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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Location: Northwest Arkansas, United States

Wednesday, October 26, 2005

Dave Pollard et Al: Open Source World

Some good stuff by David Pollard in the past few weeks on Open Source Business. Here he defines the concept:

A radically transparent organization which (a) operates through open collaborative partnerships with customers, employees, suppliers, and the communities in which it does business, (b) shares its sources of information, designs, specifications and processes with them, and (c) allows open participation in and makes public all decisions it makes, all operating information, and all documents it produces, on a creative commons basis.

In a follow-up post, he describes its functioning in the marketplace:

To remain competitive, at least as long as the 'market' economy remains in place, an OSB must be small enough to stay below the interest radar of potential larger competitors, or choose to operate on a zero- or small-profit basis, so that larger enterprises will be unwilling to match its price. So OSB is best suited to those who are looking for something other than big money in the way they make a living. That's not to say an OSB cannot be very profitable. Profit, however, is not the intention of the business, and, because growth is not the intention of an OSB either, any surplus would normally be returned to the community and the customers. Not-for-profit businesses are not volunteer organizations. Its members earn a market-rate salary, but not more.

Businesses that are not-for-profit and which have no ambitions for growth are not of much interest to banks or investors, but may well be of interest to credit unions or fraternal financial institutions, which also operate on a not-for-profit basis (though generally they do aspire to growth).

Take a look through the standard industrial classification of businesses and other organizations... and you'll have a hard time coming up with any business that doesn't lend itself to operating as an OSB. The toughest are probably mineral exploration and pharmaceuticals, industries with a huge investment required and a substantial risk of having nothing to show for it. Just about any other type of organization, it seems to me (including government, transportation, health and education), could just as easily be community based, small, and not-for-profit, with what Jon Husband calls 'wirearchy' coordinating their actions with similar organizations in other communities. Size and hierarchy are unnecessary.

Industries like mineral exploration and pharmaceuticals could manage that risk the same way all other large risks are managed -- by pooling their collective risks against failure, making the search a networked 'joint venture'. The result for those in the risky businesses is the elimination of both profit and loss. For example, suppose there were 50 tiny pharma companies looking for an antiviral for Poultry Flu. All but one of the 50 invests $1M and comes up empty. One invests $1M and comes up with the answer. The drug is valued at $50M. All the small community governments (say a million of them) in the world split that cost by paying $50 each for an unlimited amount of the drug (cost of manufacture of the drug itself is usually negligible) and offer their members the drug for nothing -- the $50 is part of the community's health care budget. The $50M goes equally to the 50 pharma companies, eliminating their loss by covering all their costs. Nobody makes a profit, but no one suffers a loss, either. The people in the pharma companies get their standard 'salary' costs paid for, and the satisfaction of knowing they participated in finding a cure for a horrific disease.

Compare this to Eric Raymond's response to a Marxist who denounced him as "right-wing":

...you know, it’s not like I’ve made any secret of the fact that I believe open-source thinking has radical political consequences in the longer term. I’ve said many times that the economic-efficiency arguments for open-source decentralization should sufficient to get people to do it without buying my politics. Then I’ve turned around and observed that learning how to do without centralization and big management in one area provides people with both working models and efficiency arguments for getting rid of authority hierarchies elsewhere. Yeah, sure, that’s a conservative prescription!

I’ve even argued — in front of Wall Street analysts, and had them buy it! — that we’re entering an era in which the traditional capital-intensive, management-intensive corporate form is less and less appropriate for managing production in which the main bottleneck is skilled human attention. I don’t use the term “workers’ cooperative” for what’s replacing it, but hello…hello? Can’t any of the so-called “progressive” thinkers in the Marxist camp put two and two together?

“Right-wing”. It is to laugh. It is to laugh exceedingly.

