The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism (46 page)

A new smart infrastructure, made up of an interactive Communications, Energy, and Logistics Internet is beginning to spread nodally, like Wi-Fi, from region to region, crossing continents and connecting society in a vast global neural network. Connecting every thing with every
being—the Internet of Things—is a transformational event in human history, allowing our species to empathize and socialize as a single extended human family for the first time in history. A younger generation is studying in global classrooms via Skype; socializing with cohorts around the world on Facebook; gossiping with hundreds of millions of peers on Twitter; sharing homes, clothes, and just about everything else online in the Communications Internet; generating and sharing green electricity across continents over the Energy Internet; sharing cars, bikes, and public transport on the evolving Logistics Internet; and, in the process, shifting the human journey from an unswerving allegiance to unlimited and unrestrained material growth to a species commitment to sustainable economic development. This transformation is being accompanied by a change in the human psyche—the leap to biosphere consciousness and the Collaborative Age.

The collaborative sensibility is an acknowledgement that our individual lives are intimately intertwined and that our personal well-being ultimately depends on the well-being of the larger communities in which we dwell. That collaborative spirit is now beginning to extend to the biosphere. Children all over the world are learning about their “ecological footprint.” They are coming to understand that everything we human beings do—and for that matter every other creature—leaves an ecological footprint that affects the well-being of some other human being or creature in some other part of Earth’s biosphere. They are connecting the dots and realizing that every creature is embedded in myriad symbiotic and synergetic relationships in ecosystems across the biosphere and that the proper functioning of the whole system depends on the sustainable relationships of each of the
parts. A younger generation is learning that the biosphere is our planetary community, whose health and well-being determines our own.

Today’s youth, connecting with one another across virtual and physical space, is quickly eliminating the remaining ideological, cultural, and commercial boundaries that have long separated “mine” from “thine” in a capitalist system mediated by private property relations, market exchanges, and national borders. “Open source” has become the mantra for a generation that views power relationships in a fundamentally different fashion than their parents and grandparents did. In a geopolitical world, the conversation cues from right to left and hones in on the question of who should own and control the means of production, with some favoring capitalism and others socialism. The Millennial Generation rarely speaks of right versus left or capitalism versus socialism. When millennials judge political behavior they have a very different political spectrum in mind. They ask whether the institutional behavior, be it in the form of a government, political party, business, or educational system, is centralized, top down, patriarchal, closed and proprietary, or distributed, collaborative, open, transparent, peer-to-peer, and an expression of lateral power. Young people are going beyond the capitalist market even as they continue to use it. They are comfortable conducting much of their economic life on a networked Collaborative Commons and engaging each other in the social economy as much as in the market economy.

Their newfound openness is tearing down the walls that have long divided people by gender, class, race, ethnicity, and sexual orientation. Empathic sensitivity is expanding laterally as quickly as global networks are connecting everyone together. Hundreds of millions of human beings—I suspect even several billion—are beginning to experience “the other” as “one’s self,” as empathy becomes the ultimate litmus test of a truly democratic society. Millions of individuals, especially young people, are also beginning to extend their empathic drive, although less pronounced, to include our fellow creatures, from the penguins and polar bears adrift on the poles to the other endangered species inhabiting the few remaining pristine, wild ecosystems. The young are just beginning to glimpse the opportunity of forging an empathic civilization tucked inside a biosphere community. At this stage, much of the anticipation is more hope than expectation. Still, there is an unmistakable feeling of possibility in the air.

Afterword

A Personal Note

I
have mixed feelings about the passing of the capitalist era. I look hopefully to the coming of the Collaborative Commons and am convinced that it offers the best vehicle to heal the planet and advance a sustainable economy of abundance. Still there are features of the capitalist system that I deeply admire while other aspects I equally abhor. (I suspect this is also true for many others—no less the men and women at the helm of the capitalist system who have experienced, up close, both its creative dynamism and its destructive excesses.)

I grew up in an entrepreneurial home. My father, Milton Rifkin, was a lifelong entrepreneur. After a brief but unsuccessful stint as an actor in early films in Hollywood in the late 1920s, my dad turned entrepreneur, a vocation that consumed the rest of his life. Not too surprising. In many ways, entrepreneurs are artists of the marketplace, continually in search of creative new commercial narratives that can capture an audience, tell a compelling story, and bring people into the universe they’ve invented—think Steve Jobs. Entrepreneurs from Thomas Edison to Sergey Brin and Larry Page have thrilled the multitudes with innovative inventions that have transformed their daily lives.

My own father was one of the early pioneers in the plastics revolution. And, before the snickers, I will tell you that when Mr. McGuire turned to a young Ben in the film
The Graduate
and whispered just one word to him, “Plastics,” I shrank down in my chair in the movie theater, half amused and half embarrassed, thinking that was my dad whispering to me. My father would corral me over the years, attempting to entice me into the family plastics business, regaling me with the bright future that awaited the human race in a society wrapped in plastic—the miracle material.

