The Hames Report

Convergence@Speed

A few years ago I started talking about the emergence of a plausible planetary technoculture resulting from the unpredictable conjunction of a few seminal streams of human invention, and the activities related to them. I was particularly fascinated by the effects of information-based technologies on what we currently do and how we do it – especially when divorced from more serious questions related to why we do it.

But now we also need to add the speed of change as an additional defining factor. Outside of its more everyday use as metaphor there is little current appreciation of the speed of change - still less concerning the conditions the speed of change could generate through technological innovation.

There are a number of significant convergences occurring that will transform human cognition and performance. The convergence of biotechnology, nantechnology and robotics, for example, is already radically transforming healthcare, war, security and manufacturing. Similarly the merging of in-memory computing, the Cloud and device mobility is shifting our capability to access knowledge, anywhere, in real-time – impacting how we interact with each other, undertake business transactions, and move to more participative forms of democracy.

Of course there are other more estoeric intersecting epistemologies that are potentially far more interesting than focusing on computer science and informatics (the convergence of quantum science, indigenous wisdom and spirituality, for example, that could well give rise to a new human cosmology) but these are outside the scope of this article.

How these conjunctions evolve, and how they will overturn everything we take for granted, make for a fascinating study for one overwhelming reason: the perceived rate of technological change is exponential. In other words we will arrive in the future much faster than anticipated. This is not a new phenomenon. One only has to review the time it took to decode the human genome or comprehend the illusion of time created by the exponential growth of a toxic weed in a pond, for example[1]. But it is still so often misconstrued and leads to patterns of human behaviour that lack foresight and wise judgement.

For the most part we cannot readily conceive of change at this magnitude because our intuition about the future tends to be commonly expressed as linear extrapolations of the past or the present. Consequently we tend to ignore, misinterpret (or drastically underplay) the impact of exponential change on our lives. This has huge implications for investors, ethicists, designers, engineers, entrepreneurs and government policy makers, as well as technologists themselves.

Let’s spend a few moments considering what exponential change implies vis-a-vis how we currently think about progress and habitually make decisions based upon assumptions derived from more conventional understandings.

The arithmetic of logarithmic (or exponential) functions is easy enough. Essentially it is a simple formula: when relative growth of any kind (e.g. population growth, compounded interest, resource extraction, inflation or consumption) is a constant measured as a percentage over time, the doubling rate of what we are measuring (in other words the time it takes for a quantity to double in size or value) will be 72 divided by the unit of growth. So for example, if the economy grows at an average 7 per cent per annum it will double over the span of ten years. If the growth rate is an average of 10 per cent per annum then the doubling factor will be just 7 years. And so on…

In this context consider what China has achieved since 1980. The Chinese economy has been growing at an annual rate of 10 per cent for the past 30 years. That means the economy has doubled a total of 4 times over that period. Hundreds of millions of people have been lifted out of poverty during that time. Many new cities have been built. A modern infrastructure of highways and railways has transformed the landscape, opening up the hinterland and making it far easier to travel to the major cities. In 2010, China had 18 million households with an annual income above USD 16,000. By 2020, this number will be 167 million households. That's almost 400 million people! What is more, Chinese brands are now competing with (and out-performing) the world’s best.

Astonishing economic acceleration of this nature is unprecedented on such a scale. But there are always unintended consequences. For example, if you were motoring on the highway between Zhangjiakou and Beijing in late 2010 it would have taken you many days to reach your final destination. Massive traffic jams regularly clog this highway – occasionally stretching to more than 60 miles. On this occasion thousands of commuters were stuck on the road for days, living off water and food sold to them by vendors wandering through the semi-parked cars. Apart from ongoing construction on this highway and the carriage of illicit coal and other materials from Mongolia, it is the explosive growth in car ownership (Beijing alone is adding cars at an astonishing rate of 1,900 every day) that's the most likely cause of this urban nightmare. It has created a paradoxical situation where the number of drivers on Chinese roads now negates any benefit from travelling in cars.

Back to our exponential function. We can apply the same mathematical logic to population growth. In 1986 there were 5 billion people on the planet. The growth rate was just 1.7 per cent per annum, meaning that by 2027 we would have reached 10 billion people. By 1999 the population had reached 6 billion but the growth rate had slowed to 1.3 per cent per annum, meaning that it will take until 2052 to reach 12 billion. That still means we are growing at a rate of 80 million people a year on a planet unable to provide adequately for 7 billion. Problematically most growth is occurring in undeveloped countries that can least afford large populations and where education hardly exists – nations like Burundi, Niger and Uganda.

