Homebrew Industrial Revolution, Chapter Five: The Small Workshop, Desktop Manufacturing, and Household Production (first excerpt)

[Michel Bauwens has kindly invited me to serialize excerpts from my recently published book The Homebrew Industrial Revolution:  A Low-Overhead Manifesto.  My plan is to post two excerpts from each chapter.]

Neighborhood and Backyard Industry. A recurring theme among early writers on decentralized production and the informal and household economies is the community workshop, and its use in particular for repair and recycling.  Even in the 1970s, when the price of the smallest machine tools was much higher in real terms, it was feasible by means of cooperative organization to spread the capital outlay cost over a large pool of users.

Kirkpatrick Sale speculated that neighborhood recycling and repair centers would put back into service the almost endless supply of defunct appliances currently sitting in closets or basements—as well as serving as “remanufacturing centers” for (say) diesel engines and refrigerators. [Human Scale]

Writing along similar lines, Colin Ward suggested “the pooling of equipment in a neighborhood group.”

Suppose that each member of the group had a powerful and robust basic tool, while the group as a whole had, for example, a bench drill, lathes and a saw bench to relieve the members from the attempt to cope with work which required these machines with inadequate tools of their own, or wasting their resources on under-used individually-owned plant.  This in turn demands some kind of building to house the machinery:  the Community Workshop…. [Anarchy in Action]

Karl Hess also discussed community workshops—or as he called them, “shared machine shops”—in  Community Technology….

Sharing is a way of maximizing the utilization of idle productive goods owned by individuals.  Just about any tool or appliance you need for a current project, but lack, is probably gathering dust on the shelf of someone within a few blocks of where you live.  If the pooling of such idle resources doesn’t seem like much of a deal for the person with the unused appliances, keep in mind first that he isn’t getting anything at all out of them now, second that he may trade access to them for access to other people’s tools that he needs, and third that the arrangement may increase the variety of goods and services he has to choose from outside the wage system.

The same idea has appeared in the San Francisco Bay area, albeit in a commercial rather than communitarian form, as TechShop….

The building, bottom-up, of local economies based on small-scale production with multiple-purpose machinery might well take place piecemeal, beginning with such small shops, at first engaged primarily in repair and remanufacture of existing machinery and appliances.  As Peak Oil and the degradation of the national transportation system cause corporate logistic chains for spare parts to dry up, small garage and backyard machine shops may begin out of sheer necessity to take up the slack, custom-machining the spare parts needed to keep aging appliances in operation.  From this, the natural progression would be to farming out the production of components among a number of such small shops, and perhaps designing and  producing simple appliances from scratch.  (An intermediate step might be “mass customization,” the custom design of modular accessories for mass-produced platforms.)  In this manner, networked production of spare parts by small shops might be the foundation for a new industrial revolution.

As [Jane]  Jacobs described it, the Japanese bicycle industry had its origins in just such networking between custom producers of spare parts.

…shops to repair [imported bicycles] had sprung up in the big cities…. Imported spare parts were expensive and broken bicycles were too valuable to cannibalize the parts.  Many repair shops thus found it worthwhile to make replacement parts themselves—not difficult if a man specialized in one kind of part, as many repairmen did.  In this way, groups of bicycle repair shops were almost doing the work of manufacturing entire bicycles.  That step was taken by bicycle assemblers, who bought parts, on contract, from repairmen:  the repairmen had become “light manufacturers.” [The Economy of Cities

Karl Hess and David Morris, in Neighborhood Power, suggested a progression from retail to repair to manufacturing as the natural model for a transition to relocalized manufacturing.  They wrote of a process by which “repair shops begin to transform themselves into basic manufacturing facilities…”

A directly analogous process of import substitution can take place in the informal economy, with production for barter at the household and neighborhood level using household capital goods… replacing the purchase of consumption goods in the wage economy….

The raw materials for such relocalized production are already in place in most neighborhoods, to a large extent, in the form of unused or underused appliances, power tools gathering dust in basements and garages, and the like.  It’s all just waiting to be integrated onto a local economy, as soon as producers can be hooked up to needs, and people realize that every need met by such means reduces their dependence on wage labor by an equal amount—and probably involves less labor and more satisfaction than working for the money.  The problem is figuring out what’s lying around, who has what skills, and how to connect supply to demand….

