If we study the productive reality of the last thirty years, the changes turn out to be amazing. Among all of them, the most striking, the most unexpected, the one that most strongly contradicted the idea that the great economic systems of the twentieth century had about themselves, was not that the future would be full of computers, cellphones, and electronic equipment. That idea had already appeared in the ’40s and ’50s in science fiction and popular futurism. Nor was it globalization. The idea of a world united by free trade had been part of the Anglo-Saxon liberal ideal since the Victorian era, and from the foundation of the League of Nations, between the wars, it was part of the declared objectives of the great English-speaking powers.

No, the most shocking thing was the beginning of the end of business gigantism. From the State businesses of the USSR, to shipbuilding and metallurgy in Asturias, from Welsh mining to United Steel or the big automotive companies, the oligarchs that had been the model of “enterprise” for the contemporary industrial world, stopped hiring, collapsed, and fired tens of thousands of workers. It wasn’t just “de-localization”: the new Chinese or Vietnamese plants didn’t grow indefinitely, either. Markets like electronic products expanded year after year, and yet personnel and capital global used were reduced. It was said that the new labor-intensive industries would be services, especially services connected with the new dominant form of capital: finance. But soon, banks and insurers that employed hundreds of thousands of people at the turn of the century started to reduce personnel. Today, the great banks are on track to reduce personnel by 30% over the next decade.

What happened?

What had happened was, in fact, amazing. Following the Second World War, the United States had become the great provider to the world. When the war ended, US GDP was around half of the global GDP. Benefiting from the European need for reconstruction and from peace treaties that, while not reaching the level of humiliation of Versailles, were openly asymmetrical, big Anglo-Saxon businesses globalized at great speed speed. It was a dream come true for their shareholders. It wasn’t at all strange to economists. At the time, if Marxists, Keynsians, and neoliberals agreed on anything, it was that businesses were able to, and in fact tended to, grow indefinitely. But by the ’50s, it was already obvious that something was going wrong. In the USSR and the countries of the East European, you could always blame the arbitrariness of the political system or the mistakes of the planners. But in the USA, it was different. And yet, it was there, present and invisible, like an elephant in a high-society gala. The first to realize it was a economist called Kenneth Boulding. Boulding noted that American businesses were reaching the limit of their scale, the point at which inefficiencies due to having to manage a larger size were not compensated for by the benefits of being bigger. Looking at the America of his time, he also warned that big businesses would try compensate for their inefficiencies using their weight in the market and in the State. We were under pressure long before “too big to fail” in the crisis of 2008, but he could already tell that Big Businesses would not hesitate to use the power they had as a result of employing tens of thousands of people to get made-to-fit regulations and thinly-veiled monopolies. Business over-scaling, warned Boulding, could end up being a danger to the two main institutions of our society: state and market.

But what came next was even more surprising. Businesses bet on improving their systems and processes. They discovered that information was important—crucial—to avoid entering the phase in which inefficiencies grew exponentially. It also became obvious that a business size that was inefficient for one market became reasonably efficient for a larger market. As a result, they used all their power to promote a branch of technology that had shone only marginally in the great war: information. With this same objective, as soon as the opportunity arose, they pushed governments to reach commercial agreements and, above all, frameworks for the free movement of capital, since the industry that had scaled fastest and had begun to give alarming signs of inefficiency was finance. Meanwhile, the champion in business scale, the USSR and the whole Soviet bloc, collapsed, to the astonishment of the world, in an obvious demonstration that operating life wasn’t infinite.

A true revolution in support of the feasibility of large scales in crisis was implemented in the West. The political result was called “neoliberalism.” It basically consisted of the extension of free-trade agreements, which expanded markets geographically; financial deregulation, which allowed the rise of “financialization,” or extension of markets over time; and a series of rents and monopolies for certain businesses, which were assured by regulations, like the hardening of so-called “intellectual property.”

The technological result was known as the “IT revolution,” which is to say revolution of information technology. But it came with a surprise, following a series of apparent coincidences in the search for ways beyond the limits on efficiency imposed by the rigid hierarchical systems inherited from the previous century. At the end of the ’60s, the structure of networks that connected big university computers, which was financed by defense spending, took a distributed form. This would not have brought about a radical change if a new field, domestic information science, had not evolved towards small, completely autonomous computers, known as “PCs.” The result was the emergence in the ’90s of an immense capacity for distributed and interconnected calculation outside the fabric of business and government: the Internet.

The revolution of scale

The Internet brought profound changes in the division of labor, which overlapped with the ongoing reduction of optimal scales, and changed the social results expected from delocalization, the first trend in globalization.

In the ’90s, when the “end of history” seemed go hand in hand with the consolidation of a new string of industrial technology giants (Microsoft, Apple, etc.), free software, which had been a subculture until then, built the first versions of Linux. Linux is the “steam engine” of the world that is emerging: the first expression of a new way of producing and, at the same time, a tool to transform the productive system. Over the next twenty years, free software would come to be the greatest transfer of knowledge and value in the contemporary era, equivalent to several times all foreign aid to development sent from developed countries to those on the periphery since WWII.

Free software is a universal public good and, in an era in which information infrastructure is a fundamental part of any productive investment, a free form of capital. Free capital drove an even greater reduction in the optimum scale of production. But it also helped make value chains of the physical goods with strong technological component distributed. Globalization and delocalization had broken the links in value creation in thousands of products throughout the world, especially in the less-developed nations of the Pacific basin, but all those chains were re-centralized in the US, and to a lesser extent, in Japan, Germany and other central countries, where big corporations (from Apple to Nike) branded, designed, marketed, and hoarded the benefits of intellectual property. The possibility of free software was key for many of those chains to “insource” in countries like China, and produce all the elements, including those of greater value added.

The immediate result was prodigious economic development, the greatest reduction in extreme poverty in the history of humanity, the greatest increase in real wages in the history of China, and the appearance of new global centers of innovation and production in coastal cities. These cities play by a new set of rules that, not surprisingly, include an extreme relaxation of intellectual property, an accelerated reduction of scales, and production chains systems and assembly systems that allow a formidable increase in scope, which is to say, the variety of things produced.

