Wednesday, May 2, 2012

Industrial Capitalism vs Collaborative Economy

Here are the slides for the talk on the collaborative economy I gave at TEDx Harlem. As soon as I get a nice video of that talk, I'll post it. Here are the words that go with the slides.


TEDx Harlem 
A couple of weeks ago, the Encyclopedia Brittanica announced that it would stop publishing its print edition, after 244 years. That is a long time. It feels like the end of an era. “This has nothing to do with Wikipedia or Google” said its President. Maybe. Maybe it is just part of the diminished demand for print. Or maybe that it is really hard to compete with the 145,000 people who actively worked on wikipedia last month. I went and looked up their stats -- at the source of course -- 4m articles in English; 270 different-language wikipedias. How can you compete with that? The encylopaedia brittanica’s announcement is just another part in a trend I’ve been observing and thinking about. It is another sign that we are moving from Industrial Capitalism to a Collaborative Economy.

Over the last couple hundred years, industrialization honed a specific kind of capitalism. Companies were centralied and hierarchical. With Encyclpiedia Brittanica, I’m sure there is a small number of article writers and editors; each with their own area of expertise -- no doubt rightly deserved. But they would never ever imagine letting unvetted people -- lots of them, and unknown! -- write or edit articles. Wikipedia turned this idea on its head. It is distributed -- meaning that the writers are everywhere, and they are self selecting. They participate because they feel like it.

The result is an enormous diversity of editors and expertise. A collaborative economy thrives on this diversity. It is endlessly experimenting, learning, adapting, and evolving. Industrial capitalism is the opposite. Standardization within a company -- a form of monoculture -- is how it saves money, reduces costs, and becomes the dominant producer. And once it is dominant, it hates change. Changes costs money and is uncertain, so it will do everything to defend the status quo.

I have to add in here a quick caveat. I don’t really think there are two opposing economies at work, or that things are so cut and dried. There is lots and lots of grey. I do think that we have pretty much maxed out on the benefits to be gleaned from the Industrial Capitalism approach. The worldwide Occupy movement attests to that. Pre-industrial revolution the vast majority of us lived in hovels, but hey! we were self employed! Today, 50 percent of the private sector workforce works for BIG companies, and those big companies control vastly more than 50% of the wealth, and political power. The signature of the collaborative economy is an increasing role for individuals. There is LOTS to be gained from this approach, and we will see more and more of it that thanks to the internet. OK, so now back to painting things in black and white, so that the contrasts are nice and clear.

Bell Telephone, founded in 1877, and then bought by AT&T in 1899. It was built on its huge trove of patents and grew bigger and bigger. At one point, it had over 1 million people working for it. It was broken up in 1984. It was broken up into 7 baby bells. But now, one of these babies, ATT, is itself the 7th largest company in the US. Think of all the money and infrastructure and effort and people it took to build that company over the last 150 years!

Contrast that with Skype. Skype is 9 years old, and have 663m registered users. They built a huge telco without paying for or building out the physical infrastructure! Instead, we individuals all happily contributed. It is our internet connections, our personal computers, and our video cameras of individuals. Stuff we’ve already paid for. so what do we learn?

That Industrial capitalism seeks monopoly status and control -- the more the companies have, the more they control, using their closed proprietary systems and way of doing things, the better. Which is in contrast to the collaborative economy. These companies get bigger by maximizing participation -- usually through openness.

In fact, a big piece of the collaborative economy is built on the economics of free. By that I mean assets that have been already bought and paid for (like Skype), or excess capacity (like Wikipedia). If you as a company want to take advantage of these great resources, you have to be open, and willing to cooperate. Industrial capitalism makes its money on either scale -- getting so incredibly big that it can manufacture things very cheaply -- or by keeping its expertise very close through trade secrets and patents that it lets others use at great expense.

Because Flickr is such a Peers Incorporated company, I had to put them in here. the industrial capitalism way of doing things would be Getty images, with 80m images. The collaborative economy way of doing it gives us Flickr, which has amassed 6 billion images in just 7 years. And you have to say that the Flickr images more accurately portray the world as it really is.

