From writer Erick Schonfeld in last month's
Business 2.0 comes another twist on the Gift Economy & Open Source
Business: Peer Production,."allowing individuals to create products for
themselves and others to enjoy" independent of organization or pricing
considerations. The term was coined by Yale professor Yochai Benckler.
Schonfeld worries that to the extent Peer Production replaces market
economy need and order fulfillment, it will eat into 'market economy'
profits, "allowing people to specialize in a way that is not economical
in the 'real' world". He says that Peer Production is best suited to
products made up of bits rather than atoms.
But why? Suppose I
want a chair that has the attributes of an Aeron without the $1800
price tag, or one with some additional attribute (e.g. a laptop holder)
the brand name doesn't offer? I could go online to a Peer Production
site and create an instant market, contributing the specifications, a
bunch of technical links available online about just what makes this
chair so special, and, perhaps a maximum price I would be willing to
pay. People with some of the expertise needed to produce it could
indicate their capabilities and self-organize into a consortium that
would keep talking and refining until they could meet this price --
and, if not, they might counter-offer something close. Other potential
buyers could chime in, offering more or less than my suggested price.
Based on the number of 'orders' at each price, the Peer Production
group could then accept orders and start manufacturing. The
possibilities are endless -- somebody might want customization or some
other attribute, to which the same or some other Peer Production group
might respond. Another Peer Production group might self-form and come
in with a lower price, perhaps creating a new or larger market. People
might 'subscribe' to this market to watch bids and offers progress, or
put in 'silent' bids if the offer fell to a certain point. Perhaps
Herman Miller (maker of the Aeron) might enter the bidding itself,
meeting my bid and offering the intangible value of their brand as
well. Perhaps eBay would chime in with used Aeron chairs that meet my
specifications at an even lower price (in fact eBay would be a natural
host for these virtual instant markets), bringing their reputation
systems into play.
As Schonfeld suggests, the intellectual
capital associated with this instant market becomes part of the market
archive, available for everyone to see, stripping this intellectual capital cost, and the executive salaries, dividends and corporate overhead out of
the cost of this and other similar product requests and fulfillments,
so that all that is left is the lowest possible cost of material,
labour and delivery to fill the order. And the order is exactly what
the customer wants, not the closest thing in the mass-producer's
warehouse. See a fashion design by a big-name designer on FTV that you
really like, but which sells for $10,000? Get a generic for $200, with
your own custom modifications, before the big-name designer can even
get the originals into the stores.
What is the downside here? Is this an online manifestation of the Wal-Mart Dilemma?
Would this allow cheap labour from China to steal even more
manufacturing and craft jobs from the affluent nations? Would it
facilitate easier sale of materials and products by socially and
environmentally irresponsible vendors? Would customers be willing to
pay a premium if the labour and/or materials came from the customer's
own country? What ways (certification, warranties etc.) are there of
specifying a minimum quality of materials and workmanship so that these
can be factored into the buying decisions? To what extent would the
reduced ability to recapture R&D costs in retail price hurt product
innovation (there are already far too few companies with the innovativeness
of Herman Miller)? To what extent would retirees with comfortable nest
eggs 'steal' work and wages from younger people by undercutting even
their most modest price?
Now, imagine that this instant market/Peer Production model were extended to also cover services,
especially those that don't need to be rendered physically. Could I get
complete architectural plans, specs and drawings for my space- and
energy-efficient dream house for $200? $100? Or imagine it could tap
into the wisdom of crowds to tell me that the full-priced Aeron is
worth the 800% premium over the Peer Production knock-off. Or that, in
an implementation of the Gift Economy, someone builds my dream chair
for free, with the simple request that I pay it forward? The end of the
world, or just the World of Ends? |
MADE IN CANADA
trust your
instincts 
