Jeremy Rifkin's Distributed Capitalism Scenario
distributed energy + distributed manufacturing + distributed marketing and logistics
"Energy regimes shape the nature of civilizations—how they are organized, how the fruits of commerce and trade are distributed, how political power is exercised, and how social relations are conducted. To understand how the new Third Industrial Revolution infrastructure is likely to dramatically change the distribution of economic power in the twenty-first century, it is helpful to step back and examine how the fossil fuel–based First and Second Industrial Revolutions reordered power relations over the course of the nineteenth and twentieth centuries.
- "The distributed nature of renewable energies necessitates collaborative rather than hierarchical command and control mechanisms. The new lateral energy regime establishes the organizational model for the countless economic activities that multiply from it."
Fossil fuels—coal, oil, and natural gas—are elite energies for the simple reason that they are found only in select places. They require a significant military investment to secure their access and continual geopolitical management to assure their availability. They also require top down command and control systems and massive concentrations of capital to move them from underground to the end users. The ability to centralize production and distribution— the essence of modern capitalism— is critical to the effective performance of the system as a whole. The centralized energy infrastructure, in turn, sets the conditions for the rest of the economy, encouraging similar business models across every sector.
Virtually all of the other critical industries that emerged from the oil culture—modern finance, telecommunications, automotive, power and utilities, and commercial construction—and that feed off of the fossil fuel spigot were similarly predisposed to bigness in order to achieve their own economies of scale. And, like the oil industry, they require huge sums of capital to operate and are organized in a centralized fashion. Three of the four largest companies in the world today are oil companies—Royal Dutch Shell, Exxon Mobil, and BP. Underneath these giant energy companies are some five hundred global companies representing every sector and industry—with a combined revenue of $22.5 trillion, which is the equivalent of one-third of the world’s $62 trillion GDP—that are inseparably connected to and dependent on fossil fuels for their very survival.
The emerging Third Industrial Revolution, by contrast, is organized around distributed renewable energies that are found everywhere and are, for the most part, free—sun, wind, hydro, geothermal heat, biomass, and ocean waves and tides. These dispersed energies will be collected at millions of local sites and then bundled and shared with others over a continental green electricity internet to achieve optimum energy levels and maintain a high-performing, sustainable economy. The distributed nature of renewable energies necessitates collaborative rather than hierarchical command and control mechanisms.
This new lateral energy regime establishes the organizational model for the countless economic activities that multiply from it. A more distributed and collaborative industrial revolution, in turn, invariably leads to a more distributed sharing of the wealth generated.
The extraordinary capital costs of owning and operating giant centralized telephone, radio, and television communications technology and fossil fuel and nuclear power plants in markets is giving way to the new “distributed capitalism,” in which the low entry costs in lateral networks make it possible for virtually everyone to become a potential entrepreneur and collaborator, creating and sharing information and energy in open commons. Witness twenty something young men creating Google, Facebook, and other global information networks, literally in their college dorm rooms and thousands of small businesses converting their buildings to green micro power plants and connecting with one another in regional electricity networks.
What I am describing is a fundamental change in the way capitalism functions that is now unfolding across the economy and reshaping how companies conduct business. The shrinking of transaction costs in the music business and publishing field with the emergence of file sharing of music, eBooks, and news blogs, is wreaking havoc on these traditional industries. We can expect similar disruptive impacts as the diminishing transaction costs of green energy allow manufacturers, service industries, and retailers to produce and share goods and services in vast economic networks with very little outlay of financial capital.
For example, consider manufacturing. Nothing is more suggestive of the industrial way of life than highly capitalized, giant, centralized factories equipped with heavy machines and attended by blue-collar workforces, churning out mass-produced products on assembly lines. But what if millions of people could manufacture batches or even single manufactured items in their own homes or businesses, cheaper, quicker, and with the same quality control as the most advanced state-of the-art factories on earth?
While the TIR economy allows millions of people to produce their own virtual information and energy, a new digital manufacturing revolution now opens up the possibility of following suit in the production of durable goods. In the new era, everyone can potentially be their own manufacturer as well as their own internet site and power company. The process is called 3-D printing; and although it sounds like science fiction, it is already coming online, and promises to change the entire way we think of industrial production. Think about pushing the print button on your computer and sending a digital file to an inkjet printer, except, with 3-D printing, the machine runs off a three-dimensional product. Using computer aided design, software directs the 3-D printer to build successive layers of the product using powder, molten plastic, or metals to create the material scaffolding. The 3-D printer can produce multiple copies just like a photocopy machine. All sorts of goods, from jewelry to mobile phones, auto and aircraft parts, medical implants, and batteries are being “printed out” in what is being termed “additive manufacturing,” distinguishing it from the “subtractive manufacturing,” which involves cutting down and pairing off materials and then attaching them together.
- "In the new era, everyone can potentially be their own manufacturer as well as their own internet site and power company. The process is called 3-D printing."
