The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism (13 page)

Still, the powers that be continually lowball their projections of renewable energy’s future share of the global energy market, in part because, like the IT and telecommunications industry in the 1970s, they aren’t anticipating the transformative nature of exponential curves, even when faced with the cumulative doubling evidence of several decades.

Ray Kurzweil, the MIT inventor and entrepreneur who is now head of engineering at Google and has spent a lifetime watching the powerful disruptive impact of exponential growth on the IT industry, did the math just on solar alone. Based on the past 20 years of doubling, Kurzweil concluded that “after we double eight more times and we’re meeting all of the world’s energy needs through solar, we’ll be using one part in 10,000 of the sunlight that falls on earth.”
49
Eight more doublings will take just 16 years, putting us into the solar age by 2028.

Kurzweil may be a bit optimistic. My own read is that we’ll reach nearly 80 percent renewable energy generation well before 2040, barring unforeseen circumstances.

Getting Closer to Near Zero

Skeptics legitimately argue that nothing we exchange is ever really free. Even after the IoT is fully paid for and plugged in, there will always be some costs in generating and distributing information and energy. For that reason, we always use the term
near zero
when referring to the marginal cost of delivering information, green energy, and goods and services.

Although the marginal costs of delivering information are already tiny, there is a considerable effort afoot to reduce them even further, to get as close as possible to zero marginal cost. It is estimated that the Internet service providers (ISPs) that connect users to the Internet enjoyed revenues of $196 billion in 2011.
50
All in all, an amazingly low cost for connecting nearly 40 percent of the human race and the entire global economy.
51
Besides paying for service providers, everyone using the Internet pays for the electricity used to send and access information. It is estimated that the online delivery of a one-megabyte file costs only $0.001.
52
However, the megabytes add up. The Internet uses up to 1.5 percent of the world’s electricity, costing $8.5 billion—again a small cost for enjoying global communication.
53
That’s equivalent to the price of building four to five new gambling casinos in Las Vegas. Still, with ever-increasing interconnectivity and more powerful computing devices,
electricity use is escalating. Google, for example, uses enough energy to power 200,000 homes.
54

Much of the electricity generated is consumed by servers and data centers around the world. In 2011 in the United States alone, the electricity used to run servers and data centers cost approximately $7.5 billion.
55
The number of federal data centers grew from 432 in 1998 to 2,094 in 2010.
56
By 2011 there were more than 509,000 data centers on Earth taking up 285 million square feet of space, or the equivalent of 5,955 football fields.
57
Because most of the electrical power drawn by IT equipment in these data centers is converted to heat energy, even more power is needed to cool the facilities. Often between 25 and 50 percent of the power is used for cooling the equipment.
58

A large amount of electricity is also wasted just to keep the servers idling and ready in case a surge in activity slows down or crashes the system. The consulting firm McKinsey found that, on average, data centers are using only 6 to 12 percent of their electricity to power their servers during computation—the rest is used to keep them up and ready.
59
New power-management applications are being put in place to lower the power mode when idle or to run at lower frequencies and voltages. Slowing down the actual computation also saves electricity. Another approach to what the industry calls energy-adaptive computing is to reduce energy requirements by minimizing overdesign and waste in the way IT equipment itself is built and operated.
60

Cutting energy costs at data centers will ultimately come from powering the facilities with renewable energy. Although the up-front fixed cost of powering data centers with renewable energy will be significant, the payback time will continue to narrow as the costs of constructing positive power facilities continue to fall. And once the facilities and harvesting technologies are up and running, the marginal cost of generating solar and wind power and other renewable energies will be nearly zero, making the electricity almost free. This reality has not been lost on the big players in the data-storage arena.