The Direct Economy

As all these changes were set in motion in Asia, in Europe, the free software model was expanding into a whole spectrum of sectors. Soon, groups would appear that replicate the mode of production based on the commons (“the P2P mode of production“) in all kinds of immaterial content—design, books, music, video—and increasingly, in the world of advanced services—finance, consultancy—and industrial products—drinks, specialized machinery, robots, etc.

But while the “P2P mode of production” is a fascinating path for a transition from capitalism to abundance, its direct impact—how many people live directly from the commons—is relatively small. As in Asia, Europe, and the US, structural change will begin in an intermediate space that is also based on the digital commons: the Direct Economy.

The Direct Economy is all those small groups of friends—and therefore, a basically egalitarian organization—that design a product that generally incorporates software and free knowledge into itself or its process of creation, sell it in advance on a  crowdfunding platform (making bank financing or “shareholders” unnecessary), produce it in short runs of a few thousands in a factory, whether in China or on the side of their house, and use the proceeds to improve the design or create a new product.
The Direct Economy is bar owners who invest 10,000 euros in equipment and begin to produce beer 100 liters at a time, or a few tens of thousands of euros and gain capacity to prepare almost 1,500 liters every 12 hours in continuous production—and then go on to bottle and begin distributing nearby and in networks of beer artisanal lovers.  And of course, they will have more varieties than the big brewery in their are, higher quality, and a better quality/price ratio.

The Direct Economy is the academy or the high school that installs a MOOC or Moodle to be able offer its students services over the summer, independent app developers, the role-playing bookstore that buys a 3D printer and starts selling their own figurines, or the children’s clothes store that starts designing and producing their own strollers, toys, or maternity bags.

All of them are small-scale producers making things that, until recently, only big businesses or institutions were able to make. All of them have more scope than the scale model. All of them, at some point in the process, use free software and knowledge, which reduces their capital needs even further. All of them take advantage of the Internet to reach providers and customers for low costs—for example, by being able to reach very geographically dispersed niches or find very specialized providers. Most will not have to resort to banks or investors to finance themselves, but rather, will use pre-sale and donation systems on the network to raise money. And some of them use the “commodification” of the manufacturing industry and its flexible production chains for the process.

As for internal organizing, we’re generally looking at models that are much “flatter” and more democratic than conventional businesses. While traditional businesses are autocracies, or at best aristocracies based on hierarchical command and responsibility, the large majority of projects in the Direct Economy are “ad-hocracies,” in which the needs of the moment shape teams and responsibilities. This even happens in cases where big businesses decide to take a gamble on creating a spin-off and competing in a new field. Instead of an org chart, there are task maps. Rather than “participation in management,” there emerges the type of energy that characterizes any group of friends that make something “spontaneously.” If the legal process wasn’t still so arduous, if it didn’t require notaries and endless paperwork, we would say that the natural way to the Direct Economy is worker cooperativism.

Conclusion

But none of this is as important as the broader meaning of the Direct Economy to people’s possibilities in life. In Wage Labor and Capital, one of his more accessible works, Marx explained the trap in the narrative that exalts social mobility and equality of opportunities: wages can’t become capital. Or, rather, couldn’t… and it’s true that it continues to be unable to in a good part of the world and in many branches of industry. But we’re seeing something that is historically shocking—the reduction to zero of the cost of an especially valuable part of capital, which materializes directly knowledge (free software, free designs, etc.). And above all we see, almost day by day, how the optimum size of production, sector by sector, approaches or reaches the community dimension.

The possibility for the real community, the one based on interpersonal relationships and affections, to be an efficient productive unit is something radically new, and its potential to empower is far from having been developed. This means that we are lucky enough to live in a historical moment when it would seem that the whole history of technology, with all its social and political challenges, has coalesced to put us within reach of the possibility of developing ourselves in a new way and contributing autonomy to our community.

Today we have an opportunity that previous generations did not: to transform production into something done, and enjoyed, among peers. We can make work a time that is not walled off from life itself, which capitalism revealingly calls “time off.” That’s the ultimate meaning of producing in common today. That’s the immediate course of every emancipatory action. The starting point.

Translated by Steve Herrick from the original (in Spanish)

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There is a lot of buzz around “Industry 4.0,” “The Fourth Industrial Revolution,” and “smart factories.” Much of it is great, so, before we get started, please take less than 5 minutes to watch this excellent video from Bosch.

Even if you don’t watch the video, I will briefly note the points in it that are relevant to this article (but, seriously, watch the video).

• People are at the center.
• This will not change.
• People want more choices.
• People want more personalization.

In response to those perceptions about people and their needs, Industry 4.0:

• can adapt quickly in a changing world.
• provides connectivity across companies.
• utilizes data mobility and virtual design.
• listens to preferences to define how the factory will be assembled
• is composed of modular production units which are autonomous but also trainable.
• monitors the entire value chain in the “Internet of Things” (IoT) cloud.

In other “Industry 4.0,” “The Fourth Industrial Revolution,” and “smart factories” resources, we find similar revelations. The Internet of Things will be self-describing; value-chains will auto-update, and networks of sensors will enable production systems to be aware of themselves and their components at all times.

Why Industry 4.0 Matters

So, if the promise of Industry 4.0 is legitimate, then we should end up with happier people because of better matching between their preferences and their consumption options. This is certainly not terrible, but it doesn’t really address the questions surrounding:

• too much production
• too many people
• too many choices

My belief is that the reason for this oversight, apparent in much of the Industry 4.0 material, is that all of it originates from and is produced within an outmoded economic context. In other words, it attempts to fit all of these amazing new changes into an old economic paradigm rather than ask how these new technologies and connectivity resonate with, and in fact drive, a new economic paradigm.

In other words, the real revolutionary potential for Industry 4.0 is not that can improve efficiency in the old paradigm, but that it can do something radically new.

I believe that Industry 4.0 can (and should) play a key role in solving the economic crises of late capitalism, and in turn, solve climate change, pollution, poverty, and inequality, by changing economics at its base.

Here’s how.

The Economics of Over-Production and Demand

First, a quick flashback:

1. The Economy is driven by a production-to-consumption feedback loop, called supply and demand.
2. The Market is where consumers exercise their preferences to provide the feedback that producers need.

