Jeremy
Rifkin’s latest book ”The zero marginal cost society” looks at how the economy
could change as an increasing part of what we consume is produced in ways,
where the marginal cost is near zero. We know that once a piece of information
has been produced, it can be copied and distributed for nearly free.
Jeremy
Rifkin argues that the same logic will apply to 3D printed physical objects and
to renewable energy.
It will
be expensive to establish the infrastructure and the machinery for producing
and delivering, and it will take investments to design and create the first version
of a product – but from there on, all the following copies are essentially
free.
As
Rifkin writes:
”Like
the communications internet where the up-front costs of establishing the
infrastructure were considerable, but the marginal cost of producing and
distributing information is negligible, the up-front costs of establishing an
energy internet are likewise significant, but the marginal cost of producing
each unit of solar and wind power is nearly zero. Renewable energy, like information,
is nearly free after accounting for the fixed costs of research, development,
and deployment”.
Obviously,
this completely changes the conventional logic in business:
”As more and
more of the foods and services that make up the economic life of society edge
towards near zero marginal cost and become almost free, the capitalist market
will continue to shrink into more narrow niches where profit-making enterprises
survive only at the edges of the economy”, Rifkin writes.
One
consequence of this is that the need for human labor to reproduce will be very
limited. To be of use, you must create variety and novelty – you can’t make
money on the second item.
A lot
of people will find it very hard to find employment or earn an income – yet we
will live in an era of abundance:
”When
the exchange value of producing additional units of a good or service is nearly
zero, it means that scarcity has been replaced by abundance. Exchange value
becomes useless because everyone can secure much of what they need without
having pay for it. The products and service have use and share value but no
longer have exchange value”.
In my
opinion, Rifkin tends to gloss over the risk of creating an economy in which a
very small group of people own the infrastructure, and have the capital and
intellectual resources to operate the machinery that delivers at near zero
cost. Business will need VERY large-scale operation to get a return on their
investment, when every transaction is so small – so the monopoly tendencies are
extremely strong.
Only
the superstars will be able to make money by creating designs that are so
novel, that everyone will want to use them for a small fee.
Rifkin acknowledges
the risk, but only in a sketchy way:
”Whether
the new potential inherent in the Internet of things infrastructure can be realized
will be determined by who finances the platform”.
”The
prospect of a new economic infrastructure and paradigm that can reduce marginal
costs to near zero makes the private firm, whose very existence depends on
sufficient margins to make a profit, less viable. Cooperatives are the only
business model that will work in a near zero marginal cost society”.
The
solution he points to is cooperatives – however, there’s not much in terms of
description of what a plausible type of cooperative. He does link the zero
margin cost logic to the explosion of the ”collaborative economy” with sharing,
makers, open source and social entrepreneurs exchanging value in new ways.
And I
completely agree, that this is perhaps the most important trend pointing the
way to an economic model for the 21st. Century.
I have a bit
of a love/hate relationship to Rifkin. He has a particular knack for sensing
new major shifts in the way our societies operate long before most others. He’s
very good at big picture thinking, and when he is at his best, he really
delivers great vision and insight.
I just wish
he wasn’t so pre-occupied with promoting himself and making sure we all
understand his magnitude.
I strongly
recommend starting out with the podcast.