But the population problem also exists in economically developed countries. In Australia, the city of Melbourne has experienced 1.88 per cent population growth over the past decade. One might regard that as modest growth, but that is not the case. Indeed if growth continues at that rate Melbourne will overtake Sydney in 2028, when each city will have about 5.6 million people. No other city in Australia has ever experienced growth of this size. It has taken city planners completely by surprise (because they presumably did not do the maths) and strained the city's infrastructure and services - adding to road congestion, overcrowding on public transport, increased waiting times in hospital emergency wards, the demand for energy and water, and a host of other undesirable outcomes. All of this in a relatively affluent country where annual immigration numbers are controlled by the Commonwealth government; the total fertility rate, of 1.78 per woman, is below that normally considered to be the replacement rate for a population; and where the potential impacts of exponential population growth on the city should have been apparent and handled differently in terms of systemic urban design.

Obviously we can also apply the same mathematical logic to the extraction of fossil fuels (like oil, gas and coal) the loss of biodiversity, the rate of global warming – and, of course, the increase in computer processing power.

All of which brings us back to the matter in hand: namely the speed at which technologies are converging and the subsequent role they will play in the future. For the astonishing truth is that it is not simply the rate of change in discrete fields or disciplines to which we should remain alert, but also the rate of change in that convergence. It is this speed of change that led US inventor Raymond Kurzweill to predict that the “singularity” (the year in which artificial intelligence exceeds that of humans) will occur at some stage within the next two decades.

The examples to which I have referred should show us that exponential change demands a far more sophisticated approach to systemic design, taking into account many potential features and points of view, while also pondering deeply the social, moral and ethical dimensions of the futures we are creating. All of which is easier said than done, especially when the subject is rampant, seemingly unstoppable, technological invention.

Kurzweill maintains that by 2030 we will be interacting with technologies that are billions of times more powerful than those available today. While this is correct in terms of logarithmic change I can’t help wondering if this is what we really want.

There are three paramount dilemmas we encounter when considering such possibilities as those anticipated by Kurzweill. The first has to do with distinctions between fate (the inescapable future) and desire (the preferred future). The second concerns the inability of human minds to imagine beyond what is known through experience and to translate these imaginings into a design capability. The third raises the issue of morality. In the end all three dilemmas relate to our intentions – the territory where the most difficult choices must be made.

1. The enigma of fate and desire

Depending upon the culture in which one is literate, the potential for shaping events is taken either to be severely limited (i.e. it is the role of a higher intelligence) or theoretically infinite (i.e. mankind is creator and capable of anything). Most of us occupy a space somewhere in between these two extremes.

For me, as a Buddhist and a practising futurist, the main problem I have with the kind of positivist determinism confidently proclaimed by many scientists and technologists is the irrefutable inevitability accorded most technological expressions of the future. Currently there seems to be a huge disconnect between what convergent technologies can potentially bring to humanity, and what we want those things to be. Nor are there many opportunities to discuss or debate such issues.

The notion of a reinvented species of humanoid with super intelligence in which humans can finally discard their earthbound carcases holds no joy for me. Nor do I believe there is anything inevitable about this evolution.

2. Imagining beyond the event horizon

Envisaging how our lives could be so utterly different from how they currently manifest is problematic for most of us. Other than artists and other visionaries we tend to construct our “probable” futures from linear extrapolations of present circumstances and past memories. This is the “here and now” of our daily experience and it undoubtedly limits our ability to step into a place of infinite possibilities – an “expanded” now compressing all past, present and possible options. One of the reasons Steve Jobs was not interested in asking customers what they wanted from Apple was because they had little idea of what was actually feasible. They did not know what they wanted until they could feel and see it in their hands and play with it. In other words they could not see beyond a particular event horizon.

Apart from those rare individuals who perceive the world from an altogether higher plane of awareness, there are several accepted ways of amplifying human creativity and imagination. Using hallucinatory drugs, for example, or accessing new tools such as virtual reality, allow us to perceive possibilities that would have been previously barred from us. Few people have access to simulation facilities and the immersive experiences these provide, however, as most are still privately-owned or used purely for entertainment purposes.

Perhaps we need to think more seriously about investing in the capability for the expansion of human imagination as a pre-requisit for more sophisticated social designs. Obviously an increased capacity for imaginative cognition may ultimately be provided by the technology itself. But by then it will be too late to influence the design of the technology and many ethical concerns will possibly have been overlooked.

3. The Moral Dimension

The moral issues, including many ethical questions that require resolution and will have a considerable bearing upon the various choices that may need to be made, have incredible consequences and are too important not to be considerd as part of the original impulse for design of any socio-technological ecosystem.

Meanwhile the inexorable tide of technological innovation that sweeps everyting before it gives us little time for any considered thought on these matters. For example, some clusters of transformative technologies could improve the human condition by prolonging life, enabling the human-machine interface, and eliminating disease. One might consider these critical to humanity’s future did they not exacerbate the population problem. It is ironic that most of what we regard as being good for humanity (medicine, peace, sanitation and law and order for example) actually worsen the population problem, while an alternative strategy for resolving the problem, (by promoting conflict and disease and encouraging murder for example) is morally obscene.