In another post, Pollard applies his open source vision specifically to the information and entertainment industries:

I believe we are less than a decade from reaching the point when all software and all content (information and entertainment) will be file-shared and quickly and simply downloadable free of charge as soon as it is released. By that time there will be some revolutionary changes to hardware as well -- it will get much smaller, faster, cheaper (though not free) and wireless, to the point that you won't bother to keep any content on your personal devices at all (though we may all share our content peer-to-peer through our cast-off wire-anchored PCs, part of a huge distributed network of global file servers, data warehousers that we will be oblivious to, and which will interact only with other machines). The plunging price of hardware and bandwidth and the ubiquity of free content will perhaps, at last, awaken us to the abominably low value of most of this stuff, and the horrific amount of time we spend paying attention to it -- and we may (we can only hope) rediscover the superiority of personal, self-created entertainment, conversation, live performances, imagination-provoking fiction, art and poetry, and contemplation of the real world on this side of the screen.

But there will be some other implications, less important socially but more important economically. With the disappearance of advertising, current producers of media content will need to find another business model to fund their productions. That model may vary from a Gift Economy (many of the baby boomers will have retired, and may be willing to write and produce good quality entertainment for the sheer creative joy of it), to a personalization model (sell tickets to the live performance, with a chance to meet the cast afterwards, and give the taped version away free). Those who entertain but don't perform live (studio musicians, authors who don't do readings and Q&As, and animated film producers) will need to be more creative in financing their careers (such as teaching -- long an admirable and accepted vocation for entertainers, and making customized products). It's hard to say whether corporate sponsorships (mainstay of US public broadcasting), and product placement will remain viable financing mechanisms. Private 'memberships' are doomed to be circumvented, unless they are altruistic and (also like US public broadcasting) bestow no special 'bit-access' privileges. Overpaid superstars will be a thing of the past.

The implications for media intermediaries (television and radio networks and print newspapers and other content aggregators) are more dire. These groups simply do not add enough value to justify their cost. I predict that unless they reinvent themselves (and they have shown themselves quite uninventive) they will soon go the way of ticket-punchers, tellers and bellboys ("thanks, I can look after that myself").

That reminds me of some brilliant remarks Steve Koppelman made in a comment thread at Reason Hit & Run:

Before the mid 19th century, when mass-market sheet music and piano roll sales created a "music industry" in which selling widgets and collecting royalties became sources of income, there was still plenty of music being made. People played fiddles and lutes and whistles and whatever around the kitchen table and the campfire. Some made money at it playing in party bands. Traveling musicians and buskers could earn a modest income. Other professionals played in theaters and traveling shows, and still others earned money through composing pieces on commission.

The music industry as we've come to know it in the last century and a half is a fairly new development. Music isn't. It came into being because printing sheet music, producing piano rolls, and later, manufacruring cylinders and discs and tapes was expensive and required costly equipment. The only entities that could afford do it were serious businesses, so the business models they created around copyright, publishing rights and manufacturing a physical product were viable. It was easy to use copyright to protect your interests because serious piracy required serious capital. Piracy that impacted the industry generally came from big operations run by organized crime . Cracking down was the relatively simple matter of radiing factories and warehouses and stopping big trucks full of bootlegs.

Now the "music industry" is unnecessary. Anyone can produce a flawless CD for about forty cents at home. Maintaining the industry in its current state is simply propping up an old cartel out of a misguided sense that it's the rightful gatekeeper to music distribution.

We're not rushing to ban or tax the hell out of digital cameras because Kodak and Polariod are suffering. They haven't asked government to do so, and they'd be laughed out of town if they did.

The record industry is obsolete. It's time for all those people to find another line of work. Musicians will keep making music. They just won't have an easy time making money from selling recordings. We had music for thousands of years before Edison's wax cylinders, and the inevitable end of the music industry -- pay-per-track download sites included -- won't put a stop to it. It may signal an end to the top-down star system, though, and a return to local and personal musicmaking.

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Blogger JoeTKelley said...

Might I be so bold as to suggest that Pollard does not see one vital piece of the puzzle? That piece can be recognized once the term Profit is shaken out, stripped of all falsehood, and seen from a more accurate angle of view?

The energy production market illustrates this angle of view with crystal clarity. If I, as I am now setting in motion, were to start up a new Open Source Capital Independence market, then, how is it my efforts will be rewarded?