While there is not enough room here to expound all of the features of the 20th century global economy, there are a few of relevance. Notably, the economy exists in a state of perpetual overproduction. This overproduction exists and is supported and stimulated for a variety of systemic reasons, but reason that is useful here concerns the relation between consumer choice and options as noted in the above video.
Specifically, if consumers want choices then a key way for producers to provide those choices is to produce many variations of a particular product or product type. This means making cars of every color because the market does not know what color a particular consumer will want. It means making an endless variety of media, games, and entertainment, because the market does not know what the audience desires. (Much of the activity in 20th century economics has revolved around the problem of anticipating consumer demand and preferences.) This production/consumption ambiguity generates 2 different kinds of waste:

1. Waste that is generated during overproduction processes themselves (pollution, labor, etc.), and
2. Waste that is generated from all of the already produced things that go unconsumed (food, media, etc.).

The consequence of all of this ambiguity about consumer demand and preferences is overproduction in advance. And a key consequence of that overproduction is that it creates a necessity to artificially stimulate overconsumption in return. Furthermore, overproduction

1. consumes more resources than appropriate, generating intolerable strains on our environmental wealth, and
2. produces more waste than appropriate, generating pollution, climate change, and other global impacts.

This cycle is a vicious downward spiral, and everyone knows it, but the economic and political conversations that we see in the world are all still about how to “stimulate consumption” to “foster economic growth” and to “boost production.” This is backwards.

Make. Less. More

Meanwhile, the solution to the spiraling runaway 20th century economy is not “more more more” but “less less less.” More to the point, as my colleague Richard Adler and I agreed, we need to “Make. Less. More.”

We need to make things ourselves; we need to make less of it by making the right things; and we need to get more out of what we do make by connecting things together into shared commons.

There are two particular factors in Industry 4.0 (and in the video) that point us in the right direction.

1. The factory is composed of many smaller autonomous, trainable, production modules, and
2. The information layer is in the cloud. Global, accessible.

In other words, because of the information layer is accessible from the noosphere, the actual factory modules do not have to all be in the same place. Instead, clusters of modules involved in comprehensive sub-processes, can (in general) be spread globally, closer to their resource inputs and/or closer to where their outputs will be needed next. This doesn’t have to be just information either because physical machines occupy an “ambient commons.” So, for example, heat from one set of processes can be used to benefit elsewhere in the system. The change is learning to think ecologically.
Industry 4.0 points out the potential that we have to connect networks of smaller makers into a global web that shares information. (I have written about this global maker web in Pioneering The Thing Commons). Consequently, by capturing and resolving the ambiguity of consumer demand and preferences into a data infrastructure that is inherently portable, we can transform the what/when/where in order to make:

1. what is needed: via consumer customization which is simply the expression of consumer demand and preferences in advance, and
2. when it is needed: via on-demand production and modular flexible production
3. where it is needed: via open source peer-to-peer connections that deliver production design specifications to local production devices

The resulting economic circle of “Make. Less. More.” means less production, less consumption of resources, less waste, etc. because we create to demand on demand and at demand. This is a virtuous circle, not a downward spiral.

Industry 4.0 and the principle of “Make. Less. More.” lets us create 1) to demand (what), 2) on demand (when), and 3) at demand (where).

(This is much like putting a solar panel on a street lamp, but that exploration will have to wait for my article on The Energy Commons…)

To engage with the original please go to Make. Less. More. — Why Adaptive Production Can Save The Planet by Paul B. Hartzog

Lead image: screenshot from “Future production with Industry 4.0” from Bosch Global (see below)

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The P2P mode of production is already opening the door to a society of abundance. You can stop being a consumer. You can stop being passive and letting the things you buy define your identity. You can switch sides… and produce.

Looking back now, it seems clear that the P2P mode of production started to take shape at the end of the ’90s, when the emergence of Linux turned free software into a social and productive phenomenon of the first order. At the time, however, few would have gone so far. Most people were focused on something which was also important, and which links it with the logic and ethics of abundance: its origin in the hacker movement.

For hackers, knowledge in itself is a cause for production and in general, for life and work in community. They don’t learn to produce more or better, they produce to know more. Because learning is their motivation, their life can’t be divided up into working time and “free” time. All time is free and therefore productive, because hackers defend multispecialization as a lifestyle. Freedom is their main value, as the materialization of personal autonomy and community. Hackers don’t demand that others—governments or institutions—do what they consider must be done; they do it themselves, directly. If they demand anything, it’s that obstacles of any kind (monopolies, intellectual property, etc.) that prevent them or their community from addressing production be removed.

In this framework of values, the first major victory of free software took place: building a complete free operating system, Linux. Never again would the hacker movement be part of the underground. A new electronic commons appeared before the eyes of millions of people. Soon, profoundly but quickly, this forever changes the hottest industry of the previous decade. It would go from a few large-scale businesses to a far-reaching system with many small groups, projects and companies that rested on a unique, but multiform, diverse and dynamic commons.

Not long after that, the cycle and the structure of free software production would appear in other fields. Not coincidentally, the production of immaterial cultural objects—music, literature, and audiovisual creation—took advantage of P2P technology before others. But for just that reason, it had also suffered attacks from new laws on intellectual property called for by the large-scale culture industry.

The P2P production cycle

In this model, the center of the cycle is the knowledge commons: immaterial, free and freely usable for all. This is the characteristic form of capital in production between peers. From this starting point, new projects are born. Because there’s no central authority, there can be evolutions of previous projects in the commons—including customizations for concrete needs—or, different, truly new objectives can be spelled out. This way, new knowledge is produced in the process of its materialization and development.

Each new contribution incorporates directly to the commons, the center of P2P accumulation, but also enters the market, where it may possibly appear incorporated into customization, production and maintenance services sold by small businesses or individuals.

It’s important to point out the extent to which the market and capital are defined in a fundamentally different way in the P2P mode of production from the current system. The key to understanding it is the concept of “rent.” Rent is all extraordinary benefit, created outside of the market, by the place occupied by the business. “Natural” monopolies—normally created by over-scaling—legal monopolies (like intellectual property) and deals for regulatory favor are the most common origins of business rents.

All these rents disappear in the P2P production cycle. As Juan Urrutia had predicted, only one rent remains: the one produced temporarily by innovation. Anyone who creates new technologies or products has a short time to take advantage of their solitude in the market before the fact that the new knowledge has entered the commons allows others to make offers based on it, “dissipating” rents from innovation for its creators and starting the cycle once again, without any advantages for anyone.