 

 

---

[1] If a toxic weed doubles every day and covers the entire surface of the pond in 30 days, then it wil only cover half of the pond’s surface on day 29. This, of course, is part of the reason we see so little action to combat climate change. Looking at it today doesn't seem to be so bad. Unfortunately we do not see past the 29th day to tomorrow!

The Third Industrial Revolution

Our industrial civilization is at a crossroads. Oil and the other fossil fuel energies that make up the industrial way of life are sunsetting, and the technologies made from and propelled by these energies are antiquated. The entire industrial infrastructure built off of fossil fuels is aging and in disrepair. The result is that unemployment is rising to dangerous levels all over the world. Governments, businesses and consumers are awash in debt and living standards are declining everywhere. A record one billion human beings - nearly one seventh of the human race - face hunger and starvation. Worse, climate change from fossil fuel-based industrial activity looms on the horizon, imperiling our own species’ very ability to survive.

Since the beginning of the Great Recession in the summer of 2008, governments, the business community, and civil society have been embroiled in a fierce debate over how to restart the global economy. While austerity measures and fiscal, labor, and market reforms will all be necessary, they are not sufficient to re-grow the economy. Let me explain by way of an anecdote. Just months after arriving in office, the new Chancellor of Germany, Angela Merkel, asked me to come to Berlin to help her administration address the question of how to create new jobs and grow the German economy in the twenty-first century. I began my remarks by asking the chancellor, “How do you grow the German economy, the EU economy, or, for that matter, the global economy, in the last stages of a great energy era and an industrial revolution built on it?”

It is becoming increasingly clear that the Second Industrial Revolution is dying and that industrial induced CO2 emissions are threatening the viability of life on Earth. What we need now is a bold new economic narrative that can take us into a sustainable post-carbon future. Finding that new vision requires an understanding of the technological forces that precipitate the profound transformations in society.

A New Economic Narrative

The great economic revolutions in history occur when new communication technologies converge with new energy systems. New energy revolutions make possible more expansive and integrated trade. Accompanying communication revolutions manage the new complex commercial activities made possible by the new energy flows. In the 19th century, cheap steam powered print technology and the introduction of public schools gave rise to a print-literate work force with the communication skills to manage the increased flow of commercial activity made possible by coal and steam power technology, ushering in the First Industrial Revolution. In the 20th century, centralized electricity communication - the telephone, and later radio and television - became the communication medium to manage a more complex and dispersed oil, auto, and suburban era, and the mass consumer culture of the Second Industrial Revolution.

Today, Internet technology and renewable energies are beginning to merge to create a new infrastructure for a Third Industrial Revolution (TIR) that will change the way power is distributed in the 21st century. In the coming era, hundreds of millions of people will produce their own renewable energy in their homes, offices, and factories and share green electricity with each other in an “Energy Internet” just like we now generate and share information online.

The establishment of a Third Industrial Revolution [TIR] infrastructure will create thousands of new businesses and millions of jobs and lay the basis for a sustainable global economy in the 21st century. However, let me add a cautionary note. Like every other communication and energy infrastructure in history, the various pillars of a Third Industrial Revolution must be laid down simultaneously or the foundation will not hold. That’s because each pillar can only function in relationship to the others.

The five pillars of the Third Industrial Revolution are (1) shifting to renewable energy; (2) transforming the building stock of every continent into micro–power plants to collect renewable energies on-site; (3) deploying hydrogen and other storage technologies in every building and throughout the infrastructure to store intermittent energies; (4) using Internet technology to transform the power grid of every continent into an energy internet that acts just like the Internet (when millions of buildings are generating a small amount of renewable energy locally, on-site, they can sell surplus green electricity back to the grid and share it with their continental neighbors); and (5) transitioning the transport fleet to electric plug-in and fuel cell vehicles that can buy and sell green electricity on a smart, continental, interactive power grid.

The creation of a renewable energy regime, loaded by buildings, partially stored in the form of hydrogen, distributed via a green electricity Internet, and connected to plug-in, zero-emission transport, opens the door to a Third Industrial Revolution. The entire system is interactive, integrated, and seamless. When these five pillars come together, they make up an indivisible technological platform—an emergent system whose properties and functions are qualitatively different from the sum of its parts. In other words, the synergies between the pillars create a new economic paradigm that can transform the world.

The public/private financing of the Third Industrial Revolution infrastructure build-out across the world will be at the very top of the agenda for the international banking and financial community in the first half of the 21st century.

The Shift To Lateral Power

The Third Industrial Revolution is the last of the great Industrial Revolutions and will lay the foundational infrastructure for an emerging collaborative age. Its completion will signal the end of a two-hundred-year commercial saga characterized by industrious thinking, entrepreneurial markets, and mass labor workforces and the beginning of a new era marked by collaborative behavior, social networks and professional and technical workforces. In the coming half century, the conventional, centralized business operations of the First and Second Industrial Revolutions will increasingly be subsumed by the distributed business practices of the Third Industrial Revolution; and the traditional, hierarchical organization of economic and political power will give way to lateral power organized nodally across society.

