Trust Between Strangers: Open Source Economics

Rachel Botsman: The Case for Collaborative Consumption

Yochai Benkler: On the New Open Source Economics

The quotes below are all from the two videos above, so just watch the videos, and we'll talk about the quotes in the discussion!

Wired to Share
We've actually wired our world to share, whether that's our neighborhood, our school, our office, or our Facebook network, and that's creating an economy of "what's mine is yours." From the mighty eBay, the grandfather of exchange marketplaces, to car-sharing companies such as GoGet, where you pay a monthly fee to rent cars by the hour, to social lending platforms such as Zopa, that will take anyone … with 100 dollars to lend, and match them with a borrower anywhere in the world, we're sharing and collaborating again."

Googles innovation was crowdsourcing relevancy
Google, the critical innovation is outsourcing the one most important thing -- the decision about what's relevant -- to the community of the Web as a whole, doing whatever they want to do: so, page rank. The critical innovation here is instead of our engineers, or our people saying which is the most relevant, we're going to go out and count what you, people out there on the Web, for whatever reason -- vanity, pleasure -- produced links, and tied to each other.

Croudsourced supercomputing has been going on longer than you think
Around June 2002, the world of supercomputers had a bombshell. The Japanese had, for the first time, created the fastest supercomputer -- the NEC Earth Simulator -- taking the primary from the U.S., and about two years later -- this, by the way, is measuring the trillion floating-point operations per second that the computer's capable of running -- sigh of relief: IBM [Blue Gene] has just edged ahead of the NEC Earth Simulator. All of this completely ignores the fact that throughout this period, there's another supercomputer running in the world -- SETI@home. Four and a half million users around the world, contributing their leftover computer cycles, whenever their computer isn't working, by running a screen saver, and together sharing their resources to create a massive supercomputer that NASA harnesses to analyze the data coming from radio telescopes.

It's been an information economy all along, just centralized.
Now, the term "information society," "information economy," for a very long time has been used as the thing that comes after the industrial revolution. But in fact, for purposes of understanding what's happening today, that's wrong. Because for 150 years, we've had an information economy. It's just been industrial, which means those who were producing had to have a way of raising money to pay ... for the telegraph, and the radio transmitter, and the television, and eventually the mainframe. And that meant they were market based, or they were government owned, depending on what kind of system they were in. And this characterized and anchored the way information and knowledge were produced for the next 150 years.

Decentralized means of producing information, knowledge and culture
What this picture suggests to us is that we've got a radical change in the way information production and exchange is capitalized. Not that it's become less capital intensive -- that there's less money that's required -- but that the ownership of this capital, the way the capitalization happens, is radically distributed. Each of us, in these advanced economies, has one of these, or something rather like it -- a computer. They're not radically different from routers inside the middle of the network. And computation, storage and communications capacity are in the hands of practically every connected person -- and these are the basic physical capital means necessary for producing information, knowledge and culture, in the hands of something like 600 million to a billion people around the planet.

What this means is that for the first time since the industrial revolution, the most important means, the most important components of the core economic activities -- remember, we are in an information economy -- of the most advanced economies, and there more than anywhere else, are in the hands of the population at large. This is completely different than what we've seen since the industrial revolution. So we've got communications and computation capacity in the hands of the entire population, and we've got human creativity, human wisdom, human experience -- the other major experience, the other major input -- which unlike simple labor -- stand here turning this lever all day long -- is not something that's the same or fungible among people. Any one of you who has taken someone else's job, or tried to give yours to someone else, no matter how detailed the manual, you cannot transmit what you know, what you will intuit under a certain set of circumstances. In that we're unique, and each of us holds this critical input into production as we hold this machine.

Four key drivers to this new collaborative economy:
1. A renewed belief in the importance of community, and a redefinition of what friend and neighbor really means.
2. A torrent of peer-to-peer social networks and real-time technologies, fundamentally changing the way we behave.
3. Pressing unresolved environmental concerns.
4. Aglobal recession that has fundamentally shocked consumer behaviors.

