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The Third Revolution

Republished lecture from a conference I participated in, in Milan on October 22 -23, 2010, i.e. “The Effects of New Communication Technologies upon Information”.

This is the transcript of my lecture, which focuses more than usual on the anthropological underpinnings of p2p relationships. The spoken word nature of the intervention, may make it extra readable and more lively than the usual theoretical texts.

“I want to start with a little trip to history.

Let’s imagine that we are living at the dawn of human history. Back then there were very small bands and tribes of 30, 40 or 50 people. The women usually went out foraging and the men went hunting. They did it in groups and when they came back from foraging or hunting they had some kind of rule that established that the elderly got this, the female got that. However, anthropologically speaking, the important thing is that the totality of the tribe was a primary entity and the individuals were part of the tribe. In anthropological terms, this is called “communal shareholding”. So at the dawn of human history, the human anthropological system was communal.

Now, a few thousand years later, you can think about North American Indians or Polynesia. When they start having surpluses, what do they do? Basically they have parties, they have potlucks. They would invite the tribe during certain ritualistic festivities and they would give away the surplus. Anthropologically speaking this is called “equality matching”. In a gift economy, when you give something you create an obligation for the other side and the obligation is that on another occasion you will give back at least as much as you got if not more. The competition is that you obtain prestige through giving and that is what happens with the surplus.

Now we move on a few thousand years until the emergence of the city-states and the kingdoms in Mesopotamia. The situation is a little bit different. There is an army coming in and if you lose the chief of the enemy would say: “Out of the goodness of my heart I will not kill you but you will be my slave. I give you life”. So we have a system which anthropologists call authority ranking. In those slavery-based systems, 100% of the surplus would go to a system of authority ranking: your place in society determines the amount of surplus you get.

Now we move to the 16th century where we find a new invention: market pricing and the exchange of commodities. You sell your labour or you sell a product and you get a market equivalent back, either a salary or some money for your product. This is pretty much the system we have been living on for the last 200-300 years.

Let’s consider the logic of working for Wikipedia, Linux or Wikihow, in other words: shared knowledge shared code or shared design. Imagine that you contribute to Wikipedia: are you selling your labour? No, you are not. You are voluntarily contributing to Wikipedia. Is there an authority ranking? Do you get more because you are higher in the hierarchy? No, you don’t. Everybody can use Wikipedia. There is hierarchy within Wikipedia but it is not this kind of authority ranking hierarchy. Is it a gift economy? Well, certainly you are giving something, your time and your work, but is there an obligation on the side of Wikipedia to give you the same amount back? You can use Wikipedia without giving anything or can use it while working full time. In other words, you are exchanging with a totality, which means we are back to the communal shareholding logic: “give a brick, get a house”.

What is interesting is that these new systems of value creation are now out-cooperating and outcompeting for-profit alternatives. Wikipedia has replaced Britannica. Linux is gaining an enormous amount of market share these days. Android is outcompeting the iPhone. So we see these as the new modes of value creation which is based on a core of communal shareholding. This is a new modality of value creation which seems to be able to replace the pure for-profit firms wherever it appears.

I would like to suggest a few concepts associated to the anthrological scheme just outlined above.

The first is what I call the “third revolution” in human productivity. Let us go back in history again.

The first revolution in human productivity is the invention of coercion. The Roman army conquers foreign lands, they make slaves and then put them to work. If you do not work, you die. This was an enormous revolution for human productivity. Once this system is in place, you have cities, you have states, you have beautiful roads and the surplus is put to work but the basis is coercion.

I think that the second revolution in human productivity is capitalism because what capitalism does, at least in theory, is that it changes the primary motive from extrinsic negative motivation, fear (if I do not work I die) to a new game whose logic is: I am exchanging something for my benefit against another benefit. I sell my labour against a wage, I sell a product and I get money. This creates a huge leap in human productivity when we shift from a situation of negative extrinsic motivation, where basically you do not work if there is no coercion, to a situation where you work because you get a benefit.

Everything is not as beautiful as I describe it, of course there is coercion in the system but at least it is just a part of the system. Then there is a very innovative part of the system which created a revolution in human productivity.