Lateral power is a new force in the world. Steve Jobs and the other innovators of his generation took us from expensive centralized main-frame computers, owned and controlled by a handful of global companies, to cheap desktop computers and cell phones, allowing billions of people to connect up with one another in peer-to-peer networks in the social spaces of the internet. The democratization of communications has enabled nearly one third of the human population on earth to share music, knowledge, news and social life on an open playing field, marking one of the great evolutionary advances in the history of our species.

But as impressive as this accomplishment is, it is only half of the story. The new, green energy industries are improving performance and reducing costs at an ever accelerating rate. And just as the generation and distribution of information is becoming nearly free, renewable energies will also. The sun, wind, biomass, geothermal heat and hydropower are available to everyone and, like information, are never used up.

When Internet communications manage green energy, every human being on earth becomes his or her own source of power, both literally and figuratively. Billions of human beings sharing their renewable energy laterally on a continental green electricity internet creates the foundation for the democratization of the global economy and a more just society.

Distributed Capitalism

Energy regimes shape the nature of civilizations - how they are organized, how the fruits of commerce and trade are distributed, how political power is exercised, and how social relations are conducted. To understand how the new Third Industrial Revolution infrastructure is likely to dramatically change the distribution of economic power in the twenty-first century, it is helpful to step back and examine how the fossil fuel–based First and Second Industrial Revolutions reordered power relations over the course of the nineteenth and twentieth centuries.

Fossil fuels - coal, oil, and natural gas - are elite energies for the simple reason that they are found only in select places. They require a significant military investment to secure their access and continual geopolitical management to assure their availability. They also require top down command and control systems and massive concentrations of capital to move them from underground to the end users. The ability to centralize production and distribution - the essence of modern capitalism - is critical to the effective performance of the system as a whole. The centralized energy infrastructure, in turn, sets the conditions for the rest of the economy, encouraging similar business models across every sector.

Virtually all of the other critical industries that emerged from the oil culture - modern finance, telecommunications, automotive, power and utilities, and commercial construction - and that feed off of the fossil fuel spigot were similarly predisposed to bigness in order to achieve their own economies of scale. And, like the oil industry, they require huge sums of capital to operate and are organized in a centralized fashion.

Three of the four largest companies in the world today are oil companies - Royal Dutch Shell, Exxon Mobil, and BP. Underneath these giant energy companies are some five hundred global companies representing every sector and industry - with a combined revenue of $22.5 trillion, which is the equivalent of one-third of the world’s $62 trillion GDP - that are inseparably connected to and dependent on fossil fuels for their very survival.

The emerging Third Industrial Revolution, by contrast, is organized around distributed renewable energies that are found everywhere and are, for the most part, free - sun, wind, hydro, geothermal heat, biomass, and ocean waves and tides. These dispersed energies will be collected at millions of local sites and then bundled and shared with others over a continental green electricity internet to achieve optimum energy levels and maintain a high-performing, sustainable economy. The distributed nature of renewable energies necessitates collaborative rather than hierarchical command and control mechanisms.

This new lateral energy regime establishes the organizational model for the countless economic activities that multiply from it. A more distributed and collaborative industrial revolution, in turn, invariably leads to a more distributed sharing of the wealth generated.

The extraordinary capital costs of owning and operating giant centralized telephone, radio, and television communications technology and fossil fuel and nuclear power plants in markets is giving way to the new “distributed capitalism,” in which the low entry costs in lateral networks make it possible for virtually everyone to become a potential entrepreneur and collaborator, creating and sharing information and energy in open commons. Witness twenty something young men creating Google, Facebook, and other global information networks, literally in their college dorm rooms and thousands of small businesses converting their buildings to green micro power plants and connecting with one another in regional electricity networks.

What I am describing is a fundamental change in the way capitalism functions that is now unfolding across the economy and reshaping how companies conduct business. The shrinking of transaction costs in the music business and publishing field with the emergence of file sharing of music, eBooks, and news blogs, is wreaking havoc on these traditional industries. We can expect similar disruptive impacts as the diminishing transaction costs of green energy allow manufacturers, service industries, and retailers to produce and share goods and services in vast economic networks with very little outlay of financial capital.

Democratizing Manufacturing

For example, consider manufacturing. Nothing is more suggestive of the industrial way of life than highly capitalized, giant, centralized factories equipped with heavy machines and attended by blue-collar workforces, churning out mass-produced products on assembly lines. But what if millions of people could manufacture batches or even single manufactured items in their own homes or businesses, cheaper, quicker, and with the same quality control as the most advanced state-of the-art factories on earth?