The various thinkers quoted above wrote on community workshops at a time when the true potential of small-scale production machinery was just starting to emerge.

The Desktop Revolution and Peer Production in the Immaterial Sphere. Since the desktop revolution of the 1970s, computers have promised to be a decentralizing force on the same scale as electrical power a century earlier.  The computer, according to Michel Piore and Charles Sabel, is “a machine that meets Marx’s definition of an artisan’s tool:  it is an instrument that responds to and extends the productive capacities of the user.”…. [The Second Industrial Divide]

As Johan Soderberg argues, “[t]he universally applicable computer run on free software and connected to an open network… have [sic] in some respects leveled the playing field.  Through the global communication network, hackers are matching the coordinating and logistic capabilities of state and capital.” [Hacking Capitalism]

Indeed, the computer itself is the primary item of capital equipment in a growing number of industries, like music, desktop publishing and software design.  The desktop computer, supplemented by assorted packages of increasingly cheap printing or sound editing equipment, is capable of doing what previously required a minimum investment of hundreds of thousands of dollars.

The growing importance of human capital, and the implosion of capital outlay costs required to enter the market, have had revolutionary implications for production in the immaterial sphere.  In the old days, the immense outlay for physical assets was the primary basis for the corporate hierarchy’s power, and in particular for its control over human capital and other intangible assets.

As Luigi Zingales observes, the declining importance of physical assets relative to human capital has changed this.  Physical assets, “which used to be the major source of rents, have become less unique and are not commanding large rents anymore.”….  [“In Search of New Foundations,” The Journal of Finance, August 2000]

In many information and culture industries, the initial outlay for entering the market in the broadcast days was in the hundreds of thousands of dollars or more.  The old broadcast mass media, for instance, were “typified by high-cost hubs and cheap, ubiquitous, reception-only systems at the end.  This led to a limited range of organizational models for production:  those that could collect sufficient funds to set up a hub.”…. [Benkler, The Wealth of Networks]

The networked economy, in contrast, is distinguished by “network architecture and the [low] cost of becoming a speaker.”

The first element is the shift from a hub-and-spoke architecture with unidirectional links to the end points in the mass media, to distributed architecture with multidirectional connections among all nodes in the networked information environment.  The second is the practical elimination of communications costs as a barrier to speaking across associational boundaries.  Together, these characteristics have fundamentally altered the capacity of individuals, acting alone or with others, to be active participants in the public sphere as opposed to its passive readers, listeners, or viewers.

The central change that makes these things possible is that “the basic physical capital necessary to express and communicate human meaning is the connected personal computer.”…

The desktop revolution and the Internet mean that the minimum capital outlay for entering most of the entertainment and information industry has fallen to a few thousand dollars at most, and the marginal cost of reproduction is zero….

The networked environment, combined with endless varieties of cheap software for creating and editing content, makes it possible for the amateur to produce output of a quality once associated with giant publishing houses and recording companies….

As Tom Coates put it, “the gap between what can be accomplished at home and what can be accomplished in a work environment has narrowed dramatically over the last ten to fifteen years.”

These developments have profoundly weakened corporate hierarchies in the information and entertainment industries, and created enormous agency problems as well.  As the value of human capital increases, and the cost of physical capital investments needed for independent production by human capital decreases, the power of corporate hierarchies becomes less and less relevant.   As the value of human relative to physical capital increases, the entry barriers become progressively lower for workers to take their human capital outside the firm and start new firms under their own control….

The Expansion of the Desktop Revolution and Peer Production into the Physical Realm.

1.  Open-Source Design:  Removal of Proprietary Rents from the Design Stage, and Modular Design. One effect of the shift in importance from tangible to intangible assets is the growing portion of product prices that reflects embedded rents on “intellectual property” and other artificial property rights rather than the material costs of production.

The radical nature of the peer economy, especially as “intellectual property” becomes increasingly unenforceable, lies in its potential to cause the portion of existing commodity price that results from such embedded rents to implode.

Karim Lakhani describes this general phenomenon, the separation of open-source design from an independent production stage, as “communities driving manufacturers out of the design space…”

A more complex scenario involves the coordination of an open source design stage with the  production process, with the separate stages of production distributed and coordinated by the same peer network that created the design….