What is the third revolution in human productivity? Let’s consider Wikipedia once again. Is Wikipedia a division of labour? Are people assigned definite roles and do they get a salary in exchange for their work? No. What you have is a broadcasting of tasks. So if you are an expert, let’s say, in Theravada Buddhism and you want to contribute to Wikipedia you go and look. That gives you a signal: yes, the article exists but there is something wrong in it or something is missing and I would like to add it. We have moved to a world of “stigmergic” signalling (stigmergic is a word that comes from science and biology and refers, for instance, to the way ants signal to each other what is to be done through chemical droppings). We are moving from a situation of division of labour to a situation of distribution of tasks.

What is very important is the aspect of the motivation. There have been a lot of studies on the motivation behind Wikipedia and there are dozens of motivations: some would do it because they learn, some to improve their reputation, some for altruism but the point is that it does not really matter what the motivation is, what matters is that the motivation comes from the individual. They do not do it out of coercion neither out of immediate personal benefit. Therefore, this new modality is what I would call “passionate production”. This has been studied by human resources departments for ages: in a typical for-profit company, one out of five people is motivated intrinsically so this means that if they were not paid only one out of five people in the company would still like what they do. In Wikipedia 100% of the people are there because they want to be there. When they work, they do it out of desire to give and out of passion. I am sure that you already know the answer to this question: who works better? Somebody who only gets money and does something against his wishes, or somebody who wants to do something with value out of his own passionate motivation?

Of course the systems of production which can rely on a broad passionate input will be hyper-productive.

This is why we see the emergence of what I call the “laws of asymmetric competition”. Let me explain how this system works before I mention the laws. The classic system is: I pay you, you work for me, we protect intellectual property and through this artificial scarcity, through this criminalization of sharing, we can sell our product on the market. How does it work in shared knowledge, shared code or shared design? At the core of the system you have a community of people, some are paid, some are not (if you look at Linux, 75% are paid) but the key thing is that whether they are paid or not is not the crucial issue. The crucial issue is that the result of their work goes into a commons. If you use a GPL (General Public Licence), you are legally obliged to put your work in the code commons. Anybody else participating and using the same system can use that innovation for his or her own benefit.

What is the problem? It is easy to see the problem of this kind of system: it derives from voluntary contributions. You can do that for a while but in this system you cannot do that permanently, you cannot work freely without earning money. This has been studied and it is called “1, 9, and 90 %” because there is 1% of the people who drive the system and contribute a lot, 9% contribute irregularly and 90% use the system without really contributing. The key is: how do we make that 1% sustainable?

Two things are required to do that. First, you need a sustainable infrastructure of cooperation and a solution that we have found in this field is the creation of for-benefit associations that manage the infrastructure of cooperation. Almost all these projects, whether it is Apache or Linux or Wikipedia, have foundations that manage the infrastructure. But be careful: they do not manage the distribution of labour, they do not determine who does what in the system, they just enable it to work.

The Wikimedia Foundation collects the money from other foundations and through fund raising so that the servers of Wikipedia can be paid. The Apache Foundation, the GNOME Foundation, the Pearl Foundation, the Eclipse Foundation, the Linux Foundation are all similar organisations which take care of the totality of the infrastructure. How are they funded? Well, when you have a successful commons you create a successful economy around it. So we have the formation of entrepreneurial coalitions that are starting to make money around the commons but this is a very big change because we have lived in a system where profit maximisation is at the core and around it you can have some gift economies, some communal shareholding in the family but they are peripheral. Conversely, here we have a system where the core of the value creation is the commons and the market players are at the periphery of the commons. They create marketable scarcities around the common knowledge code and design.

Let me read very quickly the 3 laws of asymmetric competition: in the competition between a for-profit entity with closed propriety strategies on the one hand and, on the other side, a for-benefit institution working with a community and a commons, the latter will tend to win out. So Android will tend to outcompete iPhone. In a competition between for-profit companies those using open and free participatory and commons-oriented strategies will tend to win out. However, there is a third point which shows why we need a hybrid model: in a competition between two open ecologies the one that successfully attracts entrepreneurial coalition wins out.

I would now like to explain how historical change happens and why these 3 laws are so important in that context.