While the TIR economy allows millions of people to produce their own virtual information and energy, a new digital manufacturing revolution now opens up the possibility of following suit in the production of durable goods. In the new era, everyone can potentially be their own manufacturer as well as their own internet site and power company. The process is called 3-D printing; and although it sounds like science fiction, it is already coming online, and promises to change the entire way we think of industrial production. Think about pushing the print button on your computer and sending a digital file to an inkjet printer, except, with 3-D printing, the machine runs off a three-dimensional product. Using computer aided design, software directs the 3-D printer to build successive layers of the product using powder, molten plastic, or metals to create the material scaffolding. The 3-D printer can produce multiple copies just like a photocopy machine. All sorts of goods, from jewelry to mobile phones, auto and aircraft parts, medical implants, and batteries are being “printed out” in what is being termed “additive manufacturing,” distinguishing it from the “subtractive manufacturing,” which involves cutting down and pairing off materials and then attaching them together.

3-D entrepreneurs are particularly bullish about additive manufacturing, because the process requires as little as 10 percent of the raw material expended in traditional manufacturing and uses less energy than conventional factory production, thus greatly reducing the cost.

In the same way that the Internet radically reduced entry costs in generating and disseminating information, giving rise to new businesses like Google and Facebook, additive manufacturing has the potential to greatly reduce the cost of producing hard goods, making entry costs sufficiently lower to encourage hundreds of thousands of mini manufacturers—small and medium size enterprises (SMEs) - to challenge and potentially outcompete the giant manufacturing companies that were at the center of the First and Second Industrial Revolution economies.

Already, a spate of new start-up companies are entering the 3-D printing market with names like Within Technologies, Digital Forming, Shape Ways, Rapid Quality Manufacturing, Stratasys, Bespoke Innovations, 3D Systems, MakerBot Industries, Freedom of Creation, LGM, and Contour Crafting and are determined to reinvent the very idea of manufacturing in the Third Industrial era.

The energy saved at every step of the digital manufacturing process, from reduction in materials used, to less energy expended in making the product, when applied across the global economy, adds up to a qualitative increase in energy efficiency beyond anything imaginable in the First and Second Industrial Revolutions. When the energy used to power the production process is renewable and also generated on site, the full impact of a lateral Third Industrial Revolution becomes strikingly apparent. Since approximately 84 percent of the productivity gains in the manufacturing and service industries are attributable to increases in thermodynamic efficiencies - only 14 percent of productivity gains are the result of capital invested per worker - we begin to grasp the significance of the enormous surge in productivity that will accompany the Third Industrial Revolution and what it will mean for society.

Near Zero Cost Marketing and Logistics

The democratization of manufacturing is being accompanied by the tumbling costs of marketing. Because of the centralized nature of the communication technologies of the first and second industrial revolutions - newspapers, magazines, radio, and television - marketing costs were high and favored giant firms who could afford to devote substantial funds to market their products and services. The internet has transformed marketing from a significant expense to a negligible cost, allowing start ups and small and medium size enterprises to market their goods and services on internet sites that stretch over virtual space, enabling them to compete and even out compete many of the giant business enterprises of the 21st century.

Consider Etsy, a brash, web start-up company that has taken off in the past seven years. Etsy was founded by a young New York University graduate, Rob Kalin, who made furniture in his apartment. Frustrated that he had no way to connect with potential buyers interested in hand-crafted furniture, Kalin teamed up with a few friends and put up a website designed to bring individual craftsmen of all kinds, from around the world, together with prospective buyers. The site has become a global virtual showroom, where millions of buyers and thousands of sellers from more than fifty countries are connecting, breathing new life into craft production—an art that had largely disappeared with the advent of modern industrial capitalism.

Connecting multitudes of sellers and buyers in virtual space is almost free. By replacing all of the middlemen - from wholesalers to retailers - with a distributed virtual network of sellers and buyers and eliminating the transaction costs that are marked up at every stage in the marketing process, Etsy has created a new global craft bazaar that scales laterally rather than hierarchically, and markets goods collaboratively rather than top-down.

Etsy brings another dimension to the market - the personalization of relationships between seller and buyer. The website hosts chat rooms, coordinates online craft shows, and conducts seminars, allowing sellers and buyers to interact, exchange ideas, customize products, and create social bonds that can last a lifetime. Giant, global companies mass-producing standardized products on assembly lines operated by anonymous workforces can’t compete with the kind of intimate one-to-one relationship between artisan and patron.

Although still in its infancy, Etsy is a quickly growing enterprise. In 2011, Etsy’s sales topped nearly $500 million. In a recent conversation, Kalin told me that his mission is to help foster “empathic consciousness” in the global economic arena and lay the foundation for a more inclusive society. His vision of connecting up “millions of local living economies that will create a sense of community in the economy again” is the essence of the Third Industrial Revolution model. Etsy is only one of hundreds of global Internet companies that are bringing together producers and consumers in virtual marketing spaces and, in the process, democratizing marketing costs across the global economy.

