Subtitles section Play video Print subtitles We are just beginning to glimpse the bare outlines of an emerging new economic system, the collaborative commons. This is the first new economic paradigm to emerge on the world scene since the advent of capitalism and socialism in the early 19th century. So it's a remarkable historical event. It has long-term implications for society. But what's really interesting is the trigger that's giving birth to this new economic system. The trigger is something called zero marginal cost. Now, marginal costs are the costs of producing an additional unit of a good and service after your fixed costs are covered. Business people are all aware of marginal costs, most of the public isn't. But this idea of zero marginal cost is going to dramatically intimately affect every single person in the world in the coming years in every aspect of their life. There's a paradox deeply embedded in the very heart of the capitalist market system previously really undisclosed. This paradox has been responsible for the tremendous success of capitalism over the last two centuries. But here's the irony, the very success of this paradox is now leading to an end game and a new paradigm emerging out of capitalism is collaborative commons. Let me explain. In a traditional market, sellers are always constantly probing for new technologies that can increase their productivity, reduce their marginal costs so they can put out cheaper products and win over consumers and market share and beat out their competitors and bring some profit back to investors. So business people are always looking for ways to increase productivity and reduce their marginal cost, they simply never expected in their wildest dreams that there would be a technology revolution so powerful in it's productivity that it might reduce those margins of cost to near zero making goods and services essentially free, priceless and beyond the market exchange economy. That's now beginning to happen in the real world. The first inklings of this zero margin cost phenomenon was with the inception of the World Wide Web from 1990 until 2014. We saw this zero marginal cost phenomenon invade the newspaper industry the magazine industry and book publishing. With the coming of the World Wide Web and the Internet all of a sudden millions of people, then hundreds of millions of people, and now 40 percent of the human race with very cheap cell phones and computers they're sending audio, video and texting each other at near zero marginal cost. So what's happened is millions of consumers became prosumers with the advent of the Internet. And so they're producing and sharing their own videos, their own news blogs, their own entertainment, their own knowledge with each other in these lateral networks at near zero marginal costs and essentially for free bypassing the capitalist market, in many instances altogether. This zero marginal cost phenomena, as it invaded the information industries, wreaked havoc on big, big industries. Newspapers went out of business; they couldn't compete with near zero marginal costs. Magazines went out of business. And my own industry publishing has been just wracked by free e-books and free knowledge and information. But, you know, the strange thing about it is at first a lot of industry watchers said this is a good thing because if we give out more and more information goods free and people are producing and sharing it free, these freemiums will stimulate people's appetite to want premiums and then upgrade this free goods and information by getting more customized information. I'll give you an example. Musicians give away their music free when they started to see this happen hoping that they would get a big loyal fan repertoire and then their fans would be enticed to go to their concerts and pay premium in order to be there in person. And then, of course, we saw this with newspapers. The New York Times will give you ten free articles a month freemiums, hoping that you'll then upload upgrade to premiums and buy their subscription service. It didn't happen on any large scale. This was very naïve by industry watchers. Sure, some people have moved from freemiums to premiums but when more and more information goods are out there nearly free shared with each other, music, film, arts, information and knowledge attention span is not there to then want to go to the premiums when you have so much available already in the freemiums. So, economists have come back recently and said all right, we understand that information goods are moving towards near zero marginal cost devastating the newspaper industry, magazines, book publishing, et cetera, but there's a firewall here that this new year zero marginal cost phenomenon on the Internet it won't pass the firewall into the physical world of physical goods and services the brick and mortar world; the world of energy and physical products. That's no longer the case. There's a new technology revolution coming online that's making it possible for millions and soon hundreds of millions and eventually billions of people to not only produce and share their own information goods but now energy and physical goods. it's called the Internet of Things. This is the expansion of the Internet and it's all happening in the last 12 months. Now this is a pretty new phenomenon. What's going on here is the traditional Internet that we're all so familiar with is now converging with a very fledgling energy internet and a nascent logistics and transport internet. And as these three Internets come together they're creating a single operating platform, a nervous system, a sort of intelligent brain. And they're taking this brain and they're attaching sensors now across the entire value chain of the economy to feed into this three Internets energy, communication and logistics. So right now we have 13 billion sensors out there connecting appliances and things with human beings. We have sensors connecting resource flows in nature. We have sensors at warehouse and distribution centers. We have sensors on the smart roves monitoring traffic. We have sensors on the factory floor constantly keeping up-to-date information on the flow of production in the factories. We have sensors in the front and back office, sensors in retail stores. We have sensors all across the system feeding big data back. What's interesting is 13 billion sensors now, IBM says in 2020 we'll have 30 billion sensors connecting everything with every being. And by 2030 the most recent forecast we'll have a hundred trillion sensors connecting all of us in one vast lateral neural network made up of three operating engines. A communication Internet converging with an energy and a logistics Internet. And let me say one more thing about these three engines. When you look back at every society their economic platforms always contained three elements, a form of communication, a form of energy to power a society and a form of mobility to move economic activity. For example, in the 19th century the first Industrial Revolution their communication was steam power printing and later the telegraph to move economic activity. The form of energy was coal and steam power. The form of mobility was the locomotive and the railroads. And that platform allowed us to build out a first industrial revolution. In the 20th century we had these three as well, these components, communication, energy and mobility. The communication was centralized electricity and especially the telephone and later radio and television. The form of energy was oil, and the mobility was the internal combustion engine. And that platform then allowed us to have a great advance of economic opportunity in the 20th century with the second Industrial Revolution. This expanse of Internet, this Internet of Things brings us to a third Industrial Revolution. And the form of communication is the Internet. The form of power is renewable energy, distributed renewable energy. And the form of mobility is driverless automated vehicles, logistics and automated drones. So what we're seeing is just the first inklings of this new platform, these three Internets in one. And what this allows us to do is any consumer can become a prosumer just like we did with information goods on the old Internet, access this new Internet of Things and have available to us a complete stream of data from every part of the economy. That means you and I, small cooperatives, small businesses, large companies, if it keeps its network neutrality we all have equal access like we did with the Internet. So we can go up on this Internet of Things now and we can take that big data flowing through the system from the devices all the way to these three Internets and any of us with our own apps and our own mobile technology will be able to use the big data and combine it with analytics to create our own algorithms just like the big guys at Google. And it won't be rocket science because those apps will be programmed for us. So we can create our own apps with our mobile technology, using that big data to dramatically increase our productivity reduce our marginal cost in the production of physical things like energy and 3-D printed products. That's already begun.