As you may recall, the OuiShare Fest 2015 is approaching fast. As part of my assignments on the program, I will be looking after a couple of the tracks, mostly those related to capital and startups. By doing so, I quickly stumbled upon the following question: what is the role of neoliberalism and capital in the era of the Big Shift?
In my continuous quest to understand how companies and markets will be reshaped by the “collaborative” transformation, I keep stumbling upon a variety of more or less credible hypotheses. Among the many different ones, a recurring vision in the community is that independent cooperatives and decentralized systems may in the near future take over companies backed by private shareholders by offering services or products. I often find inconsistencies and holes in related reasoning: polarizing actors of the economy in two sides – peer to peer communities on one side and businesses on the other – is a truly delusional approach to understanding. Instead, so-called cognitive capitalism (as defined by Michel Bauwens) may well have a key, enabling role in an era of abundance and intangible markets; as Rifkin calls it, in the zero marginal cost society. In short, I believe that a market where a transformed and enabling version ofcapitalism coexists with peer production instead of coming to a confrontation is a credible prospect for prosperity. For neoliberal capitalism, now facing conflicts with the 99% (masterfully described in Piketty’s seminal book), it will not be an easy step. However, being said that capitalism not only learns from mistakes but also from successes, I believe this is going to be a natural transformation.
Global Perspectives, from extinction to take-off
An interesting read about this topic is the latest from Peter Thiel ("From Zero to One").
In the book, the author who perhaps best embodies Silicon Valley political DNA, provides underestimated considerations for us to think about. "From Zero to One" is almost a poster of (cognitive) capitalism and neoliberal startup thinking and clarifies a lot of the Valley’s thirst for innovation. In a dense concluding chapter, Thiel postulates (quoting philosopher Nick Bostrom) four potential scenarios in which society can evolve in the future. These four scenarios include:
- recurring collapse (alternation between prosperity and ruin)
- technological plateau (the future looks more or less like the present)
- extinction (I think I don’t have much to explain here)
- "take-off" (a much better future).
Though it happened a few times in the past (in the passage between antiquity and Middle Age for instance, or with the Greeks forgetting the use of writing after the collapse of the Minoan empire), to me, collapse does not seem such a believable perspective today: can we expect humanity coming back to Stone Age and then get back to develop its technologies? This steampunk future seems unlikely. In the same way, the prospect of a future extinction is more material for Hollywood’s disaster movies than for us to think about. What about the remaining perspectives? On the one hand there is a future in which we continue to globalize the same technologies, the same behaviors and the same ideologies and continue - at will - to have the current level of access to goods, services and technologies (the plateau). However, a legitimate question is again related to the credibility of such a scenario: given current level of conflict on resources and climate emergency, or given current geopolitical frictions can we really imagine a static future? Can we imagine a future in which where the balance of power - between emerging and developed countries, or between 99% and 1% - can resist indefinitely? That’s extremely unlikely.
Take-off and singularity: radical innovation on a large scale
The only desirable future for us to pick is the one in which we invent something radically new: abundance can be reached through a combination of powerfully innovative technologies and new disruptive models that we can’t even imagine today. That is creative destruction. But how to generate this level of innovation? The future of neoliberal capitalism could exactly be about adapting and becoming an "enabling" factor in the picture. The key question here is the following: can purely peer-to-peer systems autonomously generate the innovation level which is necessary today? While there is no doubt that these models can generate what we call "large scale peer learning"(i.e. a society more able to learn and adapt quickly to challenges), they seldom generate new visions and enabling technologies by themselves through co-creative process. The role of the leaders, founders, visionaries and investors is often overlooked. Regardless of the public or private nature of the capital which sustains innovation, the distribution of the latter to new categories of users most often happens thanks to the initiative of private individuals or business entities operating within a market. While it is true that we can generate new waves of enabling innovation and new categories of abundance with participatory systems, these systems are often based on an individual’s vision, or better that of a team, organization of private persons. More important, capital is critical in re-interpreting and redefining such systems and adapt it to niche markets to make it profitable. Capital increasingly creates platforms to facilitate and speed up the creation of a new market (e.g. Google with Android) and create sort of "brand of brands" (Android is again a good example, as well as Project Ara, again, from Google). In a zero marginal cost society, there could be a unusually clear role for capitalism:
Createenabling infrastructures and interfaces, connect supply and demand end eventually create entirely new markets.
Peer-to-peer interactions are then developed thanks to such facilities and value is generated at niches level, in the long tail.