Because, at the limit, the market only pays the value of the work contained in services, the businesses need to innovate constantly to win short temporary rents from successive innovations. That’s why the P2P mode of production is a true abundance-producing machine, which accumulates in the form of a ever-growing and universally usable knowledge commons. And all without any need for central control, hierarchy or large-scale organizations.

From the immaterial to the material

Ten years ago, talking about designing and producing objects without being a captain of industry would have sounded like madness or a symptom of over-exposure to science fiction novels. In a world that was enjoying the first glimpses of abundance in intangible goods after the digital revolution, the very idea of physical production felt like a throwback to an era that felt outdated and limiting; something that,while it kept functioning, it was out of the simple need to provide everyday objects: cars, computers, and appliances of all kinds.

In 2008 two teams, one at the University of Bath in the United Kingdom, and other in las Indias, competed to complete the development of the “RepRap,” a machine capable of printing objects, up to and including replicating itself. Soon, the repositories of free knowledge also began orienting themselves towards the world of production. At first, limited by the machines themselves and the materials they use, pieces of small size proliferated: figurines and models for board games were the most popular objects of the first repositories.

With the “RepRap,” the first step was taken towards the factory at home. Quite naturally, 3D printers would turn hardware and design into natural allies of free software. In fact, the most important thing is that the new field replicated—for goods closer and closer to industrial production—the cycle of P2P production.

It’s not just that a new mode of producing is being consolidated, it’s that it’s sustained by the great economic and technological trends of our time, which it also drives. This whole immaterial commons maintained on the Internet will accelerate the reduction of the optimum scale of production more and more, until it turns the 3D printer into the symbol of a future of very high productivity and very small scale, which can already be sensed.

The Direct Economy and P2P Production feed each other

The possibility of using free knowledge—with a starting price of zero—substantially reduces the capital necessary to launch a company. Software, patents, technical training… all things that were substantive parts of the business plan of any SME in the ’90s, and which justified a good part of the investment, simply begin to fade. One of the main obstacles to starting a project of industrial production, capital, decreases substantially. What Marx had thought of as the basic “trap” of capitalism—the impossibility of turning salaries into capital—is less and less a problem. In an era where average qualifications are higher than they have ever been before, the substitution of monetary capital with direct knowledge puts it within reach for groups as small as a real community to produce for themselves.

Simultaneously to the reduction of the optimal scales of capital, smaller scales of production also become viable. Traditionally, short runs mean higher unit costs. Also, with a small volume of production, distribution becomes a nightmare, and negotiations with traditional channels becomes impossible. The product is limited to nearby markets.

And here’s where the Internet and virtual communities come into play. As conversational communities based on lifestyles and similar preferences form, what before were “statistical leftovers” in market studies, begin to become buying groups. The Internet is replacing scale with reach. The “long tail” begins to be talked about, and the idea emerges that “there are no big markets, but rather, unserved niches.” Soon, these communities of users participate in the design and conceptualization of products, finance them on crowdfunding platforms, and will be the main way word spreads about them. We’re still in the world of the direct economy which, as we saw, is fed by free software and networked collaboration. But in turn, as the direct economy colonizes new markets, carries with him the seeds of the step a P2P production.

From the point of view of a designer or a company, a direct- economy project is attractive, among other things, because the risks are reduced drastically. The different mechanisms of pre-release sales and crowdsourcing allow promoters to finance the costs of the first production with sales practically guaranteed.

From the user’s point of view, the experience of buying becomes discovery, a story that you share with those around you. Many people participate in the financing of a project for the pure pleasure of supporting the creation of something nice, or that interests them. Two decades ago, it would have been unbelievable for someone to decide to support someone else’s business launch without asking them for a share or hoping for a cut of the profits, but it’s true. It could be called pride in belonging, understanding collaboration in a broader sense, or a willingness to contribute to economic development. The issue is that the essence of financing a business project has been modified, in the most revolutionary way, and almost production itself: now, for hundreds of thousands of people, it has to do with the development of their identity and their community more than with the monetary cost effectiveness that a microinvestment offers them.

Conclusions

While in the old consumerist culture, identity was defined by consumption, which is why one bought, in the direct economy and P2P production, it’s the reverse: exercising one’s own identity is participating in production. Production returns, by a new path, to the center of what defines people. At the same time, the possibility of designing and producing directly is more accessible than ever, and that’s why communities begin to emerge that, after having been “niche” suppliers for others, “take the leap” for themselves into production, starting from the commons and adding new ideas, improvements, and product lines.

The P2P mode of production is already opening the door to a society of abundance. You can stop being a consumer. You can stop being passive and letting the things you buy define your identity. You can switch sides and produce, get involved a little or a lot in others’ production, and enjoy what’s been created together, from creating your own design to supporting someone else’s proposal with an advance purchase.

Don’t look in the store when you need something, from a cell phone to a razor or a computer for your nieces and nephews. Look for projects that are underway. None of them convince you? Propose your own, learn on the net what you need to do it, find your community in the search, become the owner of your life and of the material world around you. Become part of the freedom that allows the new time we live in. Enjoy the approaching abundance.

Translated by Steve Herrick from the original (in Spanish)

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The Direct Economy puts us in a world that goes far beyond collaborative consumption or SMEs empowered by technology: we’re talking about a world where production and community are joined and knowledge replaces capital.

Around the year 2010, John Robb, known for his efforts in the theoretical development of resilience, decided to develop a consultancy. He presented himself as an economic agent and discovered that he had different resources he wasn’t using. Incorporating them into his activity would contribute to diminishing his dependence on his main economic source—consulting. John Robb designed a set of activities, and concentrated on get them moving. He became a small agricultural producer and rented out different spaces in his house, besides selling advisory hours through tele-presence, writing books, and writing his blog. He started to refer to this phenomenon as the “direct economy,” a formula that allowed him distribute his income across different activities, all of them disintermediated.

While John was coming to this approach by seeking the reinvention of the North American family as a productive unit that is resistant to crises, in las Indias, at the same time, we were starting to lay the foundation for the direct economy as a result of the application of free knowledge and the reduction of the scale of production.