As the new 3-D technology becomes more widespread, on site, just in time customized manufacturing of products will also reduce logistics costs with the possibility of huge energy savings. The cost of transporting products will plummet in the coming decades because an increasing array of goods will be produced locally in thousands of micro-manufacturing plants and transported regionally by trucks powered by green electricity and hydrogen generated on site.

The lateral scaling of the Third Industrial Revolution allows small and medium size enterprises to flourish. Still, global companies will not disappear. Rather, they will increasingly metamorphose from primary producers and distributers to aggregators. In the new economic era, their role will be to coordinate and manage the multiple networks that move commerce and trade across the value chain.

New Business Models and Jobs in the 21st Century

Germany is leading the way into the new economic era. The Federal Government has teamed up with six regions across Germany to test the introduction of an energy internet that will allow tens of thousands of German businesses and millions of home owners to collect renewable energies on site, store them in the form of hydrogen, and share green electricity across Germany in a smart energy internet. Entire communities are transforming their commercial and residential buildings into green micro-power plants. To date, more than 1 million buildings in Germany have been converted into partial green micro power plants. Companies like Siemens, Bosch and Daimler are creating sophisticated new IT software, hardware, appliances and vehicles, that will merge distributed Internet communication with distributed energy, to create smart buildings, infrastructure, and green mobility for the cities of the future.

The transition to the Third Industrial Revolution will require a wholesale reconfiguration of the entire economic infrastructure of each country, creating millions of jobs and countless new goods and services. Nations will need to invest in renewable energy technology on a massive scale; convert millions of buildings into green micro power plants; embed hydrogen and other storage technology throughout the national infrastructure; lay down a green energy internet; and transform the automobile from the internal combustion engine to electric plug-in and fuel cell cars.

The remaking of each nation’s infrastructure and the retooling of industries is going to require a massive retraining of workers on a scale matching the professional and vocational training at the onset of the First and Second Industrial Revolutions. The new high tech workforce of the Third Industrial Revolution will need to be skilled in renewable energy technologies, green construction, IT and embedded computing, nanotechnology, sustainable chemistry, fuel-cell development, digital power grid management, hybrid electric and hydrogen-powered transport and hundreds of other technical fields.

Entrepreneurs and managers will need to be educated to take advantage of cutting edge business models, including distributed and collaborative research and development strategies, open source and networked commerce, performance contracting, shared savings agreements, and sustainable low-carbon logistics and supply chain management. The skill levels and managerial styles of the Third Industrial Revolution workforce will be qualitatively different from those of the workforce of the Second Industrial Revolution.

The lateral scaling of the Third Industrial Revolution shifts the fulcrum of power from centralized global companies to distributed small and medium size enterprise networks. The rapid decline in transaction costs brought on by The Third Industrial Revolution are leading to the democratization of information, energy, manufacturing, marketing, and logistics, and the ushering in of a new era of distributed capitalism that is likely to change the very way we think of commercial life. The Third Industrial Revolution offers the hope that we can arrive at a sustainable post-carbon era by mid-century. We have the science, the technology, and the game plan to make it happen. Now it is a question of whether we will recognize the economic possibilities that lie ahead and muster the will to get there in time.

This article was written by Jeremy Rifkin and is reprinted here with his permission. Jeremy is the author of The New York Times best selling book, The Third Industrial Revolution, How Lateral Power is Transforming Energy, the Economy, and the World. He is an adviser to the European Union and to heads of state around the world. He is a senior lecturer at the Wharton School’s Executive Education Program at the University of Pennsylvania and the president of the Foundation on Economic Trends in Washington, D.C.

Economies of Scope

The competitive dynamics of industrial capitalism are well-known, and they are all about economies of scale. Producing more of a unit enables companies to drive the unit price down and thus outcompete the competition. Multinational corporations and global brands now have very complex value chains, in which various parts of a product are mass-produced in different parts of the world.

Nevertheless, the system has obvious weaknesses. One weakness is that it tends towards monocultures, both agricultural and industrial. An example is the dependence of the Chinese coastal economy on exports.

Because competition drives prices down the dominant western players changed their strategy in the 1980s. They abandoned costly western workers, moved low-profit industrial production to low-wage countries, and expanded the intellectual property (IP) regime using patents, copyrights and trademarks. As Thijs Markus has written, if you want to sell $5 shoes for $150 in the West, you'd better have one heck of a repressive IP regime in place. Hence the need for SOPA, PIPA, ACTA and other attempts to criminalise the right to share.

But there is, of course, a more fundamental problem: the whole system of globalising the advantages of scale fundamentally rests on cheap global transportation and, thus, the continuous availability of fossil fuels. Once the era of cheap oil ends it is more than likely that the whole regime will come tumbling down. Competing on the basis of scale, even if it is still effective today, ultimately can only be played by those who do not care about the destruction of our planet. What game can the others play? Rising fossil fuel prices mean that innovation and competition have to find another outlet.

