Consequences of Peer Production

Excerpts from a great post by the Anomalous Presumptions, at http://jed.jive.com/?p=23

On the difference between capitalists and entrepreneurs

The author argues that “incentives of entrepreneurs (whether they work for free, get consulting fees, or go public and become billionaires) and capitalists (who want to get a return on something they own) diverge in situations that are mainly coordinated through non-monetary incentives.”

For example, Linus Torvalds is a great entrepreneur, and his management of the Linux community has been a key factor in the success of Linux. Success to an entrepreneur is coordinating social activity to create a new, self-sustaining social process. Entrepreneurship is essential to peer production, and successful entrepreneurs become “rock stars” in the peer production world. A capitalist, by contrast, wants to get a return on something they own, such as money, a domain name, a patent, or a catalog of copyrighted works. A pure capitalist wants to maximize their return while minimizing the complexity of their actual business; in a pure capitalist scenario, coordination, production and thus entrepreneurship is overhead. Ideally, as a pure capitalist you just get income on an asset without having to manage a business.

The problem for capitalists in peer production is that typically there is no way to get a return on ownership. Linus Torvalds doesn’t own the Linux source code, Jimmy Wales doesn’t own the text of Wikipedia, etc. These are not just an incidental facts, they are at the core of the social phenomenon of peer production. A capitalist may benefit indirectly, for a while, from peer production, but the whole trend of the process is against returns on ownership per se.”

On the difference between for profit and for benefit

“Historically, entrepreneurship is associated with creating a profitable enterprise. In peer production, the idea of profit also splits into two concepts that are fairly independent, and are sometimes opposed to each other.

The classical idea of profit is monetary and is closely associated with the rate of (monetary) return on assets. This is obviously very much aligned with capitalist incentives. Entrepreneurs operating within this scenario create something valuable (typically a new business), own at least a large share of it, and profit from their return on the business as an asset.

The peer production equivalent of profit is creating a self-sustaining social entity that delivers value to participants. Typically the means are the same as those used by any classical entrepreneur: creating a product, publicizing the product, recruiting contributors, acquiring resources, generating support from larger organizations (legal, political, and sometimes financial), etc. Before widespread peer production, the entrepreneur’s and capitalist’s definitions of success were typically congruent, because growing a business required capital, and gaining access to capital required providing a competitive return. So classical profit was usually required to build a self-sustaining business entity.

The change that enables widespread peer production is that today, an entity can become self-sustaining, and even grow explosively, with very small amounts of capital. As a result it doesn’t need to trade ownership for capital, and so it doesn’t need to provide any return on investment.

There are examples where a dying business becomes a successful peer-production entity. The transformation of Netscape’s dying browser business into the successful Mozilla open source project is perhaps the clearest case. Note that while Netscape could not make enough profit from its browser to satisfy its owners, the Mozilla foundation is able to generate more than enough income to sustain its work and even fund other projects. However this income could not make Mozilla a (classically) profitable business, because wouldn’t come close to paying for all the contributions made by volunteers and other companies. “

Conclusion

Historically many benefits of entrepreneurship have been used to justify capitalism. However, we are beginning to see that in some cases we can have the benefits of a free market and entrepreneurship, while avoiding the social costs imposed by ensuring returns to property owners. The current battles over intellectual property rights are just the beginning of a much larger conflict about how to handle a broad shift from centralized, high capital production to decentralized, low capital production." (http://jed.jive.com/?p=23)

Criticism of Peer Production

Main Arguments summary

Review of the main arguments of the critics. These are excerpts only.

Tim Lee [1]:

Denying that the decentralized process can work at all (or claiming that their occasional successes were flukes) despite the fact that it obviously does. Peoples’ claims that open source software is “unsustainable”, despite the fact that it’s been growing rapidly for decades, are in the same vein.

Insisting that the process will only work in small-scale or peripheral cases, but that it doesn’t scale as well as centralized mechanisms. It’s sometimes argued that open source software is good for databases and web servers, but that for browsers, or office suites, or whatever, more centralized development processes are needed. Of course, these predictions don’t have a very good track record, as peer-produced products continue to succeed in new markets.

Focusing on failures in individual cases, while ignoring that the average is moving steadily in the right direction. Likewise, when people point to particular open source projects that aren’t very good, or to particular errors in Wikipedia pages, they’re missing the forest for the trees. No one ever claimed that every Wikipedia page would be 100 percent accurate. What we claim is that Wikipedia pages tend to steadily get better (more accurate, more comprehensive, more timely) over time, and so in the long run, we should expect it to be better than more traditionally edited publications.

Demanding a detailed description of how the process will solve a particular problem. A lot of criticisms of Wikipedia rest implicitly on the fact that we can’t predict in advance who will contribute to any given Wikipedia article: “We know that the Brittanica article on the French Revolution was written by an expert. How do I know the Wikipedia article on the French Revolution wasn’t written by a 6th grader who didn’t know what he’s talking about?” Which, of course, we don’t. All we know is that as Wikipedia becomes more popular, the average number of experts that will review any given article will increase. But we can’t necessarily predict who they’ll be or when or how they’ll come across the article in any given case."

(http://www.techliberation.com/archives/040722.php)

Nicholas Carr on the limited application field of peer production

"The bottom line is that peer production has valuable but limited applications. It can be a powerful tool, but it is no panacea. It’s a great way to find and fix problems, to collect and categorize information, or to perform any other time-consuming task that can be sped up by having lots of people with diverse perspectives working in parallel. It can also have the important added benefit of engaging customers in your innovation process, which not only allows their insights to be harnessed but also may increase their loyalty to your company.

But if peer production is a good way to mine the raw material for innovation, it doesn’t seem well suited to shaping that material into a final product. That’s a task that is still best done in the closed quarters of a cathedral, where a relatively small and formally organized group of talented professionals can collaborate closely in perfecting the fit and finish of a product. Involving a crowd in this work won’t speed it up; it will just bring delays and confusion." (http://www.strategy-business.com/press/article/07204?pg=3)

The Evolution of Peer Production

Franz Narada distinguishes three phases in the development of peer production, based on the intensity of the collaboration between peers, and its relation with the for-profit mode of production.

1. The classical "prosumer mode", in which everybody is working basically for themselves in using and customizing productive abilities created or reinforced by industrial products that enable people do use "embodied potentials" of information and automation. Alvin Toffler has discovered that in the eighties, but only Shosanna Zuboff recently formulated that this will result in a "copernican shift" where the value-creation in the classical sense is replaced by the support economy.

2. The "swarm mode" in which people are loosely aggregated in doing things, either for themselves (ebay,musicsharing) or for an external task that uses the "least effort" way (Seti@home and successors)

3. The "community mode", in which the team up in new forms of voluntary social organisation. (classical example Free Software).

The interesting thing is that this three modes are pretty separated, but there is a "hidden continuum" structurally connecting them, they become "mutual enablers". (http://www.globalvillages.info/wiki.cgi?GlobalVillages/FranzNahrada/Workspace/RomeSpeech)

More Information

From Michel Bauwens' P2P Manifesto:

The basic essay:

The Political Economy of Peer Production

Aspects of Peer Production:

Webcasts/Podcasts

Peer Production - Part Two

Contents