Published on Apr 22, 2014
Economic theorist and author Jeremy Rifkin explains his concept of The Internet of Things. Rifkin’s latest book is The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism.
Transcript — We are just beginning to glimpse the bare outlines of an emerging new economic system, the collaborative commons. This is the first new economic paradigm to emerge on the world scene since the advent of capitalism and socialism in the early 19th century. So it’s a remarkable historical event. It has long-term implications for society. But what’s really interesting is the trigger that’s giving birth to this new economic system. The trigger is something called zero marginal cost. Now, marginal costs are the costs of producing an additional unit of a good and service after your fixed costs are covered. Business people are all aware of marginal costs, most of the public isn’t. But this idea of zero marginal cost is going to dramatically intimately affect every single person in the world in the coming years in every aspect of their life.
There’s a paradox deeply embedded in the very heart of the capitalist market system previously really undisclosed. This paradox has been responsible for the tremendous success of capitalism over the last two centuries. But here’s the irony, the very success of this paradox is now leading to an end game and a new paradigm emerging out of capitalism is collaborative commons. Let me explain. In a traditional market, sellers are always constantly probing for new technologies that can increase their productivity, reduce their marginal costs so they can put out cheaper products and win over consumers and market share and beat out their competitors and bring some profit back to investors. So business people are always looking for ways to increase productivity and reduce their marginal cost, they simply never expected in their wildest dreams that there would be a technology revolution so powerful in it’s productivity that it might reduce those margins of cost to near zero making goods and services essentially free, priceless and beyond the market exchange economy. That’s now beginning to happen in the real world.
The first inklings of this zero margin cost phenomenon was with the inception of the World Wide Web from 1990 until 2014. We saw this zero marginal cost phenomenon invade the newspaper industry, the magazine industry and book publishing. With the coming of the World Wide Web and the Internet all of a sudden millions of people, then hundreds of millions of people, and now 40 percent of the human race with very cheap cell phones and computers they’re sending audio, video and texting each other at near zero marginal cost. So what’s happened is millions of consumers became prosumers with the advent of the Internet. And so they’re producing and sharing their own videos, their own news blogs, their own entertainment, their own knowledge with each other in these lateral networks at near zero marginal costs and essentially for free bypassing the capitalist market, in many instances altogether. This zero marginal cost phenomena, as it invaded the information industries, wreaked havoc on big, big industries. Newspapers went out of business; they couldn’t compete with near zero marginal costs. Magazines went out of business. And my own industry publishing has been just wracked by free e-books and free knowledge and information.
But, you know, the strange thing about it is at first a lot of industry watchers said this is a good thing because if we give out more and more information goods free and people are producing and sharing it free, these freemiums will stimulate people’s appetite to want premiums and then upgrade this free goods and information by getting more customized information. I’ll give you an example. Musicians give away their music free when they started to see this happen hoping that they would get a big loyal fan repertoire and then their fans would be enticed to go to their concerts and pay premium in order to be there in person. And then, of course, we saw this with newspapers. The New York Times will give you ten free articles a month, freemiums, hoping that you’ll then upload upgrade to premiums and by their subscription service. It didn’t happen on any large scale. This was very naïve by industry watchers. Sure, some people have moved from freemiums to premiums but when more and more information goods are out there nearly free shared with each other, music, film, arts, information and knowledge, attention span is not there to then want to go to the premiums when you have so much available already in the freemiums.
Published on May 14, 2014
Transcript – Well, we’re all familiar with the first Internet, the communication Internet. We’ve been on it for 24 or 25 years, most of us. We use the Internet all the time to communicate and send information. The energy Internet is very, very new. It’s now actually being built out in places like Germany, in Denmark and across Europe so it’s no longer academic. Here’s how it works.
We are moving toward renewable energy across Europe. We have millions and millions now of buildings, homes, offices, factories, retail stores that have been transformed into micro power plants and they are producing their own green electricity on site, solar panels on the roof, vertical wind on the property, geothermal pumps for energy underneath the ground, bio converters to convert garbage to biomass energy in the kitchens, et cetera. In Germany alone we’ve retrofitted one million buildings, made them efficient, put in the insulation and put these new renewable technologies on the building. A million buildings are producing their own greens electricity. And there’s a feed-in tariff that gives them premium for sending their electricity back to the grid, they get more than the market price. So now we’re setting up storage and an energy Internet. You have to store these energies. The sun isn’t always shining. Sometimes the wind blows at night, you want the electricity during the day so we’re putting in all sorts of storage technologies like batteries, flywheels, capacitors and hydrogen. We’re most bullish on hydrogen as a storage technology to store these energies so that you can use them when you need them. Because if the suns under the clouds you’re in trouble, you’ve got to store it when the sun is out.