Rather than answer the question practically in dollars and cents, which happens to be a very cloudy language, let me use the language of binary code and electric power i.e. watts.

Rather than answer the question in practical terms with examples of personal costs concerning the price tag on a windmill ($20,000.00) the output of a windmill (1500kWh per month @15mph) and the amortization of eventual return on investment (x years dependent upon current exchange rates on energy) etc. Rather than all that practical reality – it may suffice to communicate clarity by imagining the creation of a widget.

The actual widget may turn out to be a home drop in unit where a wind turbine, solar panel, battery, hydrogen generator, hydrogen storage tank, hydrogen dispenser, hydrogen appliances, hydrogen car, etc. and so on. Rather than naming the actual salable product and accessories – let’s just call the theoretical project - a widget.

I make a widget that will cost only me (all alone) - 5 years of my life - x watts of energy in all forms that total $100,000.00 in investment costs (charged to my account) at the end of 5 years, when, I alone switch on the widget.

Me + 5 years + $100K = Active Widget

Who profits?

In actuality the product I have in mind will generate twice the required watts that I will use and allow me to sell the remaining watts at market or below market prices. I am that kind of guy.

In this theoretical widget world my widget puts out twice the worlds current electric energy.

How am I doing?

Dialog replaces dictates in an open source world. Stuff goes out and stuff returns back to the source intact or better.

October 27, 2005 4:48 PM  
Blogger JoeTKelley said...

Back to the drawing board,

Without dialog it is impossible for me to communicate.

I can wait for dialog to find me; however I’m not that patient.

So here goes for another try at refining the model and the concept.

If it takes x number of years and y total investment capital energy for one individual to develop the proverbial widget (the widget that doubles the total Global potential of energy) at an arbitrary cost (for arguments sake) of half the current cost of energy, then, the whole concept of power of all kinds is brought into clear view.

Total Global Potential Energy – 50 percent costs of energy production = Real economic power.

I make the widget. I have it on my site (property). I turn on the switch.

I now have all the energy I need at half the cost. The widget works for me.

The first person to see the value in this new product is my neighbor. I walk over to his house or he walks over to my house. We negotiate. I sell him power at half the current market cost.

My neighbor has a water well. He can now sell water to me at cost minus half the cost of energy required to pump the water from his well to my water tank. He can now sell me pistachios, or rice, or beef, windmill blades, water tanks, or whatever he currently produces at “cost” minus half the cost of the energy required to produce the products he sells. I profit from his success.

I go to my next neighbor and offer the same deal. Each new neighbor joining the network reduces the cost of doing business by half the cost of energy required to produce the products that require energy. Total Global energy begins to cost less.

By the time the network reaches past the cost of pushing the energy through electric cables, or through any current carrying medium, then, it is time to build an array of new widgets spanning the circumference of distance. I sell 4 widgets to four new customers going north, east, south, and west. I can also bypass outdated economic practice and simply publish all the information needed to build your own widget. I give away the widget plans. I open the source.

Rather than wait for the widget plans to be sold by me to anyone “interested” and to anyone “rich” enough to afford my price, instead, I profit from their ability to see the wisdom of starting their own node in the new power structure. I profit as more energy is made and as the cost of making things with energy lowers. I gain purchasing power. Gaining purchasing power is my profit. I give away the plans. I get back cheaper goods as the energy supply increases and as energy costs decrease. I profit from the success of my neighbors as they too see the wisdom of generating energy.

Each new node decreases my ability to sell energy above cost. This looks like a bad idea to an old, outdated, economist. An old outdated economist will prefer to sell his valuable stuff above cost. He defines profit as: personal enrichment in the short term. I define profit as personal enrichment in the long term. See the difference? I give away value with the certain knowledge that I will receive value in return. I reject personal, short term, enrichment in favor of long term investment. In fact - I cut out much of the costs associated with ‘protection’.

October 28, 2005 9:29 AM  
Blogger JoeTKelley said...