In our view, the direct economy brought together a whole series of productive and commercial activities of tiny scale that, thanks to the Internet, were gaining a large scope with very little need for financing. In fact, the combination of software and free knowledge, online advance sales and “crowdfunding,” was saving already a growing number of projects the search for shareholders and credit. On the other hand, the flourishing world of mobile apps was serving as a model for a whole new sector of micro-industrial SMEs. This was a sector centered above all, though not solely, on consumer electronics, that used traditional industry as a sort of gigantic 3D printer to manufacture ever-shorter runs of all kinds of products at low prices.

That is, the power of the direct economy does not reside in the possibility of getting extra income from underused consumer goods (house, car, tools…), which is the core of collaborative consumption, but rather in the possibilities offered by networks, disintermediation, definancialization and the “commodification” of the industrial work of entering the market with innovative products despite having a very small scale.

Why does the direct economy push society towards abundance?

The direct economy is the most radical expression of the reduction of the optimum scale of business. The development of technologies over the last decades of the twentieth century and of what we’ve seen of the twenty-first century has made it possible for the manufacture of sophisticated objects, from cellphones to electric cars, to be accessible for really small groups of people. The changes this holds in store are as radical as they are surprising.

In the first place, while it seems obvious, for the creators of an industrial project to be able to finance their production without the need to give up ownership is a true historical novelty. Ultimately, the economic system that we have known and lived with our entire lives was called capitalist because those who provided the capital were considered the legitimate owners of a company.

Secondly, this is possible thanks not only to advance sales or private donations that arrive via the Internet. It is also due to the fact that the large majority of these companies intensively use free software, which is to say, they benefit from existing capital, which they access freely and for free. What replaces monetary capital is less the value of the creative and technical contribution of the entrepreneurs, and more the prior knowledge accumulated communally and freely.

To put it another way, in the core of the direct economy, we already see the transformation of capital into free knowledge, the direct application of knowledge to production with no need for the formerly necessary mediator of social capital and credit.

This is more than a happy historical coincidence. The direct economy is the change in the modes of productive organization that take place among when the optimum scale of production approaches the community dimension. If we look at the structure of businesses in the direct economy, we’ll find they’re mostly made up of groups of 6 to 10 people. They transfer the knowledge that they possess, and design and offer products in the market. The community of concrete knowledge and the community of production begin to merge, while accumulated knowledge takes a directly useful, free and accessible form: the commons.

What are big companies doing?

Before getting into the social and philosophical consequences of all this, which are very important from the point of view of abundance, it’s interesting to pause for a moment to observe how big, multinational businesses have joined this movement as a way of relieving the growing inefficiencies of their own over-scaling.

As for products, it’s more and more common to hear announcements of pre-sale campaigns or even of production on demand: these minimize up-front investment at the same time that they make it possible to try out a new product in the market. Today, companies like Sony routinely measure the success of new lines of business with secondary brands on “crowdfunding” platforms, looking to minimize even the reputational risk of a possible failure. The use of crowdfunding as a way to capitalize a project has become natural.

Another growing trend in the incorporation of the direct economy by the giants of scale is to carry out direct public offerings (“DPOs”). This is a formula that allows a company create and administrate shares directly, without resorting to an intermediary. Businesses like Ben&Jerry’s used it as the way to finance their expansion in the US and into Europe. The company has the possibility to choose who the offer is directed to—so, for example, it could be exclusive to their workers and family, or citizens of the city where it’s based. At the level of local development, the use of direct public offerings by businesses opens up the possibility of locally organizing funding systems that local businesses join and in which citizens-investors own shares of the business. That way, not only would funds be created to promote development, social and democratic control of the businesses would also increase.

What about scales below the optimum?

Meanwhile, the supply of services available on the Internet is being taken advantage of by language teachers, personal trainers, therapists, nutritionists… access to services at a click has become more and more frequent. The Internet operates as disintermediating agent between client and provider. An increase of supply is produced, which incentivizes price differentiation between competitors, but it also encourages them to innovate in the design of services or in user experience.

Big businesses and professionals are two sides of the same coin. Both benefit from the reduction of the optimum scale of production as it approaches a community dimension. But this is not, by far, the most relevant thing.

Where the Direct Economy is leading us

We’re talking about small groups in which the difference between knowledge, applied knowledge, and practice starts to break down. In these groups, making the leap to production doesn’t require capital like something external and superior, which is capable of reorganizing the whole process in its image and likeness. In such groups, the division of labor and hierarchy fade in a way they never would in commercial businesses. The direct economy is the natural place for “multispecialization.”

The convergence point of the trends in the direct economy is the “productive community”: a group of people whose knowledge is converted directly into production, and whose process of generation of knowledge is difficult to distinguish from the productive process.

But beyond this, there’s still more. Theres a space that’s still closer to abundance, which is fed by this new communal world: P2P production. We’ll talk about that in the next post.

Translated by Steve Herrick from the original (in Spanish)

The post Direct Economy and abundance appeared first on P2P Foundation.

The path towards abundance is no longer a proposal or a utopian dream. It is a real path, an economic and social movement taking place in parallel to the decomposition of the old ways, and which offers us a new promise to overcome scarcity, war and collapse.

For two decades now, it’s a rare month that newspapers don’t surprise us with a multi-million-dollar valuation of some enterprise, website or mobile app. The famous “rounds of financing” of start-ups, media hype when someone announces a public offering, and the eternal discussions about their “lossifits” have become part of business folklore and media hubbub. They’re really an obscene example of the growing difficulties of capital to find a place in real production. They are one more symptom of the overscaling of financial capital which is really one side of a process whose other side is that we have never been so close to abundance. But that deserves an explanation.

The shortcut that failed

At the end of the nineteenth century, two states, Prussia and Japan, discovered a shortcut to development: authoritarian State planning. At first, it worked, and worked so well that the progressive political forces of the time—social democracy, a large part of liberalism, nationalism, and even sectors of conservatism?built their economic models on it. At the limit, the Soviet State born of the ruins of Russia and its empire after the civil war, for the first time, attempted the “total nationalization” of production: a system planned and oriented to maximize the training and activation of the large masses of capital needed to create the modern infrastructure of a continent, to teach a population to read, and satisfy its basic needs.

And at first, it worked. So much so that it became the path to follow for most of the European colonies that achieved statehood, and the magic formula to develop regions of the central countries that had been left behind. Recent examples outside the socialist States would include the industry developed by Francoism in Asturias or Peron’s five-year plans. Everything was based on quickly reaching large scales in use of capital, and no one better than the State, through public or nationalized enterprises, to reach it.