3-D entrepreneurs are particularly bullish about additive manufacturing, because the process requires as little as 10 percent of the raw material expended in traditional manufacturing and uses less energy than conventional factory production, thus greatly reducing the cost.
In the same way that the Internet radically reduced entry costs in generating and disseminating information, giving rise to new businesses like Google and Facebook, additive manufacturing has the potential to greatly reduce the cost of producing hard goods, making entry costs sufficiently lower to encourage hundreds of thousands of mini manufacturers—small and medium size enterprises (SMEs)—to challenge and potentially outcompete the giant manufacturing companies that were at the center of the First and Second Industrial Revolution economies.
Already, a spate of new start-up companies are entering the 3-D printing market with names like Within Technologies, Digital Forming, Shape Ways, Rapid Quality Manufacturing, Stratasys, Bespoke Innovations, 3D Systems, MakerBot Industries, Freedom of Creation, LGM, and Contour Crafting and are determined to reinvent the very idea of manufacturing in the Third Industrial era.
The energy saved at every step of the digital manufacturing process, from reduction in materials used, to less energy expended in making the product, when applied across the global economy, adds up to a qualitative increase in energy efficiency beyond anything imaginable in the First and Second Industrial Revolutions. When the energy used to power the production process is renewable and also generated on site, the full impact of a lateral Third Industrial Revolution becomes strikingly apparent. Since approximately 84 percent of the productivity gains in the manufacturing and service industries are attributable to increases in thermodynamic efficiencies— only 14 percent of productivity gains are the result of capital invested per worker— we begin to grasp the significance of the enormous surge in productivity that will accompany the Third Industrial Revolution and what it will mean for society.
Near Zero Cost Marketing and Logistics
The democratization of manufacturing is being accompanied by the tumbling costs of marketing. Because of the centralized nature of the communication technologies of the first and second industrial revolutions—newspapers, magazines, radio, and television—marketing costs were high and favored giant firms who could afford to devote substantial funds to market their products and services. The internet has transformed marketing from a significant expense to a negligible cost, allowing start ups and small and medium size enterprises to market their goods and services on internet sites that stretch over virtual space, enabling them to compete and even out compete many of the giant business enterprises of the 21st century.
Consider Etsy, a brash, web start-up company that has taken off in the past seven years. Etsy was founded by a young New York University graduate, Rob Kalin, who made furniture in his apartment. Frustrated that he had no way to connect with potential buyers interested in hand-crafted furniture, Kalin teamed up with a few friends and put up a website designed to bring individual craftsmen of all kinds, from around the world, together with prospective buyers. The site has become a global virtual showroom, where millions of buyers and thousands of sellers from more than fifty countries are connecting, breathing new life into craft production—an art that had largely disappeared with the advent of modern industrial capitalism.
Connecting multitudes of sellers and buyers in virtual space is almost free. By replacing all of the middlemen—from wholesalers to retailers— with a distributed virtual network of sellers and buyers and eliminating the transaction costs that are marked up at every stage in the marketing process, Etsy has created a new global craft bazaar that scales laterally rather than hierarchically, and markets goods collaboratively rather than top-down.
- " The internet has transformed marketing from a significant expense to a a negligible cost, allowing start ups and small enterprises to compete with many of the giant business enterprises of the 21st century."
Etsy brings another dimension to the market—the personalization of relationships between seller and buyer. The website hosts chat rooms, coordinates online craft shows, and conducts seminars, allowing sellers and buyers to interact, exchange ideas, customize products, and create social bonds that can last a lifetime. Giant, global companies mass-producing standardized products on assembly lines operated by anonymous workforces can’t compete with the kind of intimate one-to-one relationship between artisan and patron.
Although still in its infancy, Etsy is a quickly growing enterprise. In 2011, Etsy’s sales topped nearly $500 million. In a recent conversation, Kalin told me that his mission is to help foster “empathic consciousness” in the global economic arena and lay the foundation for a more inclusive society. His vision of connecting up “millions of local living economies that will create a sense of community in the economy again” is the essence of the Third Industrial Revolution model. Etsy is only one of hundreds of global Internet companies that are bringing together producers and consumers in virtual marketing spaces and, in the process, democratizing marketing costs across the global economy.
As the new 3-D technology becomes more widespread, on site, just in time customized manufacturing of products will also reduce logistics costs with the possibility of huge energy savings. The cost of transporting products will plummet in the coming decades because an increasing array of goods will be produced locally in thousands of micro-manufacturing plants and transported regionally by trucks powered by green electricity and hydrogen generated on site.
The lateral scaling of the Third Industrial Revolution allows small and medium size enterprises to flourish. Still, global companies will not disappear. Rather, they will increasingly metamorphose from primary producers and distributors to aggregators. In the new economic era, their role will be to coordinate and manage the multiple networks that move commerce and trade across the value chain." (http://theeconomicrealms.blogspot.co.uk/2013/05/the-third-industrial-revolution-how.html)