A new breed of companies
You can find an interesting contribution in a recent piece on Harvard Business Review where Barry Libert presented an OpenMatters/Deloitte study, based on the observation of 40 years of S&P500. According to the report, four major business models, have been used so far:
- Asset Builders: These companies build, develop, and lease physical assets to make, market, distribute, and sell physical things. Examples include Ford, Wal-Mart, and FedEx.
- Service Providers: These companies hire employees who provide services to customers or produce billable hours for which they charge. Examples include United Healthcare, Accenture, and JP Morgan.
- Technology Creators: These companies develop and sell intellectual property such as software, analytics, pharmaceuticals, and biotechnology. Examples include Microsoft, Oracle, and Amgen.
- Network Orchestrators. These companies create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, and Visa, Uber, Tripadvisor, and Alibaba.
No big surprises, research confirmed that Network Orchestrators historically achieved better financial results: bigger market value, faster growth, higher profit margins (Airbnb just raised funding at a valuation of $10 billion, which would make it worth more than Hyatt Hotels or Wyndham Worldwide). Similar evidence was provided recently by Fabernovel, in a rather interesting report called GAFAnomics (NewEconomy, New Rules). The report shows how Google, Amazon, Facebook and Apple are today the clearest representatives of what is just a new breed of companies. These companies create entire new markets made of millions of users, reaching a global user base by making connections and generating interactions: they focus on creating customer driven value and generate hundred times better user experiences (faster, less expensive, etc.) that the existing ones. These companies "orchestrate" peer-to-peer production networks (as in social media, e-commerce or in the Sharing Economy). These companies have less need for investment in tangible resources when compared to traditional incumbents as it could be a retail company or a hotel chain. They need smaller and leaner staff, work on digital infrastructure and invest budget in product innovation and in sustaining demand and supply.
From the Value Chain to the Internet
Companies like these also have a role to play in the way we deal with radically new models of production. A wonderful piece by Esko Kilpi explains in plain words the role of capital, labor and workers in the digital market:
"The Internet is the first communication environment that decentralizes the financial capital requirements of production. Much of the capital is not only distributed, but also largely owned by the workers, the individuals, who themselves own the smartphones and other smart devices, the new machines of work. Creative network-based work in the future will not be about jobs, but about tasks and interdependence between people. You don’t need to be present in a factory any more, or in an office, but you need to be present for other people. [...] Can companies perhaps be replaced by apps in some cases? Or can managers be replaced by apps? Or perhaps more and more new companies look like apps, like Uber or Airbnb already do."
Internet and technology not only become here the enablers of a new production model, but are in fact instruments of "liberation" that can shift power from the large corporation to the employee. A new era of independent (or rather inter-dependent) work, driven by passion and meaning, looks now at hand. One issue, however, remains open: how to enjoy this new enabled era, while keeping track of the growing powerand impact
on environment and society of the so-called cognitive capitalism? If we use apps instead of companies and organizations, who will guarantee us about their goodness and integrity? Is it really possible to imagine that our increasingly digital society nicely accelerates into a perspective of coexistence between neoliberal capital and interconnectedpeer production towards Thiel’s singular take-off?
Dreaming of Automatic Corporations
A lot of people are talking today about the possibility that autonomous, almost automatic, entities could eventually replace the firm: the company that designs, cures, maintains and innovates a "platform" (an enabling system). This is what I read a few days ago on Coindesk: “Is there a better way [ed: to run a sharing economy platform]? One of the most significant promises of bitcoin was its ability to operate in a decentralised, autonomous way, with a degree of trust that was coded into the network. We know that cryptocurrencies excel at payments; could they also be used to run the other parts of a sharing economy service?”
The web is full of ruminations phantom Dapps (DecentralizedApps) or DAOs (Decentralized Autonomous Orgnizations) working as "shared" platforms and co-managed by a system of peers (users). But what happens when you cut out investors, designers and founders from the whole innovation picture and try to automate one firm? Who is responsible in that case of the kaizen? The perpetual innovation? Who would improve the user experience all the time? How, eventually, such an organization could compete with a "non-automatic" one? With one owned by private capital and able to provide greater value at fair market price?
A more credible prospect is offered by Lisa Gansky in her latest piece on FastCo.Exist. The role of the platform owners and creators is identified as fundamental in many key moments in the life of such companies. As noted by Gansky: “in the case of many peer to peer marketplaces, the producers rely on the platform to create demand, competitive pricing, expectation management (which in many cases includes liability insurance), a mobile app and website, the ability to track performance, and a compensation mechanism.” At this complex moment in history, "to build business models that generate dignity" may be the right way to give stability and resilience to ventures and increase brand value over the long term: experimenting with sharing ownership, governance, revenues and strategy-making are just some of the possible ways to do this.