In reality, as theoreticians of bureaucracy in Europe or Galbraith in the US would soon point out, State businesses were not that different from what big businesses had become in economies where the market called the shots. Success consisted of having large-scale businesses, with lots of capital, able to import or create new technologies, hire tens of thousands of people, and of produce the industrial goods that would make it possible to increase the general productivity of the economic system.

Business over-scaling and crisis

The problem, as would become clear to economists like Boulding as early as the ’50s, is that to try to reach development, and ultimately abundance, with hyper-scaled productive units is like trying to reach heaven by climbing a tree. At the beginning, it looks like you’ll go very quickly, but as you go higher, the branches are more fragile, and finally, all your effort—still very far away from the objective—ends up focusing on not falling.

Every era has an optimum size of scale that depends on technology and the dimension of the market. The better the technology, the smaller the optimum size for a given dimension. Beyond that size, the inefficiencies created by the form of organization itself make every increase in capital or in people hired counterproductive, and the value produced is reduced.

In the first stages of capitalism in each place, with all the large basic infrastructure to make—highways, telephone lines, railways, sewers, etc.—the optimum size was gigantic for the levels of resource accumulation allowed by the pre-capitalist agrarian economy. It seemed that “the greater the scale, the greater the growth”… but precisely because it worked, the first symptoms of crisis would soon come.

The first great collapse

In 1955, when the USSR starts to talk about “peaceful co-existence” with the American bloc, it’s really talking about “peaceful competition.” At that time, the accelerated development of the USSR, the extension of its model first to Eastern Europe and soon to a good part of the decolonized countries of Asia and Africa, and even Cuba, create the impression that the most centralized forms of state capitalism are the owners of the future. But soon, by the beginning of the 60s, the numbers start to not work out. Political and cultural factors were blamed, but the fact is that gigantism is beginning to fail… on both sides of the Iron Curtain.

In the West, the market will prioritize a change in technological orientation: information technology grow to become an industry. It is clearly oriented towards improving management, which is to say, to reducing inefficiencies of scale. But it’s not enough. Markets must expand to justify the sizes already reached: the “European Community” progressively becomes a “Common Market,” and in 1973, Great Britain is integrated, once the preferential market in its former colonies is no longer enough.

Beginning with the crisis of ’73, the numbers of the Western nations and the results of their big businesses don’t give any reason to be optimistic, either. By the ’80s, the inviability of the industrial businesses on the largest scale, the public scale, is obvious. Industrial overscaling has become a danger to the survival of the State itself. This is the time of “reconversion” in regions like Asturias or Flanders, and the moment when the numbers of eastern Europe—but also Cuba—really begin to break down.

In the US and Great Britain the first political response to the crisis of scale emerges: neoliberalism. Basically, it consists of racing forward: finance is deregulated and financialization appears as a way of homogenizing, and therefore expanding, the market for capital, the speculative use of which is growing more and more as it becomes more difficult use it in capital-intensive big businesses. The State restructures its relationship with big businesses: the rents they receive actually increase, but on a new basis: legislation on intellectual property becomes hardened. Management and informatization become a true “cult” in the attempt to reduce inefficiencies.

When the Soviet bloc finally collapses, “globalize” becomes the new mantra. The neoliberal strategy looks to the East and see the volume of extension of markets that has been made possible as a triumph: it has reformed the world to rationalize the over-scaled sizes of its companies.

Globalization and the globalization of the small

Along the way, in the ’90s, technological development had accelerated, and with it, the optimum size of enterprise had been reduced even more. The Internet and large cell-phone networks appear, liberalization drastically reduces the costs of transportation both of cargo and of people, and we start to see the first glimpses of abundance.

But in the first phase, the dismantling of trade barriers looks like it’s going to basically favor multinationals by allowing them reduce size, gaining back at least part of the efficiency lost to overscaling. It’s a time for “breaking value chains“: production is divided into phases that are subcontracted to SMEs in peripheral countries. From the viewpoint of the developed countries, it’s a “dislocation” of production, and a real threat to industrial salaries. Unions abound with the idea that businesses change production sites to be able reduce salaries. The fact is that what makes that salaries are low in subcontracted businesses in these countries is that their productivity is, initially, lower than that of Europe, and therefore they have to compensate for their lack of knowledge and technologies by reducing other costs.

But that changes in two ways: the first is that peripheral SMEs learn to coordinate their own chains, without depending on brands from the central countries, by taking advantage of the reduction of transportation costs and the new accessibility of central markets. The second is that, especially in the consumer-goods market, they benefit from one of the first products of emerging abundance: free software. In less than five years, the volume of this movement exceeds the sum total of all aid to developed countries since World War II.

The result, which is known as “globalization of the small” when seen as a whole, is an unprecedented rise in world trade and a way out of extreme poverty for hundreds of millions of people, most of them in Asia. In quantitative terms, it is the greatest leap towards abundance in the history of humanity. With it, the productivity of the industrialized nations will grow steadily, also increasing salaries and improving living conditions.

The crisis of the center and the P2P mode of production

But for capital, times are hard. The scale of the leaders of the change is too small, and that of the great financial centers too big, for capital to be invested efficiently in the new productive economy. The result is a speculative rush towards anything “commodifiable,” which hits a ceiling in 2007. It is no coincidence that the fall of Enron, the company that did business by turning things like bandwidth or electricity into “commodities,” shortly precedes the collapse of the financial system in the developed countries, which was tangled up in financial products whose complexity was nothing more than the result of try to homogenize risks beyond what’s reasonable.

The longest crisis in the history of capitalism, however, showed the path of abundance. While the financial system collapsed, the business model that had leading the globalization of the small was developed and universalized into what John Robb called the direct economy. The direct economy is the meeting point of the vectors of change of the moment: it basically means the substitution, to the highest degree possible, of necessary financial capital with the free and communal use of knowledge and the capital needed to pay everyday costs through advance sales that often times take the form of “crowdfunding” on virtual platforms.

The intensive use of free software also turns the cycle of P2P production into a model to follow for a whole set of industries in which the reduction of optimal scales is made evident by the impact of the direct economy. The appearance of 3D printers, the rudiments of free multipurpose hardware (like Arduino), and the evolution of good part of the hacker movement into the “maker” movement describe a situation today in which, more than ever, we can talk of the path towards abundance not only in the world of the immaterial, but also in traditional industrial production.

