This is a crucial issue is the new economy which I have touched upon a number of times before, and I’m not sure I’m totally understanding the mechanics of it yet. The key point I have been making is: openness creates value, but enclosure captures it.
The crucial issue therefore is,thinking as an entrepreneur or company: how open can I be, and what should I enclose. The more we are open, the more we strengthen the commons which is the ultimate source of all value, but if anyone can just take everything, how can we, as separate entities, capture value. Kevin Kelly, which we cited recently, has one answer, don’t enclose artificially, but rather build added value which is not copy-able.
Umair Hacque has another take. Radically promote openness, and that will create hyper-value that you can build an economy on. So what Umair seems to be saying, is that the second part of my own conviction, that enclosures captures value, may not only be unnecessary, but even counterproductive?
I’m just not sure how exactly that can be done, but let me cite his insights.
His key point is: data is valueless.
Umair Hacque:
“…Success isn’t determined by how hard I can exclude you from scraping your data – but how effectively and efficiently I can help you share/use/reuse/hack/etc it.
Let me try and put it more simple. Data is inherently valueless in the edgeconomy, because it’s infinitely replicable. Any structure seeking to limit access to data will simply be too radically inefficient for the market to bear in the medium-long run. So a massconomy strategy of “owning” a massive stock of data is destined to crash and burn.”
He explains:
“Data isn’t the valuable.
In fact, data’s a commodity. We’re drowning in data.
Think about it this way: the lower the cost of interaction, by definition, the more abundant data is – because every interaction creates reams of data. More data is created tomorrow than was created yesterday. And so on.
What is valuable are the things that create data: markets, networks, and communities.
Google isn’t revolutionizing media because it “owns the data”. Rather, it’s because Google uses markets and networks to massively amplify the flow of data relative to competitors. Even when Google opens up more and more data – and make no mistake, it will – it will still realize an advantage.
What’s strategically critical aren’t the costs of exclusion, but the costs of inclusion.
Success isn’t determined by how hard I can exclude you from scraping your data – but how effectively and efficiently I can help you share/use/reuse/hack/etc it.
Any structure seeking to limit access to data will simply be too radically inefficient for the market to bear in the medium-long run. So a massconomy strategy of “owning” a massive stock of data is destined to crash and burn.
Rather, what is valuable is being plugged into (and plugging others into) the right flows of data. That’s what Google does. It’s what Facebook refuses to do.”
So, what then is wrong with Facebook, according to Umair:
“Rather, evil is dominated in the edgeconomy because it destroys the potential for future value creation.
Because Facebook is evil, it created Beacon, which actually raises the costs to interaction, imploding the utility of the network.
So whether or not your average lame brainless Ivy League teen is aware of it – he/she will feel it’s effects, and their behaviour will, in turn, begin indirectly to shift.
So there are two effects. One is an information effect. I know you’re evil, so I won’t directly interact with you. That’s a weak effect.
The stronger effect is the second: when you’re evil, all else equal – even if others interact with you – your ability to co-create value implodes: because you make moves which are focused on shifting costs and extracting value, rather than creating it.
But it takes two to dance the tango of co-creation.
Conversely: when you’re evil, the only game you want to – or can play – is domination.
That’s exactly Facebook’s problem: because it’s evil, it’s massive network is a deadweight loss – Facebook is learning to co-create no value with it, just trying to extract value from it.“
Using the word ‘value’ to represent ‘profit’ is tremendously confusing. Profit is nothing more than “price above cost”. Why would we (anyone seeking to solve the economic troubles we face) want to keep price above cost? Must we perpetuate poverty to insure profit?
If everyone in world had “at cost” access to bread, would you say bread has no value? I’ll bet the starving Hatians wouldn’t agree. Isn’t “use value” worth considering?
Of course things lose “exchange value” as we approach abundance, but that only proves that profit is an inverse measure of development.
We don’t NEED to keep price above cost when the users and the owners are the same set. Wage is also a cost, and work is paid before profit is even calculated.
Users are willing to invest in “for product” production for the purpose of “use value” alone.
Users already pay all costs anyway, and they ALSO pay “price above cost” (profit) whenever they do not yet have sufficient ownership in the means of production (the physical sources) required to meet those objectives.
You say “how can we, as separate entities, capture value.”, but what makes you think the founders of an enterprise MUST remain divided from the users it was supposedly created for? Don’t we want to create true public utilities?
Governments at all levels and every non-profit corporation and/or organization keep control away from the users they claim to serve by not understanding the “price above cost” those users pay should be considered an INVESTMENT from the very user that paid it – for the only reason a user pays the portion called profit is because the do not yet have enough control to achieve those goals “at cost”.
Patrick, consider the “commercial” implications: a trust bound by a purpose to meet a public need, operating at cost, has the advantage over a company seeking profit too. Momentum must be gained for a steady customer base, and this is where anti-competitive practices and collusion can smother the upstart before it begins.
A trust, I believe, can already contain the necessary mechanisms for either using investment for improved service, or paying it back to the trustees (customers of the service they’re providing). These do sort of already exist, in the form of cooperatives.