My father was, to my knowledge, among the very first manufacturers to convert polyethylene into plastic bags in the early 1950s. While young people today can’t possibly comprehend a world without plastic, in those early years it was a novelty. Packaging was usually in the form of paper bags, cardboard, burlap, or metal, glass, and wood containers.

I remember my father sitting the family down around our tiny kitchen table each night entertaining us with new ideas about how plastic bags might be used. Why not package groceries in plastic bags, laundry from the cleaners, appliances from the department store. We may have been the first family to wrap all of our furniture in plastic. I can still recall the sticky feeling of the plastic covers on a hot summer day when I plopped down on the couch in my shorts.

My dad’s excitement was contagious. Every bit the performer, he drew prospective buyers into his storyline and they became converts and players in the plastic makeover of the world.

During his nearly 25 years as an entrepreneur in the plastics industry, I never heard my father talk about the financial rewards of his work. While I’m sure it was always in the back of his mind, he was far more concerned with the entrepreneurial game itself. He saw his efforts in creative terms as more art than industry. He wanted to make a difference in people’s lives by giving something of himself that could make their lives a little better. Although his efforts were on a very small scale compared to some of the great entrepreneurial giants that created the capitalist economy, biographical accounts of other inventors and innovators follow pretty much the same script.

That is not to say that pecuniary interests are not at play, but many entrepreneurs I’ve met over the years are far more driven by the creative act than the almighty dollar. The pecuniary fetish generally comes later when entrepreneurial enterprises mature, become publicly traded in the market, and take on shareholders whose interest is in the return on their investment. There are countless tales of entrepreneurs driven out of their own companies by professional management brought in to transform the enterprise from a creative performance to a sober, “financially responsible” business, a euphemism that means focusing more attention on the bottom line.

Of course, my father could never have imagined in the early years that the millions of plastic bags he was selling would end up in landfills and pollute the environment. Nor could he have foreseen that the petrochemicals used to extrude the polyethylene would emit carbon dioxide and play a key role in altering the climate of the planet.

Reflecting on my own father’s career, it is clear to me that the invisible hand that Adam Smith alluded to 237 years ago in
The Wealth of Nations
is really not all that invisible. It’s the entrepreneurial spirit that drove my dad and countless other entrepreneurs to innovate, reduce marginal costs, bring cheaper products and services to the market, and spur economic growth. That entrepreneurial spirit is now taking us to near zero marginal costs and into a new economic era of history where more goods and services will be nearly free and shared on a Collaborative Commons.

For those who were long skeptical of the operating assumptions of the invisible hand of supply and demand, the approach of a near zero marginal
cost society—the optimum efficient state—is “visible” proof that the system first described by Smith did indeed work, in part, although I would add four caveats. First, the invisible hand was often slowed or blocked altogether for long periods of time by the inevitable concentration of monopoly power that continually thwarted innovation in virtually every commercial sector. Second, the invisible hand did little to ensure that the increase in productivity and profits was shared with the workforce that jointly created the largesse. The workers had to fight management at every step of the journey by organizing themselves into trade unions and political lobbies to ensure a fair return on their labor. Third, while capitalism dramatically improved the lives of everyone inside the system, its track record at the margins of the system, where human resources were, more often than not, ruthlessly exploited to benefit those cocooned inside, was horrendous by any reasonable standard. And fourth, the operating logic of the invisible hand of supply and demand never extended beyond the confines of the market mechanism itself and was, therefore, never able to account for the damage that the capitalist system inflicted on the larger environment from which it drew its raw materials and where it dumped its wastes.

Still, Smith’s invisible hand proved to be a formidable social force, but not for the philosophical reasons he put forth. Smith’s theory revolves around the notion that in a market economy each individual pursues his or her own self-interest in the acquisition and exchange of property, without any intention of promoting the public interest, and by doing so, “inadvertently” advances the general well-being of society as a whole.

Here are Smith’s exact words:

Every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it . . . he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.
1

By suggesting that each individual does not have others’ interest in mind, Smith strangely misunderstood the dynamic of one of the key tenets of classical economic theory—the sellers’ unswerving search of new innovations to increase productivity, which enables them to lower operating costs and the price of their products and services in order to win over prospective buyers, improve their profit margins, and increase their market share. Somehow, Smith completely missed the critical element between seller and buyer that brings them together into a mutually reciprocal relationship and makes the invisible hand work. That is the seller’s role
in tending to the personal welfare of the buyer by continually providing better products and services at lesser prices. It is by being continuously mindful of the needs, desires, and wants of buyers and servicing them that capitalist entrepreneurs thrive. An entrepreneur or firm that is not looking out for the welfare of prospective customers is not going to stay in business for very long.