The traditional Marxist conception is that one class takes over the system and then changes it completely but if you look at transitions in history this is not what happens. Let us consider the end of the Roman Empire: at some point, the cost of maintaining and expanding the empire becomes higher than the benefits and so the expansion stops. Slaves, the raw material, become more expensive, the tax payers of the Roman Empire diminish. If you are a slave owner you see that the Barbarians are at the gates and are gaining ground and whenever they are in front of Roman cities they tell the slaves: “You will be free if we win” so the slaves free the Roman cities. Slaves revolt and they are no longer arrested because insisting is no longer worth it, so there is an exodus out of the system. So what do you do? To respond to that pressure, if you are an enlightened slave owner, you would say: “Instead of having slaves, why don’t I liberate my slaves? I let them work for themselves, I protect them against competing landlords and in exchange I ask 50% of the production”. This paralleled another trend going in the same direction whereby the once free Roman farmers where also increasingly reduced to serf-dom. Within the dying Roman Empire there is a double change: a bottom-up dislocation of the slave system but also a part of the elite that is looking for solutions.

I’m arguing that this is exactly what is happening today. If these laws of asymmetric competition really apply, it would be very logical, if you have capital, to adapt to this new modality. This is indeed what we see happening. Today we have an emergence of what I call “net-archical” capitalism. Look at YouTube, look at Google: how do they make money? Do they make money by hiring people, making them creating content and then selling the content? No, they don’t. They know that we are producing the value. The only thing Google does is presenting to you what you have already done. They re-represent the value that has already been created. They enable and empower the sharing of documents just as YouTube enables and empowers the production of videos and Flicker of photos. This is a segment of capital that has already understood and that is adapting to this new modality of value creation. This is what I call the “sharing economy”. These are individuals sharing their creative expression. Since they are not working together for a common goal and they do not have deep links with each other, they need a third-party platform to do that for them.

The second modality is commons-oriented peer production, such as the work on Linux for example. There you have companies contributing to a commons by paying people to develop a code and using a licence that develops this commonality and other companies can use the same code. This is addition to the volunteer contributions which are also crucial.

Thirdly, we have crowd sourcing. Basically, instead of paying people to do the work you have a platform where they can sell their production and the platform gets a cut for each sale.

These are the three modalities deriving from this new modality of value creation.

Typically what happens in a process of social change is that you first have an emergence, think about the transition between feudalism and capitalism: back then the Templars invented international banking while another monk invented double-entry book accounting, Luther said that we maybe do not need an intermediary to relate to the divine and Calvin said: “If we lend money for interest maybe we are not sinning after all”. What happened was that the system was in a crisis, the serfs fled the countryside to go to the cities, at the same time people were looking for solutions, they were innovating. At first, these patterns were isolated: there is no direct link between the invention of double-entry book accounting and Calvin saying that lending is not such a bad thing after all. However, somehow after 200 years all these patterns form the seed of a new logic and when the old system crumbles this new logic is there ready to take over.

This is exactly what happened at the end of the Roman Empire. The Christians did not fight the Roman Empire (they said “give unto Cesar what is Cesar’s”) but they created alternative structures so when the new Barbarian overlords came the only structure that was there after the collapse of the state was the Christian infrastructure which became the core of the new feudal system.

How is this happening today (because of course that is my thesis)?

My thesis is that all these things that we are describing are the seed of a new political economy, of a new system of civilization.

Here is a slide with four quadrants around two axes, vs. Free, vs. Open vs. Closed intellectual property. This gives you closed and paid (upper right), open and paid (upper left); closed and free (bottom right); open and free (bottom left).

Let me begin by explaining why classic business is dead, i.e. the business model of the upper-right. Classic business models are dead because digital reproduction can be done for a marginal cost. Imagine that you are a company, that you pay people and use proprietary codes and that you fight piracy: such an example is Microsoft, a company that is making money. Let’s take another example: I used to work for British Petroleum, I worked with traders and we used to buy real time stock information, it was about 30,000 dollars a year to get it. One day a company came to us and said: “You know, instead of paying 30,000 dollars for real time information you can get it for free with a 15-minute delay and if you want it in real time you can pay us 3,000 dollars. How about that?” and we answered “That seems a really good idea. Where can we sign in?”. In about 18 months’ time the model of selling real time stock information just collapsed. I am talking about the period around 2001. Then a new creative company came along and said: “What if I gave you real time stock information for free? If you pay an extra amount you also get access to this software that makes sense of your data” of course we answered: “Where can we sign in?”. What we have here is a strategy of decommodification of intellectual property which basically outcompetes the players who hold on to pure intellectual property. This is the replacement of closed, paying IP by closed but free IP. This is what Chris Anderson describes in his book as “freeconomy”.