Apple announced in 2012 that its huge new data center in North Carolina will be powered by a massive 20-megawatt solar-power facility and include a five-megawatt fuel-storage system powered by biogas to store intermittent solar power to ensure a reliable 24/7 supply of electricity.
61
McGraw-Hill’s data center in East Windsor, New Jersey, will be powered by a 14-megawatt solar array. Other companies are planning to construct similar data-center facilities that will run on renewable energy.
62

Apple’s data center is also installing a free cooling system in which cool nighttime outside air is incorporated into a heat exchange to provide cold water for the data center cooling system.
63
Providing data centers with onsite renewable energy whose marginal cost is nearly free is going to dramatically reduce the cost of electricity in the powering of a global Internet
of Things, getting us ever closer to nearly free electricity in organizing economic activity.

Reducing the cost of electricity in the management of data centers goes hand in hand with cutting the cost of storing data, an ever larger part of the data-management process. And the sheer volume of data is mushrooming faster than the capacity of hard drives to save it.

Researchers are just beginning to experiment with a new way of storing data that could eventually drop the marginal cost to near zero. In January 2013 scientists at the European Bioinformatics Institute in Cambridge, England, announced a revolutionary new method of storing massive electronic data by embedding it in synthetic DNA. Two researchers, Nick Goldman and Ewan Birney, converted text from five computer files—which included an MP3 recording of Martin Luther King Jr.’s “I Have a Dream” speech, a paper by James Watson and Francis Crick describing the structure of DNA, and all of Shakespeare’s sonnets and plays—and converted the ones and zeros of digital information into the letters that make up the alphabet of the DNA code. The code was then used to create strands of synthetic DNA. Machines read the DNA molecules and returned the encoded information.
64

This innovative method opens up the possibility of virtually unlimited information storage. Harvard researcher George Church notes that the information currently stored in all the disk drives in the world could fit in a tiny bit of DNA the size of the palm of one’s hand. Researchers add that DNA information can be preserved for centuries, as long as it is kept in a dark, cool environment.
65

At this early stage of development, the cost of reading the code is high and the time it takes to decode information is substantial. Researchers, however, are reasonably confident that an exponential rate of change in bioinformatics will drive the marginal cost to near zero over the next several decades.

A near zero marginal cost
communication/energy infrastructure for the Collaborative Age is now within sight. The technology needed to make it happen is already being deployed. At present, it’s all about scaling up and building out. When we compare the increasing expenses of maintaining an old Second Industrial Revolution communication/energy matrix of centralized telecommunications and centralized fossil fuel energy generation, whose costs are rising with each passing day, with a Third Industrial Revolution communication/energy matrix whose costs are dramatically shrinking, it’s clear that the future lies with the latter. Internet communication is already being generated and shared at near zero marginal cost and so too is solar and wind power for millions of early adopters.

The stalwart supporters of fossil fuels argue that tar sands and shale gas are readily available, making it unnecessary to scale up renewable energies, at least in the short term. But it’s only because crude oil reserves are
dwindling, forcing a rise in price on global markets, that these other more costly fossil fuels are even being introduced. Extracting oil from sand and rock is an expensive undertaking when compared to the cost of drilling a hole and letting crude oil gush up from under the ground. Tar sands are not even commercially viable when crude oil prices dip below $80-per barrel, and recall that just a few years ago, $80-per-barrel oil was considered prohibitively expensive. As for shale gas, while prices are currently low, troubling new reports from the field suggest that the promise of shale gas independence has been overhyped by the financial markets and the energy industry. Industry analysts are voicing growing concern that the shale gas rush, like the gold rushes of the nineteenth century, is already creating a dangerous bubble, with potentially damaging consequences for the American economy because too much investment has moved too quickly into shale gas fields.
66