In other words, it’s in an entrepreneur’s self-interest to be sensitive to the well-being of others if he wants to succeed. Henry Ford understood that and made it his life’s mission to provide a cheap, durable automobile that could put millions of working people behind the wheel and ease their lives. Steve Jobs understood this as well. Servicing the needs and aspirations of a highly mobile, globally connected human population by providing cutting-edge communication technologies was his all-consuming passion. It is this dual role of pursuing one’s entrepreneurial self-interest by promoting the welfare of others in the marketplace that has moved us ever closer to a near zero marginal cost society.

The march toward near zero marginal costs and nearly free goods and services has not only partially validated the operating logic of the invisible hand but also, interestingly enough, the utilitarian arguments offered up by David Hume, Jeremy Bentham, and others in defense of market capitalism. Recall that Hume and Bentham argued that private property exchanged in the market is a purely human convention with no basis in natural law and is justified because it is the best mechanism to “promote the general welfare.” Were they right?

Since the market mechanism has helped take us to near zero marginal costs and the promise of nearly free goods and services, which is considered to be the optimally efficient state for promoting the general welfare, Hume and Bentham’s claim that private property, exchanged in markets, is the best means of promoting the general welfare has proven its utilitarian worth. The irony is that when near zero marginal cost is reached, goods and services become nearly free, profit margins evaporate, and private property exchanged in markets loses its reason for existing. The market mechanism becomes increasingly unnecessary in a world of nearly free goods and services organized around an economy of abundance, and capitalism shrinks to a niche economic realm.

So we would have to say that Hume and Bentham’s particular brand of utilitarianism, wedded to the exchange and accumulation of private property in the capitalism marketplace, was never meant to be an eternal verity but only a specific description of the particular economic forces at work that would come to span the First and Second Industrial Revolutions of the nineteenth and twentieth centuries. No doubt, the nineteenth-century utilitarian economists and their twentieth-century progenies would be aghast at the prospect that the very theory they espoused would eventually run its course, but not before taking society to the cusp of a new economic
order where promoting the general welfare is best achieved through collaborative pursuits operating in vast networked Commons in an evolving social economy.

Admittedly, the very idea that an economic system that is organized around scarcity and profit could lead to an economy of nearly free goods and services and abundance is so counterintuitive that it is difficult to accept. Nonetheless, this is exactly what is unfolding.

Passing judgment on the capitalist system at the end of its reign is not an easy matter. The capitalist market was not the savior its zealous supporters claimed. Nor was it the devil incarnate that its vocal critics claimed. Rather, it was the most agile and efficient mechanism at the time to organize an economy whose energy and communication matrices, and accompanying industries, required large concentrations of financial capital to support vertically integrated enterprises and accompanying economies of scale.

So, while I celebrate, with qualifications, the entrepreneurial spirit that drove my father and so many others, I don’t mourn the passing of capitalism. The new social entrepreneurialism that animates a generation embedded in collaborative networks on the Commons—although as passionately embraced as commercial entrepreneurialism embedded in markets—is of a different kind. The new spirit is less autonomous and more interactive; less concerned with the pursuit of pecuniary interests and more committed to promoting quality of life; less consumed with accumulating market capital and more with accumulating social capital; less preoccupied with owning and having and more desirous of accessing and sharing; less exploitive of nature and more dedicated to sustainability and stewardship of the Earth’s ecology. The new social entrepreneurs are less driven by the invisible hand and more by the helping hand. They are far less utilitarian and far more empathically engaged.

While the inherent logic of the invisible hand and the market mechanism helped get us to this critical crossroad of a near zero marginal cost society and the possibility of transforming the human journey from an economy of scarcity to an economy of sustainable abundance, it needs to be said that the entrepreneurs didn’t do it alone. Rather, they must share the credit with visionaries wedded to the idea of a social economy on the Commons. The exponential curve in computing that helped bring the marginal cost of producing and sending information to near zero was primarily driven by global companies. On the other hand, recall that the Internet was invented by government scientists and university academics, and the World Wide Web was the creation of a computer scientist interested in promoting the Commons. GPS, touchscreen displays, and voice activated personal assistants (e.g., Siri)—the key technologies that make the celebrated iPhone “smart”—were the result of government funded research. Linux, Wikipedia, and MOOCs are inspirations that come largely from the social
economy while Facebook and Twitter are commercial ventures whose success depends on building social Commons in the hopes of reaping financial gain. Breakthroughs in renewable energy have come from government and university laboratories as well as from private companies working the marketplace. Similarly, the 3D printing revolution is being spurred by both nonprofit Fab Labs and commercial developers.