How peer production transcends capitalism: entrepreneurs vs. capitalists, for-benefit vs. for-profit

I missed this great post by the Anomalous Presumptions blog, which also focuses on peer production.

It argues that: In peer production, the interests of capitalists and entrepreneurs are no longer aligned.

Because it is so central to our concerns, I’m taking a very large excerpt, the text below is from the original author:

1. On the difference between capitalists and entrepreneurs

The author argues that “incentives of entrepreneurs (whether they work for free, get consulting fees, or go public and become billionaires) and capitalists (who want to get a return on something they own) diverge in situations that are mainly coordinated through non-monetary incentives.”

For example, Linus Torvalds is a great entrepreneur, and his management of the Linux community has been a key factor in the success of Linux. Success to an entrepreneur is coordinating social activity to create a new, self-sustaining social process. Entrepreneurship is essential to peer production, and successful entrepreneurs become “rock stars” in the peer production world.
A capitalist, by contrast, wants to get a return on something they own, such as money, a domain name, a patent, or a catalog of copyrighted works. A pure capitalist wants to maximize their return while minimizing the complexity of their actual business; in a pure capitalist scenario, coordination, production and thus entrepreneurship is overhead. Ideally, as a pure capitalist you just get income on an asset without having to manage a business.

The problem for capitalists in peer production is that typically there is no way to get a return on ownership. Linus Torvalds doesn’t own the Linux source code, Jimmy Wales doesn’t own the text of Wikipedia, etc. These are not just an incidental facts, they are at the core of the social phenomenon of peer production. A capitalist may benefit indirectly, for a while, from peer production, but the whole trend of the process is against returns on ownership per se.”

2. On the difference between for profit and for benefit

“Historically, entrepreneurship is associated with creating a profitable enterprise. In peer production, the idea of profit also splits into two concepts that are fairly independent, and are sometimes opposed to each other.

The classical idea of profit is monetary and is closely associated with the rate of (monetary) return on assets. This is obviously very much aligned with capitalist incentives. Entrepreneurs operating within this scenario create something valuable (typically a new business), own at least a large share of it, and profit from their return on the business as an asset.

The peer production equivalent of profit is creating a self-sustaining social entity that delivers value to participants. Typically the means are the same as those used by any classical entrepreneur: creating a product, publicizing the product, recruiting contributors, acquiring resources, generating support from larger organizations (legal, political, and sometimes financial), etc.
Before widespread peer production, the entrepreneur’s and capitalist’s definitions of success were typically congruent, because growing a business required capital, and gaining access to capital required providing a competitive return. So classical profit was usually required to build a self-sustaining business entity.

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.

There are examples where a dying business becomes a successful peer-production entity. The transformation of Netscape’s dying browser business into the successful Mozilla open source project is perhaps the clearest case. Note that while Netscape could not make enough profit from its browser to satisfy its owners, the Mozilla foundation is able to generate more than enough income to sustain its work and even fund other projects. However this income could not make Mozilla a (classically) profitable business, because wouldn’t come close to paying for all the contributions made by volunteers and other companies. “

3. Conclusion

“Historically many benefits of entrepreneurship have been used to justify capitalism. However, we are beginning to see that in some cases we can have the benefits of a free market and entrepreneurship, while avoiding the social costs imposed by ensuring returns to property owners. The current battles over intellectual property rights are just the beginning of a much larger conflict about how to handle a broad shift from centralized, high capital production to decentralized, low capital production.”

5 Comments How peer production transcends capitalism: entrepreneurs vs. capitalists, for-benefit vs. for-profit

  1. AvatarDustin Puryear

    Huh. Very interesting. I have to admit I always have to sit back and consider how it is an open source company can truly make money. We provide consulting services, so that’s an easy win for us, but distros and the like have a much broader expense issue, and just providing pure services doesn’t seem to work all the time for them. But perhaps being profitable isn’t always the point.

    Dustin Puryear
    Author, Best Practices for Managing Linux and UNIX Servers

  2. AvatarPatrick Anderson

    Profit is not a societal ‘need’ in itself, it is a measure of ownership centralization, or in other words, of partial monopoly. As proof of this, in the special case when consumers are the owners of the physical sources of production, the payment of price above cost has no meaning except as investment in yet more sources.

    Profit is calculated as the difference between the price a consumer pays and the costs the owners of physical sources paid for that round of production. Wages are a one of those costs, and are paid to workers as compensation for the skill and time applied to goals they may otherwise have no interest in.

    Perfectly decentralized production (only achievable for brief periods of time because of the dynamic nature of collectives) would have ownership continuously distributed to the consumers by treating any amount they pay above cost as their own investment so that competition is perfected (though never quite perfect) at a rate that is higher at first when the consumers have little control, and tapering toward zero as each user becomes a partial collective owner.

    Wages are a valid cost that will always need to be paid in some form when we are trading labor for the purpose of specialization, but profit can be minimized and nearly eliminated in an indirect fashion when object users become physical source owners according to the amount they are willing to invest as measured by what is traditionally called profit.

  3. AvatarSam Rose


    Yes, I am sayign above that (some) people see “Profit” as just a tool, a means to an end, as opposed to a “way of life” which is how some people also see “profit”.

    The concept of “profit” is not viewed universally in the same way by all people. There is a spectrum of conceptualizations.

  4. Pingback: P2P Foundation » Blog Archive » Does peer production hamper the monetary economy?

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