Andy Hall, an oil trader known in the sector as “God,” owing to his remarkably accurate trend forecasts on oil futures, shook up the industry in May 2013 with his declaration that shale gas will only “temporarily” boost energy production. Hall informed investors in his $4.5 billion Astenbeck hedge fund that, although shale gas gushes at first, production rapidly declines because each well only taps a single pool of oil in a large reservoir. The quick exhaustion of existing shale gas reservoirs requires producers to continuously find new shale gas deposits and dig new wells, which jack up the cost of production. The result, says Hall, is that it is “impossible to maintain production . . . without constant new wells being drilled [which would] require high oil prices.” Hall believes that shale gas euphoria will be a short-lived phenomenon.
67
The International Energy Agency (IEA) agrees. In its annual 2013 World Energy Outlook report, the IEA forecast that “light tight oil,” a popular term for shale gas, will peak around 2020 and then plateau, with production falling by the mid-2020s. The U.S. shale gas outlook is even more bearish. The U.S. Energy Department’s Energy Information Administration expects higher shale gas levels to continue only to the late teens (another five years or so) and then slow.
68

What hasn’t yet sunk in is that fossil fuel energies are never going to approach zero marginal cost, or even come close. Renewable energies, however, are already at near zero marginal cost for millions of early adopters. Scaling them so that everyone on Earth can produce green energy and share it across the Internet of Things, again, at near zero marginal cost, is the next great task for a civilization transitioning from a capitalist market to a Collaborative Commons.

Chapter Six

3D Printing

From Mass Production to Production by the Masses

T
he distributed, collaborative, and laterally scaled nature of the Internet of Things will fundamentally change the way we manufacture, market, and deliver goods in the coming era. Recall that the communication/energy matrices of the First and Second Industrial Revolutions were extremely capital intensive and required vertical integration to achieve economies of scale and centralized management to ensure profit margins and secure sufficient returns on investment. Manufacturing facilities have even supersized over the past half century of the Second Industrial Revolution. In China and throughout the developing world, giant factories are churning out products at speeds and in volumes that would have been unheard of half a century ago.

Micro Infofacturing

The long-dominant manufacturing mode of the Second Industrial Revolution is likely going to give way, however, at least in part, over the coming three decades. A new Third Industrial Revolution manufacturing model has seized the public stage and is growing exponentially along with the other components of the IoT infrastructure. Hundreds of companies are now producing physical products the way software produces information in the form of video, audio, and text. It’s called 3D printing and it is the “manufacturing” model that accompanies an IoT economy.

Software—often open source—directs molten plastic, molten metal, or other feedstocks inside a printer, to build up a physical product layer by layer, creating a fully formed object, even with moveable parts, which then pops out of the printer. Like the replicator in the
Star Trek
television series,
the printer can be programmed to produce an infinite variety of products. Printers are already producing products from jewelry and airplane parts to human prostheses. And cheap printers are being purchased by hobbyists interested in printing out their own parts and products. The consumer is beginning to give way to the prosumer as increasing numbers of people become both the producer and consumer of their own products.

Three-dimensional printing differs from conventional centralized manufacturing in several important ways:

First, there is little human involvement aside from creating the software. The software does all the work, which is why it’s more appropriate to think of the process as “infofacture” rather than “manufacture.”

Second, the early practitioners of 3D printing have made strides to ensure that the software used to program and print physical products remains open source, allowing prosumers to share new ideas with one another in do-it-yourself (DIY) hobbyist networks. The open design concept conceives of the production of goods as a dynamic process in which thousands—even millions—of players learn from one another by making things together. The elimination of intellectual-property protection also significantly reduces the cost of printing products, giving the 3D printing enterprise an edge over traditional manufacturing enterprises, which must factor in the cost of myriad patents. The open-source production model has encouraged exponential growth.

The steep growth curve was helped along by the plunging costs of 3D printers. In 2002 Stratasys put the first “low-cost” printer onto the market. The price tag was $30,000.
1
Today, “high-quality” 3D printers can be purchased for as little as $1,500.
2
It’s a similar cost curve reduction to that of computers, cell phones, and wind-harnessing and solar technologies. In the next three decades, industry analysts expect that 3D printers will be equipped to produce far more sophisticated and complex products at ever-cheaper prices—taking the infofacturing process to near zero marginal cost.

