Economic Advantages of Open Networks
Discussion
Tiberius Brastavieanu:
"Yochay Benkler identifies two reasons for understanding why open networks can outcompete traditional organizations.
The first one is related to what economists call information opportunity cost. In essence, it says that open networks perform better in complex situations where a lot of information needs to be processed in order to seize opportunities and produce good responses to events.
The second reason refers to what economists call the resource allocation problem. Open networks do better in matching skills to tasks and allocating resources to the right activity.
Li and Seering (2019) also found that an open community reduces costs and shortens the time to market with five mechanisms:
- OS community members can help decrease the risk of product failure by providing product testing feedback,
- OS community developers can help reduce internal R&D costs,
- the OS community helps to reduce marketing and sales costs by introducing OS products to ideal potential customer pools,
- the OS community represents a talent pool for recruitment, which saves on recruiting costs, and
- the OS community provides resources for product customer channels and partnerships. Reference paper.
In ancient times, the tribe's socioeconomic structure was effective when the in-group was less than ~150 people, and one could remember reputation, debts and favors for each member of the tribe. This is called the Dunbar number. Since then, religions, nation-states, and corporations have all taken our ability to collaborate on shared goals to new levels of achievement. Today, Michel Bauwens speaks about peak hierarchy: horizontality is starting to trump verticality, it is becoming more competitive to be distributed, than to be (de)centralized. If we go back to Ronald Coase, hierarchies have higher costs due to excessive overhead for bureaucracy (an army of paper pushing middle men), a lack of transparency, coherence, speed & efficiency. Open networks seem to be poised for domination.
All these transformations are not just the desire of a group of individuals, they are not driven purely by ideology. They happen because the conditions are right, because a new potential exists and people all over the world respond to it, intuitively understanding the benefits that it offers. But disruptive changes are usually met with resistance. Sooner or later those who benefit from the status quo come to understand the threat that the change poses to their situation and they start to oppose it. A conflict takes shape between them and those who already benefit from the new potential. The church opposed the enlightenment by denigrating the scientific method and by banning the printing press, trying to stop the spread of new ideas. Monarchs opposed the shift to parliamentary democracy and free market economy fueled by the industrial revolution. Today, states go after cryptocurrency which symbolizes the movement of decentralization. In all these cases, a technology was at the heart of the movement: the printing press for spreading non-dogmatic ideas, the steam engine for spreading new modes of production, the Internet for facilitating new ways of organizing. It is easier to crash an organized movement solely based on ideas. History shows that it is almost impossible to stop a diffused transformation based on a new potential.
Fundamentally speaking, the new potential comes from disruptions in three key areas:
- Communication: The Internet makes possible many-to-many communication at global scale, in a p2p way (i.e. non-intermediated).
- Coordination: The Internet makes possible stigmergic coordination, allowing huge numbers of individuals to swarm into action like never before.
- Collaboration: The Internet allows many minds to think together, many arms to swing together. In other words, it gives rise to social intelligence, makes possible massive crowdsourcing and facilitates the deployment of complex activities based on stigmergy.
In sum, we are witnessing the emergence of a peer-to-peer society, which has its own load of good and bad. On the good side of things, it strikes a balance between the individual and communities. It transfers power to the individual, allowing open access to participation in all socioeconomic processes, within the boundaries of community, or network, self-imposed rules.
At the economic level, individuals in a p2p society have the ability to coordinate their efforts, transact among themselves, co-create and distribute their creations, while bypassing hierarchical intermediary institutions, thus escaping the established power structure, which is designed to perpetuate economic dependence. We are witnessing the emergence of a new mode of production, commons-based peer production, the formation of a p2p economy.
When it comes to material production, digital fabrication allows small groups of people to create local capacity for production at very low cost. Fablabs and makerspaces are local production units that go in that direction. that is coupled to access to global supply markets for key components. These small groups are interconnected via Internet to coordinate innovation (open source development)."