There is Network TV as opposed to YouTube. YouTube has more video uploaded each month, than the 3 major networks created in 60 years. Is a lot of this stuff junk? Yes, absolutely, but so is the “Bachelorette”.

We see the collaborative economy in every sector. Even banking. Prosper is a company in which individuals lend money to other individuals. It is 7 years old and already has 1.3 million members. It has made $314m of loans. If one of those lending individuals goes bankrupt -- it isn’t the end of the world.

The collaborative Economy is delightfully resilient. Industrial Capitalism, with its huge behemoths, produces companies that are “too big to fail.” Yet we know they will one day. While both systems could share value better with individuals, it seems that the collaborative economy is the one that will do it -- because remember, it seeks to maximize the participation of others, and if its going to succeed in the long run, it has to share more equitably. We will see more and more web-based companies that partner with individuals to help them make money.

I heard this great anecdote: my father had one job in his lifetime; I’ll have 7 jobs in mine, and my child will have 7 at the same time. The value sharing partnership between a web-based company and individuals will form a significant part of our economy future.

I recently founded a company called Buzzcar. We operate in France, and will be opening here in New York shortly. With Buzzcar, car owners can rent out their cars to their friends and neighbors in a safe, secure, and standardized way. I think of the car owners as Auto-preneurs, and they get 65% of the revenue generated, in contrast to the business model of traditional car sharing and car rental companies. Buzzcar builds the technology, operational, communications, and contractual support, sets a minimum standard for good drivers and safe cars, insures each car and person during the rental and with 24-hour roadside assistance, and does the payment collections. The owner is in charge of his car, and inviting his friends and neighbors to share his car. And he can make about $1000/month. You can see that we have all types of owners and cars, and all types of drivers too.

I have a goal of getting everyone to share their cars, dramatically reducing the numbers of cars needed to satisfy a given population, dramatically reducing the numbers of parked cars that clog our city streets and make our homes expensive, and dramatically reducing the enormous bite car transportation takes out of personal budgets.

And I know that the collaborative economy approach can work, even in a sector that seems so suited to big huge projects, because of my colleagues at carpooling.com. They are a 10 year old German company that provides ridesharing services throughout Europe, and shortly the US. Every single day, they transport as many people as would fill 130 Amtrak trains. Every month, they have more than 1 million people sharing trips. In fact, Carpooling.com, and the car drivers and the riding passengers, move more people than travel the length of Amtraks’ NE corridor.

Something that I haven’t yet mentioned, but that is really dear to my heart, is the fact that in the collaborative economy, one dollar is not like another dollar. The social intangibles are visible and valued. One of Buzzcar’s borrowers had mentioned to the car owner, that they were using the car to get to an Island ferry. The owner sent her an email with a list of the island highlights -- where to go and what to see. You won’t find that level of personalization and customization in the Industrial capitalism model. It costs too much money.

Some more examples: -- the mainstream media vs the blogosphere -- here is a short list of companies, many of which you’ll recognize, that are bringing us this new economic model. (airbnb, etsy, eBay, fiverr, topcoder, zilok, rentallic)

And to close with a final lovely example: we can contrast Google Maps with Open street maps. Google maps, which I know, use, and love, was created with a car driving on every single road in the world and mapping them all. that is a big job! We can contrast that with Open Street maps, that created the same with local hobbyists build out the open street map platform. Today, Open street maps offers maps that are as good -- and they think better -- than Google’s. Why? Because, just like wikipedia, they have thousands of people updating them each and every day.

When the Haiti Earthquake struck and the emergency responders flooded in, it was impossible for them to find their way through the city that had been poorly mapped, and those existing maps were clearly completely out-of-date for what was needed. With the help of a group called Crisis Mappers Net and released satellite photos, this group of people drew in the map of Port-au-Prince over the subsequent week, you can see them working.

To sum it all up, Industrial Capitalism is built and evolved to put the corporation’s survival a the center. I hope you enjoy those empty, headless suits I found. And now, thanks to the Internet, we see the rise of a collaborative economy, that puts people at the center.

2 comments:

Sean Van said...

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Pervezimai said...

Sometimes we need to stop for a moment...and snow can help with this :)