Third, the production process is organized completely differently than the manufacturing process of the First and Second Industrial Revolutions. Traditional factory manufacturing is a subtractive process. Raw materials are cut down and winnowed and then assembled to manufacture the final product. In the process, a significant amount of the material is wasted and never finds its way into the end product. Three-dimensional printing, by contrast, is additive infofacturing. The software is directing the molten material to add layer upon layer, creating the product as a whole piece. Additive infofacturing uses one-tenth of the material of subtractive manufacturing, giving the 3D printer a substantial leg up in efficiency and productivity. In 2011, additive manufacturing enjoyed a blistering 29.4 percent growth, besting the 26.4 percent collective historical growth of the industry in just one year.
3

Fourth, 3D printers can print their own spare parts without having to invest in expensive retooling and the time delays that go with it. With
3D printers, products can also be customized to create a single product or small batches designed to order, at minimum cost. Centralized factories, with their capital-intensive economies of scale and expensive fixed-production lines designed for mass production, lack the agility to compete with a 3D production process that can create a single customized product at virtually the same unit cost as it can producing 100,000 copies of the same item.

Fifth, the 3D printing movement is deeply committed to sustainable production. Emphasis is on durability and recyclability and using nonpolluting materials. William McDonough and Michael Braungart’s vision of “upcycling”—adding value to the product at every stage of its lifecycle—is built into the ecology of production.
4

Sixth, because the IoT is distributed, collaborative, and laterally scaled, 3D printers can set up shop and connect anywhere there is a Third Industrial Revolution (TIR) infrastructure and enjoy thermodynamic efficiencies far beyond those of centralized factories, with productivity gains in excess of what was achievable in either the First or Second Industrial Revolution.

For example, a local 3D printer can power his or her infofactory with green electricity harvested from renewable energy onsite or generated by local producer cooperatives. Small- and medium-sized enterprises in Europe and elsewhere are already beginning to collaborate in regional green-electricity cooperatives to take advantage of lateral scaling. With the cost of centralized fossil fuels and nuclear power constantly increasing, the advantage skews to small- and medium-sized enterprises that can power their factories with renewable energies whose marginal cost is nearly free.

Marketing costs also plummet in an IoT economy. The high cost of centralized communications in both the First and Second Industrial Revolutions—in the form of magazines, newspapers, radio, and television—meant that only the bigger manufacturing firms with integrated national operations could afford advertising across national and global markets, greatly limiting the market reach of smaller manufacturing enterprises.

In the Third Industrial Revolution, a small 3D printing operation anywhere in the world can advertise infofactured products on the growing number of global Internet marketing sites at nearly zero marginal cost. Etsy is among the new distributed marketing websites that are bringing together suppliers and users on a global playing field at low marginal cost. Etsy is an eight-year-old company started by a young American social entrepreneur named Rob Kalin. Currently 900,000 small producers of goods advertise at no cost on the Etsy website. Nearly 60 million consumers per month from around the world browse the website, often interacting personally with suppliers.
5
When a purchase is made, Etsy receives only a tiny commission from the producers. This form of laterally scaled marketing puts the small enterprise on a level playing field with the big boys, allowing them to reach a worldwide user market at a fraction of the cost.

Seventh, plugging into an IoT infrastructure at the local level gives the small infofacturers one final, critical advantage over the vertically integrated, centralized enterprises of the nineteenth and twentieth centuries: they can power their vehicles with renewable energy whose marginal cost is nearly free, significantly reducing their logistics costs along the supply chain and in the delivery of their finished products to users.

A 3D printing process embedded
in an Internet of Things infrastructure means that virtually anyone in the world can become a prosumer, producing his or her own products for use or sharing, employing open-source software. The production process itself uses one-tenth of the material of conventional manufacturing and requires very little human labor in the making of the product. The energy used in the production is generated from renewable energy harvested on-site or locally, at near zero marginal cost. The product is marketed on global marketing websites, again at near zero marginal cost. Lastly, the product is delivered to users in e-mobility transport powered by locally generated renewable energy, again at near zero marginal cost.

