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  • 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.

We are just beginning to glimpse the bare outlines of an emerging new economic system, the collaborative commons.

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