Open source code is in the upper-left of the slide. Basically, you do not give the information or the service for free but you no longer use closed IP and the effect is the same. The mark-up over the real cost of producing the product or service can now be up to a 1,000 to 100,000 time mark-up for medicines, for example. I think in Thailand thousands of people still die every year because they cannot access medicines which would cost about 100 dollars to make and this because of the IP rent. So what if companies appear on the market and say: “We do not have IP”. How do we know? The Italian shared design commmunity Arduino for example, whose enterpeneurial coalition makes and sell circuit boards, are making 100 million dollars already. You can buy a circuit board from us at the price of production plus 20% or you can buy a circuit board at the price of production plus 100%. What are you going to buy? Maybe at the beginning you are afraid, you do not trust them and you’d still buy the other kind but eventually when this kind of competitors appear on the market they tend to outcompete the classic for-profit IP companies.

Finally, the last mode that is emerging is almost unbelievable if you are into for-profit companies. Think about CouchSurfing. What is that? Young people travel around the world and they do not pay for lodging because they look up in a global system of voluntary lodgers on the understanding that if enough people participate in this system anybody in the system will find a place anywhere else in the world.

I know it works because my own daughter has been using it for 3 years now. She is going to places she could not afford if CouchSurfing did not exist. Of course if you are hotel owner the fact that all these people do not use hotel rooms is pretty problematic but they still have to eat, maybe they still want to go to the Scala, they will still visit the Duomo so they still create and economy. Maybe they would not be there without CouchSurfing. A very good example is geographic information. In Europe we think that geographic information has to be sold or licensed to a monopolistic company. It is a very small economy. In the United States they think it is public domain and can be used to construct a commons. Geographic information is given out for free and it can be used through Google Earth or Microsoft or whatever the system is, and it has created a vibrant economy of added value services around geographic information systems that makes a lot more money than the Europeans.

Now, I want to give you an idea of how this type of change happens but first I want to tell you something about what I call this “Class Struggle 3.0”. The classic class struggle is: I work for you, you pay me, I want more and we struggle around that issue, about how much goes to labourers and how much goes to shareholders. How does that happen in a new world? Basically, it is between community and platform. Facebook allows you to create a dashboard of your friends and to share links, chit-chat, etc. Of course Facebook does not do that out of the goodness of its heart, it is a profit maximisation company. What they say is: “I make the platform, you use it and in exchange I will sell your eyeballs to advertisers and I know so much about you that I can compete with traditional advertising”. If you are Facebook, if you are a netarchical capitalist you have a dual gene pool: half of your genes have to be dolphins, if you do not enable and empower sharing and cooperation nobody is coming; at the same time, if you do not protect some aspects of this platform that you can sell as a scarcity competing with other sharks (because there you are competing), that is not going to work either. You always have to find a balance between the sharing/empowering part and the control part. This puts you in a different position with the users who merely want to express their creativity and share and have a good time and venture to do projects together. This is the tension that we have today, this is ‘class struggle 3.0’, between user communities and platform owners, between value creators and value realizers.

Real Commons-based peer production is a bit different. If you are a hacker or a developer you love Linux because this is how you want to work. If your knowledge works you need to share it, you need to build on other people’s ideas and cooperation. This is why all of this was created. Richard Stallman created a free software because he had read a software for printing machines and some guy at the university had told him: “This is ours” and slapped a copyright on it so he could no longer use his own code. It is out of this frustration that is known to every knowledge worker, that the need for openness originates. Here the difference is that as a company you use that code but to what degree does that allow us to continue developing the code? The key conflict in a system where you have entrepreneurial coalition, a foundation and a community is to what degree you can protect the autonomy of the community while at the same time enabling an economic system to grow around it. I think this is an argument about sustainability. You may not believe this when you hear me talking but I have been in business for over 30 years and you know how that works. If you are in business you spend half of your money making a good new product, innovating and then you spend the other half of the money making sure that your competitors are not going to copy it, making sure that your TV breaks down after 10 years so people buy new ones. The game is rigged. You cannot really make real high quality products that last long and are sustainable because you would lose the competitive game.

Now, imagine that you are a company making circuit boards like Arduino. As a community of shared designers, what is your motivation to make a sub-standard circuit board? There is none. So I come back to my argument again: if in any sector you have the emergence of this ecology of community foundation and entrepreneurial coalition and they are making the best possible knowledge products, software or design, eventually they will make a better circuit board. They make a better circuit board than the companies making a circuit board which is designed to fail eventually.