Actually, it's about inventing another game altogether.

This type of economic transition has played out before. In the late fifth century, as the Roman Empire was coming to an end, Christian communities prefigured the values of a coming era of relocalisation based not on an economy of scale, but on an economy of scope - in which the cost of production becomes lower through shared infrastructure costs.

As the Roman Empire decayed and supplies of gold and slaves became gradually more problematic, the smarter landowners started to free their slaves, but bound them contractually to the land as "coloni", or serfs. Meanwhile, the increasingly taxed and bankrupted freeholders sought protection from the very same landowners. Thus, one side of the equation was localisation, since the system could no longer bear the global scale of the empire. But the new post-Roman system also invented a new system of innovation, based on the advantages of scope, not scale.

Indeed, as the cities were emptying out, the Christians invented monasteries as a new type of agrarian knowledge centre. The Christian Church actually functioned as a global open design community. Monks and manuscripts travelled, and with it the many innovations of the worker-monks. While Europe initially decayed as the remnants of the Roman empire crumbled, eventually, after the first European social revolution in the 10th century, this new system created the seeds for the first medieval industrial revolution.

Between the 10th and 13th centuries, Europe started blossoming once again, based on a unified culture of knowledge. Its population doubled and its beautiful cities, many of which were run democratically by the guild councils, grew again. Peer-to-peer universities were founded in Bologna in the 11th century. This first renaissance was based on economies of scope, a unified body of knowledge that European intellectuals and artisans could build on. The guilds may have had their secrets, but they took them with them wherever cathedrals were built.

The same experience happened in 1989 when isolated Cuba was no longer able to rely on the Soviet system's advantages of scale. The Cuban crisis of 1989 prefigured the current world situation: the country experienced its very own peak oil situation when the Soviets abruptly stopped delivering oil at below world market prices.

While the Cubans initially went back to using donkeys, its government launched several interesting initiatives. It allowed some entrepreneurship by granting more autonomy to local agricultural co-operatives, and mobilised the population's grassroots knowledge. But perhaps most importantly, Cuba created several agricultural institutes with the goal of spreading local innovations. Whatever the other faults of the country's totalitarian system, this open design experiment succeeded beyond all expectations. As documented by Bill McKibben and a number of documentaries, Cuba now produces more nutritious and organic food, using less fossil fuel, because sharing knowledge created economies of scope. Agricultural innovations could spread quickly across the country and be adopted by everyone.

Indeed, economies of scale work well in periods of energy ascent, when the supply of energy is plentiful and increasing, but work less well in periods of energy descent. In these circumstances, economies of scope are needed. These types of economies are exactly what peer production (which encompasses open knowledge, free culture, free software, open and shared designs, open hardware and distributed manufacturing) is all about.

Our current system is based on the belief of infinite growth and the endless availability of resources, despite the fact that we live on a finite planet. Let's call this pseudo-abundance. The system also holds that innovations should be privatised and only available by permission, or for a hefty price, making sharing of knowledge and culture a crime, Let's call this enforced artificial scarcity.

Peer production methodologies are based on the exact opposite tenets. Peer production communities believe that knowledge is a commons for all to share. Therefore no innovation can be withheld from the human population as a whole. In fact, withholding a life-saving or world-saving innovation is seen as distinctly unethical. Peer production designs for distribution, inclusion and small-scale fabrication. Planned obsolescence, which is a feature and not a bug of the current system, is totally alien to peer production logics. In other words, sustainability is a feature of open design communities, not a bug.

So what are the economies of scope of this new age? They come in two flavours: the mutualising of knowledge and the mutualising of tangible resources.

The first principle is easy to understand. When an individual doesn't know something, it's more likely that a community, whether local or virtual, does know. Hence, the mutualising of knowledge and crowd-accelerated innovation are now well-known features of the collaborative economy. But the advantage of scope is created when that knowledge is shared and can be used by others. With this social innovation the cost of production that depends on knowledge can be dramatically reduced.

Take the example of the Nutrient Dense Project. This global community of agrarian workers and citizen scientists experiments with better nutrients to obtain better quality food. They carry out joint research on nutrients in various soils and climate zones, which can benefit not just the participating community but, potentially, the whole of humankind. Strategies based on privatising intellectual property cannot obtain such advantages of scope - at least not at that level. Or take the example of the urban homestead of the Dervaes family in Los Angeles who managed to produce 6,000 pounds of food annually on a tiny city plot. Because they share their productivity innovations many other people have learned how to improve their own lots.

The second principle, of sharing physical resources, is exemplified by the trend towards collaborative consumption. The general idea is the same. I may lack a certain tool, skill or service, but it is likely that someone else in a community has it, and that other person could share, rent or barter it. There's no need to all possess the same tool if we can access it when we need it. Hence the proliferation of peer-to-peer marketplaces.