I think the next question is, why aren’t there more cooperatives? Does property and wealth inequity make them more unlikely? Farmer’s markets are certainly staging a comeback in parts of the US as the food supply becomes–and is recognized as–more industrialized. I think perhaps analyzing and assessing the failings of cooperatives will provide some guidance on where to go from here.
You say “consider the commercial” as though price must remain above cost, yet then go on to say the opposite. Could you tell me more specifically what you mean by that phrase?–
using investment for improved service.
I guess you are talking about treating profit as investment?
This is fine *only* if those investments finally become the real property of the humans that paid them.
or paying it back to the trustees (customers of the service they’re providing
I don’t think we can just hand the profit back to those users either. We, the originators understand the importance of growing the cooperative which requires the purchase of *MORE* land and capital.
Customers (users) generally don’t really know how or what to invest in (otherwise we wouldn’t have this problem), and are unlikely to do so anyway because the corporate media has taught them poor judgement and desire for immediate satisfaction (money in the pocket) over sound planning (investing in their own future production).
These do sort of already exist, in the form of cooperatives.
Unfortunately, almost every ‘cooperative’ on earth subscribes to the faulty notion that the ownership must be in the hands of those that happen to have the skills to operate it instead of being owned by those that need the products thereof. Price will never meet cost and profit will remain mixed with wages as long as the act of working determines the ownership (and therefore control) of the means of production.
Farmer’s markets are certainly staging a comeback in parts of the US as the food supply becomes–and is recognized as–more industrialized.
These are better than the filth from ConAgra, Nestle, etc., but still are not optimum because it is almost universally taken as apriori that the Workers must be the owners, instead of understanding that control must be in the hands of the Users that need the product even though they may not happen to have those exact skills.
Farm owners (and all small businesses) have a terribly difficult time because they must hold the entire debt themselves, while the collective consumers could do this so much easier that they might even have a chance of actually paying off the bank!
“Commercial” simply means involving commerce in my use of the word, I am not saying price must remain above cost.
I think you are far too focused on the concept of investments becoming the “real property” of those that invest. You may think that’s the most sensible, fairest way, but in practice I have not seen anything that can make it so. Having seen no method to put this into practice, I’ve developed a different take on it that reframes the issue in a way that can be feasibly solved.
People are learning to signal interest with both unfunded signals and funded signals. In other words, interest and money-backed interest, like pledges. This wasn’t very feasible before technology allowed the incredible communication we now have, and of course it will take time to evolve, but we are seeing it. Unsurprisingly, we’re seeing it in the more technologically savvy, from coordinating campaigns to get TV shows back on the air, to Howard Dean, and recently, Ron Paul. Shifts take time.
I think the far bigger problem with cooperatives and corporations are the notions of hierarchy, permanence, and employee livelihood. As Christian mentions in his work on the peerconomy, we’re moving toward democracy and projects (and where we aren’t, I think we should be). However, it is a precarious perch, because employees still need the sense of security that comes with having steady income, and that is a selective pressure toward permanence, and the continued livelihood of the organization being the purpose of the organization, rather than the need it should fulfill.
To break those compounding pressures we must change ownership of the commons to the public. Money commons, information commons, and property commons. This is what I would call the concept of creating “vested commons.” In other words, commons begin with vested owners, and then more people invest in the commons, becoming co-owners. In this sense the commons ARE becoming the “real property” of the humans that paid the investments.
This is part of the core of the Peer Trust Network Project, which uses vested-commons to bootstrap into a utilicontributist free market economy.
As for workers being the owners, in your perspective I see why that doesn’t work, however, with a different system it can work quite well. The workers can be co-owners, along with non-worker users, and the workers can charge for the use of property plus their labor. The way to do this is to create the use-based economy.
Consider spaceship Earth. We, as humans, should be able to agree that we each have an entitlement to live on Earth, but on one condition: living must not render the spaceship uninhabitable; living practices must be sustainable for present and future generations. This entitlement, then, comes with responsibility, and every human has equal entitlement. This entitlement is inalienable: one person, one share. This entitlement could be considered joint, equal ownership, too. However, I am going to use “guardianship” to signify that ownership beyond share is actually both imposing on others’ shares, and caretaking their shares. We can consider all humans to be in an “Earth trust,” which is essentially the final, networked form of the property trust.
To determine use: Use = Guardianship / Entitlement. Use higher than 1 is imposition because it is guardianship or “ownership” beyond what a person is entitled to. By controlling more than my fair share, I am imposing on everyone else’s share, and I am responsible and accountable for that: I pay for my imposition of additional use, and that payment is spread to the entitled, or the Earth trustees. In other words, I pay a use fee that is spread equally to everyone. In yet another way of looking at it, I am paying rent for extra use, because that extra use is from other people’s shares. In a final way of looking at it, the Earth is being personified in the system; the Earth views everyone as equally entitled to live, but it requires overall sustainability, so it charges those that live unsustainably in proportion to their use, and then distributes that rent equally, giving the wealth advantage to those that live more sustainably.
As a side note, this proposal actually accomplishes the concept of “basic income” in a sensible and fair way.
I’ve wandered a bit from topic, but I hope this is a useful perspective. I will add this information to my wiki entry on the project.