Now to conclude …

How does deep social change and a phase transition from one system to another start? It starts with a cultural revolution. It starts with a new system of values being born, a “transvaluation”. The feudals and the Christians did not have the same values as the elite of the Roman Empire. If you were a member of the Roman Empire work was bad, it was for the slaves, but if you were a Christian monk work was good. You were supposed to work, you were creating God’s word on earth. So feudalism was not just a continuation of the Roman empire, it was a value revolution, of course it took something over but it was really another system. This new system of common production, the commons-based peer production, is not just a continuation of capitalism, it is not just a marginal rearrangement of the furniture, it is basically a revolution in values. For us openness, sharing and commons are the core of our value system. We are still entrepreneurs but we are a different type of entrepreneurs.

What do you do if you have a bunch of people with new values?

Let us go back to the end of the feudal system: the serfs escape the countryside and go to Florence and Venice where they meet up with the merchants and because they do not fit in the guild system they have to work for the merchants. What happens in that situation? This new segment of population demands new things and new social charters are established (the Magna Charta, the free city charters). What is a GPL, a General Public Licence? It is a social charter that says: we, the community, tell you, entrepreneurial coalition (of course it is often the same people, the developers working for Linux are the same that work for IBM or that own small companies developing Linux services), that if you want to collaborate with us you have to abide by five rules and if you don’t you do not play.

Next step: we are embedding those new values and those social charters in new open infrastructures. Think about BarCamps, a new way of meeting where the people collectively decide how the meeting will go. It is a new way and it has a new value embedded in the infrastructure of meetings. These are co-working spaces, hackers’ spaces, new infrastructures of cooperation based on different values.

Open manufacturing like Arduino is another example. Or the eCars project in Finland … if you are interested I have on a list of over 300 project that are emerging among which about 25 open-source cars being planned and developed. The first one, Local Motors, based on crowdsourced design, is already on the road in the United States. ECars in Finland has made its own first shared design to transform Corolla into eCorolla, the “common” car in the Netherlands is headed for production in 2011. This is not a utopia. We are talking about real projects that are advancing at a pretty fast speed, faster than open software. These open charters, open infrastructures become new practices. You are doing open designs, you are doing open currencies, open funding, crowd funding which you apply in your own domain, so now we have open science, open education, open politics which create products. Then you have people like me who think that this is exciting and we talk about it and try to put a little grease in the system.

This is what I am trying to say: the old system is obviously crumbling and the alternative is not going to be centralised state planning, I think most people today agree on that. So what are the new alternatives? I would argue the alternative is being built. You may not see it; it depends on where you are in the system. I have a good friend who has been working for IBM for 3 years and it was really frustrating because I was excited, I am an evangelist so I always see the good side of things but he would say: “Michel, I do not see these things happening, I do not know what you are talking about”.

Well, luckily his wife got a really nice job and now he is not working but being a house-dad, he is in Alicante and I just skyped with him yesterday and he said: “Michel, for the first time in 3 years I am starting to think that you were right”. He is no longer working for IBM so he sees things differently, he is starting to see that young people today have no future, there is generalised insecurity. So if you are faced with a crumbling mainstream system, what do you do? You look for alternatives.

A little anecdote and then I close. The chairman has been very kind to give me some more time. I was in Tampere in Finland one month ago. There was in the audience a lady who is a start-up entrepreneur. There is a new subjectivity being born. Young people are building their identity based on their contribution to this common projects. So more and more identity is going away from “I am working for IBM” to “I am doing Linux”. It is the combination of their engagements which creates a reputation, association networks and their happiness in life. I have seen that many times, for example in Amsterdam. What the lady said was: “I am creating this company and I want to hire people. Finland is in crisis, you know, there is unemployment also in Finland. And you know what? I cannot find anybody who wants to work more than 3 days a week for me”. Now, why is that? According to a study in the city of Malmö, 52% of the population is engaged in peer production. 52%! And this is why Google did it, Google is a pioneer in leaving one day a week for people to engage in their own projects. This has become the reality for young people in Finland. They are not just victims of job insecurity, they also need it in a way because they want to be engaged in their passionate projects. This is what gives meaning to their lives and this is why we have a new culture and why we are building all these new alternatives.

I could say a lot more but I am going to stop here. Thanks for your attention.”

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