A contribution from Ryan Lanham:
” The problem of capital (real capital is money not stuff) is that there are uncertain returns. In the past, the uncertainly is managed (by management) and the fee for managing that risk is a percentage of profit. Now, and with the newly planned Internet 2.0 due in about 10 years, we have almost instant access to demand and information for thousands of non-commodity industries…
What is happening is that profit risk is less manageable and the tendency of consumption (a consumption function) is approaching a price of zero because people can get replacement items for free (the core of P2P theory). The result of these two trends is businesses like Twitter and outcomes like co-ops.
Whether this is good or bad is of less interest to me personally than the fact that it is happening. I am all for morality, but moralists through the centuries have led fairly unhappy lives of disappointment. Now, the momentum of history is starting to be on that side…based on technology…not on hopes of human goodness. The outcome is just the same. It will be very hard…probably impossible to stop that momentum.
Corrupt university textbook practices that tie an industry to a bookstore to a professor to a writer start to break down because technology intervenes. Now that is a petty corruption, but that’s just the point. Petty corruptions (market inefficiencies, really) are harder to maintain. Disruptive disintermediation makes profit planning harder and thus projects are not initiated through the normal credit cycle of the market economy–the credit economy. Credit dries up, but yet stuff happens. How? Because people do projects whether they profit or not…right now they think they are doing them prospective of profit, but I guarantee you that EZ didn’t do Facebook to become a billionaire. Neither did the Twitter or even the Google guys hope to profit significantly. Maybe their VC’s did, but the VCs are a day late. They’re confused as to what is happening because they are getting close to being disintermediated themselves.
That is very exciting. Investment (which was meant to gain returns based on risk assumption) is harder…because real risks cannot be managed and the old manageable risks are being subsumed by new technologies and approaches. The outcome is a system of abundance…including abundance of risk sharing–a mutual or co-op model. With minimal barriers of operations (the things that cause mutual insurance companies to de-mutualize) there will be more and more human needs filled by co-operative arrangements. This is the P2P revolution. It is actually happening all around us. We aren’t seeing the forest for the trees.
Who would pay for a browser if you can participate in Mozilla for minimal cost? Who would buy an encyclopedia if Wikipedia is trustworthy? Who would by a textbook if Yale or Harvard gives theirs away for free? Who would spend money for design and style in a car if that design is open and readily available to a manufacturer in a low labor cost market? As robotics drives labor costs to zero, and as 3d printing starts doing everything from body organs (organovo) to small mechnical parts…even the risks of production are eliminated.
My guess is that most profit now is due to marketing risk. Take away major media costs (and the fastest shrinking industry in the US now is advertising) and you will eliminate even more profit-earning risk prospects. Consequently, fewer and fewer investments will be logical. Instead, people will co-op. The last barrier is commodities. If peak oil makes transportation expensive, that will shatter fast. “