Let's take an illustrative example: car-sharing. Car-sharing projects can be mutualised through the intermediary of a private company which owns the cars (like ZipCar), through peer-to-peer marketplaces that link car users to one another (like RelayRides), or through public entities (like Autolib, in Paris). But they all achieve economies of scope. According to a study cited by ZipCar, for every rented car there are 15 fewer owned cars on the road. Furthermore, car-sharing members drove 31 per cent less than when they owned a vehicle. So, in 2009 alone, car-sharing diminished global carbon dioxide emissions by nearly half a million tonnes.

What will the new system look like if economies of scope become the norm, replacing economies of scale as the primary driver of the economy? Global open design communities could be accompanied by a global network of micro-factories producing locally, such as the ones that open-source car companies like Local Motors and Wikispeed are proposing.

This would require organisations to organise their material activities in order to minimise the common costs of the various networks and not just in terms of sharing knowledge. In other words, who will play the role that the Catholic Church and its roaming monks played in the Middle Ages? This was not just an open design community but an effective material organisation giving leadership to a whole continent-wide cultural sphere. Do we have a potential peer-to-peer version of this that can operate globally? The answer to this question will be for a future article.

Michel Bauwens is a theorist, writer and a founder of the Peer-to-Peer Foundation. He is also an Honorary Fellow of the Asian Foresight Institute. This essay was first published in the opinion pages of Al Jazeera on the 22^nd March 2012 and is reproduced here with the author’s permission.

 

Speed Man!

The February 27th edition of The Bulletin had a beaming Tim Flannery on the front cover. The headline screamed ‘Tim Flannery: Troublemaker of the Year’. Wow! We do hack and slash at the tall poppies don’t we? To be fair, the journalist charged with the daunting task of trying to summarize Flannery’s concerns and solutions to global warming did an excellent job.

We should also remember that prophets have invariably received bad press from time immemorial. Just remember what happened to John the Baptist...  And Giordano Bruno didn’t exactly win too many friends when he maintained, just over 400 years ago, that the earth was alive. He was burnt at the stake for his impudence.

But in this day and age when so much nonsense continues to be broadcast and so many absurd myths perpetuated, it is refreshing to have one of the world’s leading scientists using the facts both wisely and pragmatically. Thank god for troublemakers like Flannery when airheads and loonies (like the Herald Sun’s Andrew Bolt for example) are still taking people for a ride with their deluded, half-baked notions of reality.

But enough of the current debate. Climate change is actually only one example of a new phenomenon humanity needs to come to terms with – and quickly. The exponential nature of change. Speed!

Bluntly, we are fast reaching the limits at which we can cope psychologically with the changes we ourselves are initiating. Human ingenuity and invention is running rampant. We are generating new technologies and resultant social change much more rapidly than our traditional mechanisms and conventions can deal with. We are captivated by the new. But the technological applications are spinning out of control simply because we have not yet learned how to use our intelligence wisely.

As can be seen from the recent history of technology, innovation is cumulative and technological change is continuing to accelerate at an astonishing rate. Consider this… There are around 540,000 words in the English language – about five times as many as in William Shakespeare’s day. Around 3,000 new books are published daily. Some 1.5 exabytes of new unique information will be generated worldwide in 2007; that’s more than in the previous 5,000 years! By the year 2015 we confidently expect a supercomputer to be built that exceeds the computational capability of the human brain.  Ten years later that computer will cost around $1,000.

The social impacts of these exponential changes are astonishing. For example, one in every eight couples married in the US last year met online. It has been estimated that a week’s worth of the New York Times contains more information than a person was likely to encounter in a lifetime during the 18th century. There are over 106 million registered users of My Space. If MySpace were a country it would be the eleventh largest in the world – between Japan and Mexico. The number of SMS text messages sent and received every day exceeds the population of the planet.

And yet, in business, in politics and in education, we appear to be blind, deaf and dumb to the consequences. Politicians conveniently ignore the realities. Business people are still only interested in profits and the daily movements in their share price. In all walks of life we seem to have taken our eyes off the ball. Meanwhile teachers continue to prepare students for jobs that don’t yet exist, using technologies that haven’t been invented, in order to solve problems we don’t even know are problems yet.

The real issue here is one of exponential change. Because we are bewildered by some of their unpredictable effects, we continually try to accommodate these new realities within existing institutions – institutions that are simply inappropriate and are beginning to fail as a result.

In the final analysis we continue to apply traditional thinking and methods to these new problems. As we can see now from the issue of climate change, that approach is dangerously irrelevant. Perhaps we need more people like Tim Flannery who can see that a problem exists, is able to interpret that problem while bringing in fresh insights, draw the most leveragable conclusions, and propose sensible and economically feasible solutions.