And now we’re taking the electricity grid of Europe, the whole transmission grid and we’re transforming it to an energy Internet using the same technology we used with the communication Internet. You know, today everywhere in the world, the transmission electricity grid is servo mechanical; it’s 60 years old. It isn’t even digitalized. It’s designed to be centralized and go in one direction. Where the power is generated, nuclear fossil fuel power, then you send it to the passive consumer at the end of the line. So this old transmission grid wasn’t designed to handle millions of small players generating green electricity on site, solar wind, et cetera, and sending it back and then controlling the peak and base flows. So we are actually transforming the entire electricity grid of Europe to an energy Internet. So when millions of buildings are producing just tiny amounts of green electricity, storing it in hydrogen like we stored media in digital, then if you don’t need some of that green electricity in your home, office or factory at a given moment you can actually send your green electricity across that energy Internet from the Irish Sea all the way to the edge of Eastern Europe just like we create information, store it in digital, share it online. That actual energy Internet is now coming on line in real-time. It’s already out there in places like Denmark and Germany and other places.
So, the energy Internet is really the Internet brought to energy and it’s a perfect fit. The great economic revolutions in history occur when new energy regimes emerge and new communication revolutions emerged to organize them. In the 19th century as we said you had to have steam power printing to come together with coal and steam power and the locomotive. In the 20th century we had to have centralized electricity and the telephone to manage the complexities of an oil, auto and suburban era. So here in the 21st century the distributive collaborative peer-to-peer Internet communication, and that’s its signature, is now converging with energies that are distributed, had to be organized collaboratively and scale peer-to-peer. Renewable energies are distributed, they’re found everywhere but they’re small amounts. So you have to create critical mass by collaborating across entire continents to organize that energy and then you share them in lateral economies and scale. So, this is the energy Internet that’s going along with the communication Internet to form the beginning of this neural network. And this is already happening in real time.
Published on June 2, 2014
Transcript: The communication Internet is something that’s ubiquitous. We’re using it 24 hours a day. All of us have our cell phones and our desktop computers and we’re generating information in the form of audio, video and text and we’re sharing it with friends, we’re sharing it with the world in a communication network that’s designed to be distributive, collaborative and that favors peer-to-peer production.
Now that communication Internet is converging with this very nascent energy Internet where we’re now able to generate our own green electricity distributed, collaborative, peer-to-peer and share it with the help of the communication Internet. We create an energy Internet, a transmission line has become an Internet. And now the third component, we are just beginning to see the first glimpse of an automated transport and logistics Internet and then the whole package is complete. Right now logistics is a pretty inefficient business. If you take a look across the United States like other countries and you look at a truck on the road, sometimes those trucks are empty; they’re deadheading back. They’ve taken their cargo and then there’s nothing on the trip back or they only have 20 or 30 percent of that truck filled.
Right now our logistics system is not coordinated into a network. There are thousands of warehouses and distribution centers. But every company usually has only five or ten of these warehouses somewhere in the country. So they have to take their trains or their trucks all the way to where their handful of centers are. But what would happen if all the thousands of warehouses and distribution centers, privately owned, came together in a cooperative network? So if you’re General Electric or Walmart or whoever or a small prosumer, a small to medium-size company, you would have access to any one of those warehouses when they have surplus space and you could move your transport only where you needed it in real time instead of going to a few centralized warehouses across 3000 miles. But to do that you’d have to have common protocols where everything is standardized so you could get your packages through in the same containers with radio recognition technology like Federal Express has so you know where your freight is and your package at any given moment on a supply chain.
And then we’re now starting to move towards driverless vehicles. They’ll be in mass production within five to ten years everywhere according to the six major auto companies. And so we’ll be able to have a transport system where we power vehicles from energy from our energy Internet and we’ll power our electric vehicles and fuel-cell cars, trucks and buses powered by hydrogen, all of that from our energy Internet at near zero marginal cost to transport it. That’s already here in parts of Europe. We now have electric vehicles, fuel-cell vehicles powered with energy that’s near zero marginal costs. In a few years they’ll be driverless reducing the cost even further. And so this transport and logistics Internet is connecting with the energy Internet and the communication Internet, which provides the data, one system. It is a game changer. It is one of the great technology revolutions in history. It’s going to change our entire way of life every single person.
What it’s mainly means is it’s the democratization of everything. This means millions of people and soon billions of people they’re not going to have to rely on the goodwill of a handful of globally integrated large vertically integrated companies for the main stuff of life. We’ve now freed ourselves with information to near zero marginal cost. Millions of us are producing and sharing with each other and we now have the first early adopters that are now producing their own green electricity at near zero marginal cost, millions of them already and we’re just starting to see a transport and logistics Internet that could get us to near zero marginal cost. This is the democratization of everything and it’s going to change the economic model.