Will The Internet Of Things Lead Us To A Zero Marginal Cost Society ?

Will The Internet Of Things Lead Us To A Zero Marginal Cost Society ?

“We are just beginning to glimpse our future. A new economical system is entering on to the world stage. It is called The collaborative commons” said Jeremy Rifkin, a economic and social theorist, that gave a recent and very interesting, talk at RSA. In his talk, Rifkin painted a futuristic world, shaped by a whole new type of economical system already giving its first steps, that prone to evolve over the course of XXIst century: The collaborative commons.  He pointed its precipitating agent : Zero Marginal Cost.

According to Jeremy Rifkin: “This is the first new economical system to emerge since the advent of capitalism and socialism in the early nineteenth century. It is going to dramatically impact our lives. The precipitating agent, the trigger is something called : zero marginal cost.”

Jeremy Rifkin is not new to RSA.  In 2010 he gave a talk on empathy, that was animated and seen by more than 2 million viewers.

Rifkin, who  runs the Foundation On Economic Trends is a renowned author having published various books on the impact of scientific and technological changes on the economy, the workforce, society, and the environment. His most recent books include The Zero Marginal Cost Society (2014), The Third Industrial Revolution (2011), The Empathic Civilization (2010), The European Dream (2004). In 2011, Jeremy Rifkin publishedThe Third Industrial Revolution, which became a New York Times Bestseller, and that captured the attention of the world. His vision of a sustainable, post carbon economic era has been endorsed by the European Union and the United Nations and embraced by world leaders including Chancellor Angela Merkel of Germany, President François Hollande of France, and Premier Li Keqiang of China.

His latest book entitled “The Zero Marginal Cost Society” (2014), was the one behind the ideas conveyed at his talk at RSA.

The Zero Marginal Cost Society 

Marginal cost can be defined as the cost of producing additional units of a good or service, if fixed costs are not counted. While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring marginal costs to near zero, making goods and services priceless, nearly free, and abundant, and no longer subject to market forces.

Even though many of us might not be aware of it, the zero marginal cost phenomena has already invaded us and Rifkin gives us various examples of such phenomena:

“Millions of people turned consumer to prosumer and they began to produce their own music and share to each other, their own videos, began to create their own news blogs, bypassing the traditional media. The publishing industry, free ebooks etc.”

If economy had believe that such reduced marginal costs would only affect the information goods industry, they got it wrong, as it is now reaching as well the brick and mortar world. As Rifkin puts it: “We moved from bits to atoms.”

The technological soul mate of the collaborative commons is then: The internet of things, which Rifkin considers as a new fabulous technology infrastructure that will connects us all even more. The Internet of things has also the potential of pushing large segments of economic life to near zero marginal cost in the years ahead.

A super Internet

Rifkin describes how the Internet is becoming a super internet, with its further development into three branches:

  • The Communication Internet
  • An emerging Energy Internet
  • The Logistics Internet

Such a super internet will connect everything and everyone. “What we have done in the information industries is now moving to energy and 3 D products. “

According to IBM previews, by 2030, there will be 100 trillion sensors connecting everything, from natural resources, to all kinds of products coming from production lines, to the electricity grid, logistics networks, recycling flows. These sensors will be implemented ubiquitously in homes, offices, stores, vehicles, and even in the human body providing us with a flow of constant data. Such a gigantic Internet of Things can be seen as a global neural network to which Prosumers can connect to, and by using analytics and algorithms, they will be able to mine that big data, in order to accelerate efficiency. Anyone will be able to dramatically increase productivity, and lower the marginal cost of producing and sharing a wide range of products and services to near zero, in a similar process to what is happening now with information goods.

“With advanced analytics to create your own algorithms. You can dramatically increase your productivity, reduce the marginal cost, and producing a sharing renewable energy and 3D products.”

The falling of marginal costs is generating a hybrid economy—part capitalist market and part Collaborative Commons which might transform the world as we know it.

According to Rifkin, and largely evident to many of us, the collaborative commons is already a fact, as hundreds of millions of people are already engaging with alternative economical systems,  based in the sharing of goods and services. These are called by many terms, such as collaborative consumption, sharing economy, or relationship economy, but they are all characterized by the same characteristics as Rifkin’s Collaborative Commons.

If many of us are already plugging into the fledgling IoT to make and share our own information, entertainment, green energy, cars, homes, clothes, sooner or later we will all be making 3D-printed products with recycled plastic and paper, using renewable energy,  at near zero marginal cost.

German automotive supplier EDAG unveiled a new concept car inspired by a turtle. Showcased at the Geneva Motor Show, the Genesis’ frame is designed to demonstrate the potential of 3D printing or additive manufacturing.

Other interesting aspects of an economy shaped by a zero marginal cost is the way one can get his education freely, either by enrolling in free massive open online courses (MOOCs), or looking for training and information on youtube or in any other channel online. Finally even the banking establishment has been subjected to challenges, with the emergence of alternative virtual currencies, and platforms of crowdfunding, that can be used by entrepreneurs, as a way to finance their startup businesses.

In this new world, social capital is as important as financial capital. As Rifkin says:

“What type of new economical system can organize this system? There is another sector in our life, that we rely on every single day, that are absolutely essential: the social commons, the social economy. It is all the activity we engage in to create social capital. It doesn’t create capital market. A survey done by John Hopkins, says the non profits around the world it corresponds to a  2.2 trillion dollar revenue industry. Social commons is growing faster than the market place. It is growing faster than the market place. The social commons include any activity that is deeply social and collaborative. “

The Collaborative Commons system is thus characterized by favoring access, downplaying ownership, by being sustainable and cooperative, and by relying on products that have a “sharable value”. What is ironic is that it was precisely the extreme degree of productivity of the previous capitalist system that plummeted us into zero marginal costs

“Zero marginal cost is the most sustainable state because it allows us to produce goods and services with the minimum input of energy, labour time and capital, and optimize the output. “ That is extreme sustainability, extreme productivity.

Rifkin concludes that capitalism will not disappear but will rather become a junior partner of the new system, that will tend to serve primarily as an aggregator of network services and solutions. We are, however, entering a world beyond markets, which is increasingly interconnected. The scholar finishes his talk by inciting the new generation to embark on a hopeful and adventurous journey:

 “This is a promising journey. We share: that is the nature of human nature. To be extremely social.  It is the technology of the free market and the capitalism system, that took us to zero marginal cost.”

The full lecture of Jeremy Rifkin can be seen fully at the RSA platform: