Peer production and venture capital

Excerpted from Charles Hugh Smith:

“What I find radically appealing is not so much the technical aspects of desktop/workbench production of parts which were once out of financial reach of small entrepreneurs–though that revolution is the enabling technology–it is the possibility that entrepreneurs can own the means of production without resorting to vulture/bank investors/loans.

Anyone who has been involved in a tech startup knows the drill–in years past, a tech startup required millions of dollars to develop a new product or the IP (intellectual property). To raise the capital required, the entrepreneurs had to sell their souls (and company) to venture capital (vulture capital) “investors” who simply took ORPM (other rich people’s money) and put it to work, taking much of the value of new promising companies in trade for their scarce and costly capital.

The only alternative were banks, who generally shunned “speculative investments” (unless they were in the billions and related to derivatives, heh).

So entrepreneurs came up with the ideas and did all the hard work, and then vulture capital swooped in to rake off the profits, all the while crying bitter tears about the great risks they were taking with other rich people’s spare cash.

Now that these production tools are within reach of small entrepreneurs, the vulture capital machine will find less entrepreneural fodder to exploit. The entrepreneurs themselves can own/rent the means of production.

That is a fine old Marxist phrase for the tools and plant which create value and wealth. Own that and you create your own wealth.

In the post-industrial economies of the West and Asia, distribution channels acted as means of wealth creation as well: you want to make money selling books or music, for instance, well, you had to sell your product to the owners of the distribution channels: the record labels, film distributors, book publishers and retail cartels, all of whom sold product through reviews and adverts in the mainstream media (another cartel).

The barriers to entry were incredibly high. It took individuals of immense wealth (Spielberg, et al.) to create a new film studio from scratch (DreamWorks) a few years ago. Now any artist can sell their music/books via the Web, completely bypassing the gatekeepers and distribution channels.

In a great irony, publishers and labels are now turning to the Web to sell their product. If all they have is the Web, then what value can they add? I fully expect filmakers to go directly to the audience via the Web in coming years and bypass the entire film distribution cartel entirely.

Why go to Wal-Mart to buy a DVD when you can download hundreds of new films off the Web?

Both the supply chain and distribution cartels are being blown apart by the Web. Not only can entrepreneurs own/rent the means of production and arrange their own supply/assembly chains, they can also own their own distribution channels.

The large-scale factory/distribution model is simply no longer needed for many products. As the barriers to owning the means of production and distribution fall, a Renaissance in small-scale production and wealth creation becomes not just possible but inevitable.”

Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.