Conclusions

Beyond the crisis, we’re living in a fascinating historical moment. Before our eyes, technological development has reduced the optimum size of businesses to a level that in more and more occupations can be carried out efficiently in a local setting or community, and can even be distributed globally. Many of them are supported to a greater or lesser extent by the result of a productive cycle of a new kind in which capital and market are being redefined, dissipating rents and creating abundance.

The path towards abundance is no longer a proposal or a utopian dream. It is a real course, an economic and social movement happening in parallel to the decomposition of the old ways and which offers us a new promise of overcoming scarcity, war and collapse.

But like every promise of every historical age, isn’t destined to become reality, and has no existence outside of the willpower and actions of people and real communities who must make it present. It’s only a possible result, a horizon to move towards and to struggle for. The question that we will try to respond in the following installations is how.

Translated by Steve Herrick from the original (in Spanish)

The post The tortuous path towards abundance appeared first on P2P Foundation.

The culture in which we were brought up is the product of millenia of scarcity. That is why it’s easier for us imagine a society of abundance as the negation of a good part of what we know and take for granted than as the affirmation of a project whose elements are within arm’s reach. However, the unprecedented development of productivity during the last two hundred years, the emergence of distributed networks, and the first social experiences of abundance on the Internet have begun to clearly show outlines of the possible world in the present. Today, to imagine the society of abundance is, in more and more fields, to take the present–a present that is radically different from that of the origins of industrialism–to its limits.

The division of labor

An especially interesting example is the division of labor. In classical economics, starting with Adam Smith and his famous example of the production of pins, specialization is understood as part of the social effort for the improvement of productivity. That is, it was part of the road towards abundance. Dividing work into precise tasks and substitute people with machines, to the extent technological development made it possible, was the heart of the Industrial Revolution that transformed the world between the 18th and 20th centuries.

From the manufacturing to the robotic factory, the specialization of tasks not only revolutionized productivity, but also encouraged the specialization of knowledge, and just as it had never been possible to produce so much, neither had so much knowledge been developed ever before.

But with the development of services and the massive incorporation of information technology, knowledge becomes a direct tool of production on a new scale. Production processes are confused with marketing and communication. Businesses begin to demand people with more than one specialty. What had, until then, been reserved for engineers and a few technicians, was multiplied by all of the knowledge that the new industries understand link their more and more sophisticated tools and products. Initially, this tendency, which Juan Urrutia called multipecialization, appears above all in the new technology sector that becomes consolidated in the ’70s.

But the innovation industry linked to personal computing first and the Internet later, is a very particular industry: in the US, its pioneers are openly influenced by hippy understandings of abundance, and in Europe, by a new work ethic centered on knowledge that soon will be expressed in free software. As far back as 1984, the writer Bruce Sterling describes in his novel Islands in the Net the following dialogue full of reminiscences of the classic tales of the society of abundance:

“… a sort of hotel manager?”

“In Rhizome we don’t have jobs, doctor Razak. Only things to do and people who do them.”

“My esteemed colleagues of the Party of Innovation Popular might call this inefficient.”

“Well, our idea of efficiency has more to do with personal realization that with, um, material possessions.”

“I understand that a broad number of employees of Rhizome do not work at all.”

“Well, we keep ourselves busy doing our own thing. Of course, much of this activity is outside the money economy. An invisible economy that is not quantifiable in dollars.”

“In ecus, you mean.”

“Yes, I’m sorry. It’s like housework: you don’t pay anyone money to do it, but that’s how the family survives, isn’t it? Just because it’s not a bank doesn’t mean it doesn’t exist. As an aside, we’re not employees, but members.

“In other words, your baseline is playful joy before benefit. You have replaced work, the humiliating spectrum of forced production, with a series of varied hobbies like games. And replaced the motivation of greed with a network of social ties, reinforced by an elected structure of power.”

“Yes, I think so…, if I understand their definitions.”

“How long until you entirely eliminate work?”

What makes this scene especially interesting is that the character being interrogated is member of a transnational egalitarian community. Sterling’s intuition connects technologies that had hardly even been sketched out then–in fact, in the novel, the Internet is not used, but a sort of hybrid of fax and e-mail–with the cooperative inheritance and community values held by hippies in the US.

Twenty-first century trends

The prophecy will begin to come true scarcely a decade later with the nascent reality of the first industry linked to abundance: free software. Connected to it is the appearance of the first businesses that break with the obsessive hierarchies of the industrial enterprise. As Pekka Himanen argued in 2000 in his famous essay about the hacker ethic, in knowledge industries, work in self-managed teams is simply more productive. Also, by that time, the Internet was already restructuring the forms of relationship. Hackers, used to equality in conversation and to working in networks like equals, practiced “flat” forms of organization based on conversation between “multi-specialized” individuals. Also, networks of relationships between peers that occur in a conversational space will tend to be transnational, limited perhaps by linguistic borders.

This incipient movement will not stay in the world of software: consulting, digital publishing, graphic design, and generally all the services that were first commercialized directly via the Internet are the natural point of departure for these first experiments of transnational communities of multispecialists, but not their destination. The development of productivity and new forms will reach the industrial world in their most radical way as the “direct economy“: small groups of friends design products, finance them with pre-sales and crowdsourcing within communities of affinity, send them to be built by the old industry (now converted to 3D printers), and distribute them through the network.

As a result, traces of abundance appear in more and more places in our lives. The tendency can be summed up today as: multispecialization, transnationality, and non-heirarchical organization of business.

If we take them to their limits, we can glimpse the main features of work in a society of abundance: obsessive specialization disappears, and with it, professional identities as we know them. Thus, the ideal of knowledge as a whole is recovered. In correspondence, group projects, formed and motivated by the pleasure of creating and discovering, not by the need to earn a salary, small, non-hierarchical, identarian communities form, which don’t respect borders other than the ones of the affinity for objectives and media.

A society of abundance is a society in which productivity is not separate from research, conversation and knowledge, as if they were different worlds, and knowledge itself is not divided into professional and mercantile knowledge. It is a society where community is directly productive, without divisions.

Translated by Steve Herrick from the original (in Spanish).

The post Abundance is the end of divisions in production appeared first on P2P Foundation.

