Discussing the P2P-driven Crisis of Value (2): Open Source Abundance Destroys the Scarcity Basis of Capitalism

Excerpted from JD Moyer, the owner of a netlabel:

“The music industry still consists of proprietary players (including my company, Loöq Records), but music culture has been open-sourced, and this spirit now pervades the more enlightened aspects of the music industry. Music is radically less expensive to produce (a laptop with good software in capable hands can now compete, in terms of sound quality, with a multi-million dollar studio). For most musicians and producers (and many labels), getting their music heard and appreciated is more important than making money. To this end, artists are willing to share streams or files directly with their peers and fans. Many artists are also willing to share “remix parts” (the source sounds that make up a recording).

Does this reduce the amount of money exchanged? Yes, drastically. While open-source culture is great for the consumer, and even good for the artist in some ways, it’s terrible for the business of selling music.

Capitalism is based on scarcity. In order for the principles of supply and demand and “self-regulating” markets to function as expected, production and distribution channels need to be privately owned and tightly controlled.

Open-source destroys scarcity. When the means of production are free or very cheap, when distribution is free, and when producers prioritize values other than profit (things like social value, or status/bragging rights), then prices move quickly towards zero.

This is great for users. It’s terrible for capitalism.

Open-source only applies to sectors where content can be digitally replicated and shared over the internet, right?

Wrong, it applies to everything.

When I shared this idea with a friend, he said “What about gasoline? Obviously open-source production and distribution methods don’t apply to extracting, refining, and distributing gasoline.”

True enough, but open-source can easily be applied to energy production. For example, here’s a video that demonstrates how to make your own solar panels. For now, this kind of thing only appeals to hardcore DIY nerds, off-grid survivalist types, and the like.

A single high-quality open-source product or service can invade and dominate a sector, like kudzu or Asian carp. It has a combination of traits that is lethal to its native, proprietary competitors.


* radically less expensive to buy or implement, often free
* ubiquitous availability
* free to use in any way the user wishes
* free to modify and customize
* well-tested in the field
* a community of active developers eager to respond to feedback and improve the product

Eventually, 100% of the global economy will feel the impact of open-source.

The spread of open-source options doesn’t mean the end of economic activity. I suspect people will always be willing to pay for a sparkling brand, or the very highest quality, or things made carefully by hand.

But many industries are going to experience severe and rapid revenue shrinkage, and they may not see it coming.

To some extent, the internet, digital replication, and plummeting costs of production just shuffle revenue. Apple Computer steals revenue from the major labels. Google steals advertising revenue from newspapers and television networks. People pay AT&T and Comcast for bandwidth instead of paying for music and movies.

But it’s more than a shuffle. Revenue is actually going away. More and more stuff is becoming free, and the trend is just getting stronger.

So is that a good thing or a bad thing? I think it depends on where you live, and what your skills are.

Open-source culture creates wealth (less expensive, often higher quality goods and services for consumers), but it also destroys jobs. College kids can download all the music they want for free and thumb their noses at greedy record executives, but the record industry isn’t hiring those college graduates anymore.

Apple, Google, and Facebook employ half of Silicon Valley, but what’s to prevent users adopting an open-source version of social networking (one with no advertising, where you fully control your own data), or using BandCamp instead of iTunes? These things can happen quickly. Friendster, anyone?

If your job isn’t yet threatened by open-source methodology, consider what will happen when home 3D printing becomes a reality (of functioning devices, not just plastic models). Consider an open-source version of Siri, version 10, an AI that can not only program your appointments, but can write software, compose music, make money management decisions, supervise a team of robot farmers, etc. Will your job be safe then?”

In conclusion, “my main points:

* the means of production and distribution of practically everything are becoming more and more open and accessible

* people are creating and sharing non-proprietary solutions, designs, and works that are often of equal or greater quality than the proprietary options

* these trends will disrupt every sector of the global economy by shattering scarcity and centralized monopolistic control

* these disruptions will result in many benefits for the average person, but they may also destroy your job.”

Civic Wealth as the only solution against the Open Source Disruption

“If I lived in a country that valued civic wealth, one that offered universal health care, free public education (including early childhood and four-year college), a great public transportation system, solid energy infrastructure, and other civic perks, I’d be saying “bring it on!”

Open source/free may disrupt revenue streams, but it provides an enormous boon to the average citizen. High-quality products and services are suddenly much less expensive, easier to use and modify, etc.

The problem is, the open-source/free movement tends to concentrate revenue streams, not spread them out. There is less need for labor, and less revenue to pay employees. Business owners do fine if they run lean, but there are fewer jobs. The rich get richer and the poor get poorer.

Maybe the open source/free movement is also a solution to this problem (you might not need a job if most stuff is free), but I suspect that the economic disruptions caused by open source/free, and recent technological innovation in general, will lead to increasing income equality, social unrest, class warfare, and possibly even fascism, unless balanced by more progressive taxation policies and increased civic wealth (social democracy, or something better).

In the long run, we need to remodel our economy so that we are providing for each other instead of exploiting each other.

What can you do about it?

* you can create a realistic personal economic plan based on your temperament
* you can try to anticipate when and how open source/free/peer-to-peer is going to affect your industry
* you can expand your economic options by engaging in accelerated learning of skills that are in high demand
* you can master the odd, unnatural, rarely taught skills needed to thrive in modernity
* you can move to a country that values civic wealth, if they’ll let you in (and you can handle the cybernetic discombobulation)
* you can invest energy in influencing the policies and politicians of your own country toward creating more civic/public wealth (education, healthcare, public health, recreation, transportation, etc.)”

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