By the time the network spans the globe the cost of producing every product on the planet has been reduced by half the cost of the current price of power.

By the time the network spans the globe - the whole nature and structure of power is redefined. No longer are people interested in seizing power - each point of power generation in the matrix that does not transfer power at a standard rate at or below cost will reduce power from each production point within the circumference of an independent power generating node.

To be clear: Each independent power generation node that refuses to abide by the cost principle will try to raise the price of their power above cost. In fact: they choose to suck.

The closest customers linked up to the sucking node now have a choice. Costs of production will rise for those customers who are closest to the sucking node. Efforts to reduce costs of production are directed toward fixing the problems at the sucking node. The sucking node is a person who defines profit as: personal enrichment in the short term and people can see the problem clearly in dollars and cents (binary code and watts).

The sucking node cannot hide behind falsehood pretending to redefine crime with the word profit. The solution to the problem of this obvious falsehood is liberty.

If the sucking node has no intention of transferring power at a standard rate, and if his connected customers need cheaper power, then, if the victims know better, then, those victims build their own node and disconnect the errant node from the matrix. The errant node can still create all the power he or she needs for themselves – alone – or wise up and transfer at the standard rate. The sucking node, despite their old antiquated economic theories, despite their personal greed, will still profit from lowering costs globally.

October 28, 2005 9:39 AM  
Blogger JoeTKelley said...

Financial or pecuniary “Law” or money becomes standard world wide because money becomes accurate, indisputably accurate, common, and free from corruption. Money can become a very simple binary program recording the transfer of power measured in watts.

My neighbor’s computer measures 600kWh in one month. If we agree to negotiate a rate based upon the standard watt then I now have 600kWh of credit to be claimed or not from my customer. If my customer claims to know nothing about his promise to credit me, then, I can turn off his supply of power. If my customer wishes to renegotiate, then, we check the law books. The judge hands down the verdict written in binary code measured in watts. My hard drive shows, indisputably, a credit from my customer, for 600kWh worth of power.

If my customer does not wish to pay off his debt and if my bank account is then defaulted, then, my other customers can see, in code, the criminal, and my other customers can see just who does and just who doesn’t deserve “Negative Feedback”.

Rather than spending valuable energy in the process of increasing the size of the jail, the court, the police force, and the executioner – I can offer the criminal the plans for a smaller widget. I can give him enough credit for him to become independent. Stop sucking please.

Make your own power and do with it as you see fit.

The police force becomes the Maytag repairmen of commerce “Law”.

October 28, 2005 10:20 AM  
Blogger JoeTKelley said...

I’m done here, for now, moving on to other nodes. If you do not see this as THE means to rock the world, then, something is profoundly wrong with me or language. I see it clearly – a clearly as right is not wrong, pain is not pleasure, night is not day, black is not white, and 2 + 2 does not equal 5.

October 28, 2005 10:24 AM  
Blogger Ouranosaurus said...

Those who entertain but don't perform live (studio musicians, authors who don't do readings and Q&As, and animated film producers) will need to be more creative in financing their careers (such as teaching -- long an admirable and accepted vocation for entertainers, and making customized products).

I've thought about this for a while, as I'm a reporter and I'd love to make a living as a fiction writer someday. The fact is, it just isn't worth it to pirate 90 per cent of writers. Most of us don't make a full time living at it in the first place, and most of the rest just make a working or middle-class wage. There are only a few superstars, and those are the ones who can be targetted by pirates - but they're also in the best position to make money from their celebrity. They can sell authenticated, autographed books, do speaking tours, conduct $500 per ticket writing seminars or what have you.

Charlie Stross, who publishes under a limited Creative Commons license, pointed out the fact that for most writers, there's not a market big enough for the pirates to pick up on.

October 28, 2005 2:53 PM  
Anonymous Anonymous said...

I should point out that recording artists make most of their money touring, not recording. Most of the recording profits go to the publishers, record companies, and songwriters (if the band uses someone else's compositions). The band still makes its money on the road.

- Josh

October 31, 2005 8:05 AM  

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