaboration are replacing secrecy, individualism, and competition. Commons-based peer production is a third mode of production that is growing more important than the capitalist and the socialist modes of production. These things are not new, they are just amplified by the new technology. Moreover, the moral/social value system that supports massive collaboration and commons-based peer production is on a path to become mainstream, because of the socio-economic advantages provided, which will shortly offset classic means of production, creating a new culture, which will further put pressure on other institutions, and will accelerate the transformation of our global economy. 





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