The ability to produce, market, and distribute physical goods anywhere there is an IoT infrastructure to plug into is going to dramatically affect the spatial organization of society. The First Industrial Revolution favored the development of dense urban centers. Factories and logistics networks had to cluster in and around cities where there were major rail links that could bring in energy and materials from suppliers upstream and package and deliver finished products to wholesalers and retailers downstream. The workforce had to live within walking distance of their factories and offices or have access to commuter trains and trolleys. In the Second Industrial Revolution, production migrated from dense urban centers to suburban industrial parks, accessible from the exits of the nationwide interstate highway system. Truck transport overtook rail, and workers traveled longer distances to work by automobile.

Three-dimensional printing is both local and global; it is also highly mobile, allowing infofacturers to be anywhere and quickly move to wherever there is an IoT infrastructure to connect to. More and more prosumers will make and use simple products at home. Small- and medium-sized 3D businesses, infofacturing more sophisticated products, will likely cluster in local technology parks to establish an optimum lateral scale. Homes and workplaces will no longer be separated by lengthy commutes. It is even conceivable that today’s overcrowded road systems will be less traveled and that the expense of building new roads will diminish as workers become owners and consumers become producers. Smaller urban centers of 150,000 to 250,000 people, surrounded by a rewilding of green space, might slowly replace dense urban cores and suburban sprawl in a more distributed and collaborative economic era.

Democratizing the Replicator

The new 3D printing revolution is an example of “extreme productivity.” It is not fully here yet, but as it kicks in, it will eventually and inevitably reduce marginal costs to near zero, eliminate profit, and make property exchange in markets unnecessary for many (though not all) products.

The democratization of manufacturing means that anyone and eventually everyone can access the means of production, making the question of who should own and control the means of production irrelevant, and capitalism along with it.

Three-dimensional printing, like so many inventions, was inspired by science-fiction writers. A generation of geeks sat enthralled in front of their TV screens, watching episodes of
Star Trek.
In long journeys through the universe, the crew needed to be able to repair and replace parts of the spaceship and keep stocked with everything from machine parts to pharmaceutical products. The replicator was programmed to rearrange subatomic particles that are ubiquitous in the universe into objects, including food and water. The deeper significance of the replicator is that it does away with scarcity itself—a theme we will come back to in part V.

The 3D printing revolution began in the 1980s. The early printers were very expensive and used primarily to create prototypes. Architects and automobile and airplane manufacturers were among the first to take up the new replicating technology.
6

This innovation moved from prototyping to customizing products when computer hackers and hobbyists began to migrate into the field. (The term
hacker
has both positive and negative connotations. While some characterize hackers as criminals, illegally accessing proprietary and classified information, others regard hackers as clever programmers whose contributions benefit the general public. Here and throughout the book the term
hacker
is being used in the latter sense.)
7
The hackers immediately realized the potential of conceiving of “atoms as the new bits.” These pioneers envisioned bringing the open-source format from the IT and computing arena into the production of “things.” Open-source hardware became the rallying cry of a disparate group of inventors and enthusiasts loosely identifying themselves as part of the Makers Movement. The players collaborated with one another on the Internet, exchanging innovative ideas and learning from each other as they advanced the 3D printing process.
8

Open-source 3D printing reached a new phase when Adrian Bowyer and a team at the University of Bath in the United Kingdom invented the RepRap, the first open-source 3D printer that could be made with readily available tools and that could replicate itself—that is, it was a machine that could make its own parts. The RepRap can already fabricate 48 percent of its own components and is on its way to becoming a totally self-replicating machine.
9

MakerBot Industries, financed by Bowyer, was one of the first enterprises to emerge out of the Makers Movement, with the market introduction of its 3D printer, called Cupcake, in 2009. A succession of more versatile, easier-to-use, and less costly 3D printers followed, with names like Thing-O-Matic in 2010 and the Replicator in 2012. MakerBot Industries makes freely available the specifications for assembling the machine to anyone who would like to make their own, while also selling it to those customers who prefer the convenience of purchase.