In any case, the removal of proprietary control over the implementation of designs means that the production phase will be subject to competitive pressure to adopt the most efficient production methods—a marked departure from the present, where “intellectual property” enables privileged producers to set prices as a cost-plus markup based on whatever inefficient production methods they choose.

When physical manufacturing is stripped of the cost of proprietary design and technology, and the consumer-driven, pull model of distribution strips away most of the immense marketing cost, we will find that the portion of price formerly made up of such intangibles will implode, and the remaining price based on actual production cost will be as much as an order of magnitude lower.

Just as importantly, open-source design reduces cost not only by removing proprietary rents from “intellectual property,” but by the substantive changes in design that it promotes.  Eliminating patents removes legal barriers to the competitive pressure for interoperability and reparability.  And interoperability and reparability promote the kind of modular design that is most conducive to networked production, with manufacture of components distributed among small shops producing a common design.

This process of modularization is already being promoted within corporate capitalism, although the present system is struggling mightily—and unsuccessfully—to keep itself from being torn apart by the resulting increase in productive forces.  As Eric Hunting argues, the high costs of technical innovation, the difficulty of capturing value from it, and the mass customization or long tail market, taken together, create pressures for common platforms that can be easily customized between products, and for modularization of components that can be used for a wide variety of products. And Hunting points out, as we already saw in regard to flexible manufacturing networks in Chapters Four and Five, that the predominant “outsource everything” and “contract manufacturing” model increasingly renders corporate hubs obsolete, and makes it possible for contractees to circumvent the previous corporate principals and undertake independent production on their own account.

…[T]he further production cost falls relative to the costs of design, the greater the economic incentive to modular design as a way of defraying design costs over as many products as possible.

…A platform is a way to spread the development costs of a single component over as many products as possible….

Modular design is an example of stigmergic coordination….

2.  Reduced Transaction Costs of Aggregating Capital. …[E]ven when the machinery required for physical production is still expensive, the reduction of transaction costs involved in aggregating funds is bringing on a rapid reduction in the cost of physical production.  In addition, networked organization increases the efficiency of physical production by making it possible to pool more expensive capital equipment and make use of “spare cycles.”…

Jed Harris, at Anomalous Presumptions blog, [argues] that peer production makes it possible to produce without access to large amounts of capital.  “The change that enables widespread peer production is that today, an entity can become self-sustaining, and even grow explosively, with very small amounts of capital. As a result it doesn’t need to trade ownership for capital, and so it doesn’t need to provide any return on investment.”

Charles Johnson adds that, because of the new possibilities the Internet provides for lowering the transaction costs entailed in networked mobilization of capital, peer production can take place even when significant capital investments are required—without relying on finance by large-scale sources of venture capital:

…it’s not just a matter of projects being able to expand or sustain themselves with little capital…. It’s also a matter of the way in which both emerging distributed technologies in general, and peer production projects in particular, facilitate the aggregation of dispersed capital—without it having to pass through a single capitalist chokepoint, like a commercial bank or a venture capital fund….  Meanwhile, because of the way that peer production projects distribute their labor, peer-production entrepreneurs can also take advantage of spare cycles on existing, widely-distributed capital goods—tools like computers, facilities like offices and houses, software, etc. which contributors own, which they still would have owned personally or professionally whether or not they were contributing to the peer production project…. So it’s not just a matter of cutting total aggregate costs for capital goods…; it’s also, importantly, a matter of new models of aggregating the capital goods to meet whatever costs you may have, so that small bits of available capital can be rounded up without the intervention of money-men and other intermediaries.

So network organization not only lowers the transaction costs of aggregating capital for the purchase of physical means of production, but also increases the utilization of the means of production when they are expensive.

[The Second Installment of Chapter Five will include the third and final heading on the expansion of desktop production into the physical realm:  the declining capital outlays required for physical production]

1 Comment Homebrew Industrial Revolution, Chapter Five: The Small Workshop, Desktop Manufacturing, and Household Production (first excerpt)

  1. AvatarMark

    Thanks for the TechShop mention. One of the things we have found so powerful and transformative is that the most valuable thing about our “commercial” offer is the development of a strong community of close to 1,000 creative people sharing ideas, space and time together.

    Mark Hatch

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