The legitimate question to ask is: who will push companies to become more equitable, transparent and "empowering" in the process?
From Narratives to Companies
In Spain, Podemos, a party with a rather radical vision born from the ashes of the "indignados" movement is now troubling the traditional players, to the point of becoming a real contender and based most of its fortune in using social media as a context to develop shared narratives. Following a huge social buzz campaign and started from an article on Rolling Stone, The People’s Climate March in New York gathered hundreds of thousands people on the street - and was a tremendous accelerator of awareness in preparing the public ground for the upcoming climate discussion of 2015. Increasingly we experience the interconnected nature of our contemporary society with powerful new narratives which grow, expand and consolidate rapidly with significant impacts outside the digital realm.
According to John Hagel, companies must learn to identify, support and create new narratives that go far beyond their boundaries. These narratives should be linked to the creation of new enabling innovations: An effective corporate narrative would identify an opportunity that’s beyond the reach of a company today, an opportunity not just for the company, but for many, many others. An opportunity so great that it can’t be achieved in isolation but requires collective action. According to Hagel, companies that work as movements and know how to impersonate shared objectives can quickly learn on a large scale (scalable learning) and generate growth. Ultimately these companies-movements would shift from responding to short-term changes in markets, to having the ability to define the reality of the new possible, creating entirely new markets of which to become undisputed leaders. The recent efforts of AirBnb to move from being a “marketplace” to be a community you belong to, are emblematic:
New dynamics: from brand that create narratives to narratives that create brands
Now, trying to put the dots together, the perspective looks like this:
- connected communities incubate new narratives
- leaders simplify, focus and expand these narratives into visions and brands
- companies, products and services are created according to the existing technological enabling infrastructure
- these new businesses generate new competition for incumbents and transform markets (creating frictions with incumbents)
In this perspective of "power shift", power goes evidently from the brand to the "peer": it is thanks to the platform but within the community that interactions, relationships and transactions occur (making the bulk of the value in the networked value chain). This part of the market is essentially intangible. The tangible component is, more and more, considered a utility: it must be re-configurable and standardized. That’s why Travis Kalanick’s “dude in the car” will be soon substituted by a robot. Just because it is supposingly better both for business and users. Despite building infrastructure is not an easy job, it represent the greater concentrative opportunity of our time for generating revenue: incidentally, enabling "infrastructures" tend to become monopolies. But how much are they effectively dictatorial monopolies? The increasing speed with which new narratives assert themselves - can generate a fast loss of brand consensus. This will drive such actors towards enabling responsibly rather than to control.
In a beautiful piece on his blog, Nick Grossman – from Union Square Ventures - describes the trust problem in platforms with a very fresh point of view: “[ed: The problems web platforms face] are very much the same issues that governments grapple with in developing public policy, and that web platforms actually look a lot like governments. Which makes sense, because both in the case of governments and web-enabled networks, the central task is to
build an architecture around which other activity happens. You build the roads and the other essential public infrastructure, and then you set the ground rules which enable the community and economy to function.
Of course, there is a major difference: web networks are not governments, and are not bound by all the requirements & responsibilities of public institutions. They are free to create their own rules of engagement, which you agree to when you decide to participate (or not) in that community"
Despite a parallelism between digital platforms and states might sound alarming and dystopic, I think it makes a lot of sense and should lead us to think deeper. It took centuries to build (at least facade) democracy in the management of public good through nation states. As we start recognizing that global digital platforms have growing impacts on our lives we should try to advocate and apply democratic governance to those.
Destined to inequality?
As we face growing economic injustice – as explained by Piketty infamous book – we’re tempted to think that network orchestrators and the interconnected era rather than empowering us, operated in the reverse direction, generating greater inequalities. Could this disparity be seen as a result of the very transformations that the Internet itself brought to the market and society? Aren’t we in the Long Tail era after all? The Pareto principle (with 80% of the effects coming from 20% of the causes) sounds awfully familiar to the 1% against 99%.
Now let’s imagine ourselves in a zero marginal cost society, our lovely post take-off scenario, when new categories of abundance will be available to us. In this scenario, we will have access to an much higher level of goods and services, with costs that are orders of magnitude smaller. What will be the role of wealth inequality in such a plenty world? Will financial inequality count in a world where communities can self organize and create thriving ecosystems thanks to an efficient, enabling platforms that connect them? But even more importantly, the question is: will we have the political will – as an internetworked universe of communities - to make this vision happen... or to change a disappointing reality?
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Part of this work appeared on Chefuturo (CC-BY-SA-NC)