Three clear types of collaboration systems:
1. Redistribution markets: when you take a used, or pre-owned, item and move it from where it's not needed to somewhere, or someone, where it is. They're increasingly thought of as the fifth 'R' -- reduce, reuse, recycle, repair and redistribute -- because they stretch the life cycle of a product and thereby reduce waste.

2. Collaborative lifestyles. This is the sharing of resources of things like money, skills and time. I bet, in a couple of years, that phrases like "coworking" and "couchsurfing" and "time banks" are going to become a part of everyday vernacular. One of my favorite examples of collaborative lifestyles is called Landshare. It's a scheme in the U.K. that matches Mr. Jones, with some spare space in his back garden, with Mrs. Smith, a would-be grower. Together they grow their own food. It's one of those ideas that's so simple, yet brilliant, you wonder why it's never been done before.

3. Product-service systems. This is where you pay for the benefit of the product -- what it does for you -- without needing to own the product outright. This idea is particularly powerful for things that have high-idling capacity. And that can be anything from baby goods to fashions to -- how many of you have a power drill, own a power drill? Right. That power drill will be used around 12 to 13 minutes in its entire lifetime. (Laughter) It's kind of ridiculous, right? Because what you need is the hole, not the drill.

The fourth transactional framework
So, essentially what we're seeing is the emergence of a fourth transactional framework. It used to be that there were two primary dimensions along which you could divide things. They could be market based, or non-market based; they could be decentralized, or centralized. The price system was a market-based and decentralized system. If things worked better because you actually had somebody organizing them, you had firms, if you wanted to be in the market -- or you had governments or sometimes larger non-profits in the non-market. It was too expensive to have decentralized social production, to have decentralized action in society. That was not about society itself. That was, in fact, economic.

But what we're seeing now is the emergence of this fourth system of social sharing and exchange. Not that it's the first time that we do nice things to each other, or for each other, as social beings. We do it all the time. It's that it's the first time that it's having major economic impact. What characterizes them is decentralized authority. You don't have to ask permission, as you do in a property-based system. May I do this? It's open for anyone to create and innovate and share, if they want to, by themselves or with others, because property is one mechanism of coordination. But it's not the only one.

What's key to making these systems work? Reputation.
All of these systems require a degree of trust, and the cornerstone to this working is reputation. Now in the old consumer system, our reputation didn't matter so much, because our credit history was far more important that any kind of peer-to-peer review. But now with the Web, we leave a trail. With every spammer we flag, with every idea we post, comment we share, we're actually signaling how well we collaborate, and whether we can or can't be trusted. Let's go back to my first example, Swaptree. I can see that Rondoron has completed 553 trades with a 100 percent success rate. In other words, I can trust him or her. Now mark my words, it's only a matter of time before we're going to be able to perform a Google-like search and see a cumulative picture of our reputation capital. And this reputation capital will determine our access to collaborative consumption. It's a new social currency, so to speak, that could become as powerful as our credit rating.

Stuff will flow out of connected human beings
As you see a new set of social relations and behaviors emerging, you have new opportunities. Some of them are toolmakers. Instead of building well-behaved appliances -- things that you know what they'll do in advance -- you begin to build more open tools. There's a new set of values, a new set of things people value. You build platforms for self-expression and collaboration. Like Wikipedia, like the Open Directory Project, you're beginning to build platforms, and you see that as a model. And you see surfers, people who see this happening, and in some sense build it into a supply chain, which is a very curious one. Right?

You have a belief: stuff will flow out of connected human beings. That'll give me something I can use, and I'm going to contract with someone. I will deliver something based on what happens. It's very scary.

Waking up from the corporate hangover
I believe we're actually in a period where we're waking up from this humongous hangover of emptiness and waste, and we're taking a leap to create a more sustainable system built to serve our innate needs for community and individual identity.