Does peer production destroy profits?

Via Glyn Moody.

Members of this community and readers of the P2P Foundation blog are probably familiar with the thesis of Adam Arvidsson and myself on the crisis of value.

In my own formulation it says that we now have a society, where the creation of use value grows exponentially, but the growth of monetization of this use value grows only linearly. This creates a non-monetary surplus of value, which is at the same time a boon for society, but also a crisis for the monetary system, and a problem for all of us engaged in the creation of use value. We indeed still need money to survive.

Tom Evslin has another variant of this argument:

If you’re doing well but running at or close to breakeven, you’ve made it impossible for anybody to undercut you without running at a deficit which is hard to get funding for – at least in this market. ”

Let me rephrase that argument.

Any company that is working around a freely available commons, necessarily forsakes any surplus profits and monopoly rents.

This can be a disadvantage, since lesser profits mean lesser possibilities of growth and re-investment.

But what Tom points out in this article, which is located here but I couldn’t access it, is that it can also be an advantage.

The very fact that profits are lower, but robust as based on a whole business and community ecology, is also a guarantee against the rise of competitors, as it actually destroys the possibility of them getting funding.

Is this perhaps what is happening in the Linux economy, of which it is said that it creates about $36b, but also destroys about $60b in the value of proprietary companies?

Please join our discussion at Ning, or add your insights here.

1 Comment Does peer production destroy profits?

  1. Thoams

    Do you see the video of Clay Shirkys speech at the Web 2.0 Expo?
    http://digitalwaveriding.wordpress.com/2008/09/13/cognitive-surplus-of-society/

    Society has in the new digital age obviously an huge potential.
    What`s the problem when we get a big cognitive surplus? Is it just cause some people have to look for a new kind of job?
    Is Wikipedia not great just cause some people in the publishing industry have to look for a new job? If there is a problem solved and you can`t make money with it anymore, you will have to look for new problem, a new challenge. Than you will find a place where you can create value.
    Sorry, this sounds naive, maybe dull…

    Why should Linux destroy any value?

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