GNU-Social can become the basis of a whole new free software on distributed architectures, and we want to make our contribution.

The post Full speed ahead with GNU-Social!! appeared first on P2P Foundation.

Several weeks ago, Obama became the first president to write a line of code. It wasn’t his first nod to the leaders of the coming change. His first contact with the direct economy was through beer. A self-declared fan of this drink, the president bought a beer-making kit, and assigned his cook and part of his domestic team to begin to experiment with home recipes. After several attempts, the White House proudly announced the creation of two beers and made their recipes public.

Homebrews and start-up microbreweries have been taking hold in the market, and also expanding as an industrial business model of a new kind: small scale, linked to the surroundings, with value added in design and brand-name positioning.

More than a million people produce beer at home in the US. By 2020, artisanal beer will reach 20% of the US market. The microbrew revolution has already crossed the line from hobby to a new sector that, in 2013, created a hundred thousand jobs. This fact, this industry is beginning to make it viable to launch services for microbreweries and artisan producers.

From video games to beer

In 2012, the founders of Bioware, one of the largest videogame companies,announced their departure from the company. Both said they had lost their passion and enthusiasm. They made it clear that they would maintain a link with the business but would dedicate themselves completely to the launch of new projects. One of them, Ray Muzyka, devoted himself to support for social businesses in education and of health.

The other, Greg Zeschuk, who was fascinated by artisanal beer and the microbrewery movement, created “The Beer Diaries.” His objective: create value for the brewers and their products with a model of direct economy services.

Sense and sensibility

The Beer Diaries is an online television channel dedicated to artisanal beer, which is continuously searching for new beers, and with each new episode, they expand their map of manufacturers, kinds, and favorite brands. The brewers gain publicity, and the show’s producers discover new flavors. They also publish guides and reviews, promote consumption, and put together live events. If you like their show, you can pay to enjoy it live. They are a communications agency of a new kind, but also an audio-visual producer and product marketing business.

The user trusts their knowledge and selections. It is a buying guide in a market where new sellers continue to join and in which the product identity itself (small batches for local consumption) makes it difficult for the new brands make themselves known. The producers have a themed channel of communication, whose audience is their future customers.

Criteria, not ranking

In their business model, the accent is on their knowledge of the product and their ability to bring it to the consumer via the Internet. Their niche, for now, is beer, but what makes their viewers loyal is the criterion of selection.

That’s where the strength of their business and their unique contribution reside. Criteria based on ranking, like like Robert Parker’s wine rating system, serves to promote homogeneity at the expense of culture, and increasing demand at the expense of complexity. In other words, Parker-style ranking depends on the irresponsibility of the consumer and promotes an industry of impossible scale and impoverishing standards.

In contrast, to publicize, map, share knowledge, organize parties, and to value the diversity and culture of the product encourages the industry without promoting its concentration or devaluing the meaning that is created at small scales.
The model is staked on reinforcing the ability of the brewers to tell their story and on valuing consumers’ responsibility.

And it’s profitable. “The Beer Diaries” is not only a business model, but an ethical model. A way of being and working that promotes the values of an nearby industry. That’s why it’s an excellent example of what services mean in a world of the direct economy.

Translated by Steve Herrick from the original (in Spanish).

The post Beer, video games and local culture appeared first on P2P Foundation.

1. Bruce Sterling said back in 2002 that the new political movements that would reflect the social changes that were taking shape with the start of the century would have “passion for the vote.” In the English-speaking world, we had an advance this year with Loomio, and in our cultural surroundings, with the release of the code of Democracia OS. But things are already moving politically and socially with the founding of Podemos and the debates on how to create mass online participation.Bet 1 2015 will be the year hundreds of municipalities start up the first systems of citizen co-government using the Internet.

 

2. We began 2014 with mandatory single servings of olive oil, a law that sought transfer rents from small producers and restaurants to oil multinationals. The cherry on top of the electric reform was to make us pay big electric companies for the solar energy we produced ourselves, and we closed 2014 with the AEDE tax and the government saying that “the Government created the legislation just the way the editors of the mass media proposed it.” In 2015, things will be clear even to the most blind: the only future project Big Business is capable of in our day is trying to capture more and more rents through the State. Imagination is only useful for feeding a self-interested nationalism in which, at best, innovation means that multinationals get grants to compete against the young and the innovative.Bet 2 With this narrative and this political collusion, Big Business will become even more unpopular in 2015. The startup narrative will go from an uninspiring media mantra to being denounced as pure and simple speculation in jobs.

 

3. In contrast, the technological revolution is moving more than ever. If it doesn’t seem to fascinate the major media any more, that’s because what interests them and what they support are technologies that recentralize power, especially economic power. They give the cold shoulder, and sometimes bared fangs, to new technologies and social practices that redistribute power. But, even though there’s no hype, these things are unstoppable. With the pioneers of the direct economy maturing and opening factories in the middle of industrial desertification, the idea of crisis of scale will become part of social debate, and industrial policies driven by citizen participation will focus on new models of production.Bet 3 If last year was the year of collaborative consumption, this will be the year of the emergence of a direct economy that brings the industrial world closer to the P2P mode of production.

 

4. In an environment of alternative reflections and P2P movements, if in 2014 the rise of Syriza and Podemos served to show that a change of scene was starting to happen in Europe, 2015, with the forseeable electoral triumphs of “new Left,” will bring the focus back towards what that scenario allows. The P2P Foundation will go into greater depth with its “Open Coop” model with allies like the CIC and its own interpretation of the phyle, initiatives born at the periphery of the Anglo-Saxon world like Enspiral and Sensorica wll turn platform models that serve as an interface between the market and hacker networks and SMEs into a “replicable system.” Meanwhile, our own, dear An?ovoligo will continue growing and organizing networks and activities after its debut last October.Bet 4 In 2015, the topic among activists and researchers of P2P and other alternative models will not be theoretical debate, but rather in the practical organization of networks and little transnational “clusters” of cooperatives and P2P collectives with a view to creating a space productive of their own, a phyle. We will likely see — and have — big slip-ups and many attempts that come to nothing, but also the first seeds of a new kind of networks that are able to “take care of” their members beyond sporadic solidarity.

Translated by Steve Herrick from the original (in Spanish)

The post Four bets on change that will come in 2015 appeared first on P2P Foundation.