The Sharing Economy Holds Promise for More Goods to Be Offered at Near Zero Marginal Cost
A new economic system is entering onto the world stage. The collaborative commons is the first new economic paradigm to take root in recent years and is allowing hundreds of millions of people to produce information, energy, and goods and services at near zero marginal cost and exchange them with each other in a sharing economy. Not surprisingly, the emergence of this new economic system is coming at a time of low growth, rising unemployment and greater inequality.
The triggering agent that’s precipitating this great economic transformation is zero marginal cost. Marginal cost is the cost of producing an additional unit of a good or service after fixed costs have been absorbed.
The near zero marginal cost phenomenon wreaked havoc across the information-goods industries over the past decade as millions of consumers turned prosumers and began to produce and share their own music via file sharing services, their own videos on YouTube, their own knowledge on Wikipedia, their own news on social media and even their own free ebooks on the World Wide Web. The zero marginal cost phenonomen brought the music industry to its knees, shook the film industry, forced newspapers and magazines out of business, and crippled the book-publishing market.
Meanwhile, 6 million students are now enrolled in free massive open online courses that operate at near zero marginal cost and are taught by some of the most distinguished professors in the world. They are receiving college credits, forcing universities to rethink their costly business model.
Now, a powerful new technology revolution is evolving that will allow millions -- and soon hundreds of millions -- of prosumers to also make and share their own renewable energy, and an increasing array of 3-D printed physical products and services, at near zero marginal cost. The communications Internet is converging with a fledgling energy Internet and nascent automated transport and logistics Internet, creating a new technological infrastructure for society that will fundamentally alter the global economy in the first half of the 21st century.
Billions of sensors are being attached to every device, appliance, machine and contrivance, connecting every thing with every human being in a seamless neural network that extends across the entire economic value chain. Already 14 billion sensors are attached to resource flows, warehouses, road systems, factory production lines, the electricity transmission grid, offices, homes, stores and vehicles, continually monitoring their status and performance and feeding big data back to the communication Internet, energy Internet and logistics and transportation Internet.
It is estimated that by 2030 more than 100 trillion sensors will connect the human and natural environment in a global distributed intelligent network.
Business enterprises and prosumers will be able to connect to the Internet of Things and use big data and analytics to develop predictive algorithms that can speed efficiency, dramatically increase productivity, reduce the use of natural resources and lower the marginal cost of producing and distributing renewable energy and 3-D printed physical products to near zero. Then they will be able to share what they’ve made with others on a vast global collaborative commons, just as billions of prosumers now do with information goods.
Hundreds of millions of people are transferring bits and pieces of their economic life from conventional markets to the global collaborative commons. Forty percent of the U.S. population is already actively engaged in the collaborative sharing economy. Some 800,000 individuals in the U.S. are now using car-sharing services. Each car-share vehicle eliminates 15 personally owned cars. And millions of apartment dwellers and home owners are sharing their dwellings with millions of travelers, at near zero marginal cost around the world, via online services like Airbnb and Couchsurfing, weakening the traditional brick-and-mortar hotel industry.
In a zero marginal cost society, extreme productivity decreases the amount of information, energy, material resources, labor and logistics costs needed to produce and distribute economic goods and services, once fixed costs are absorbed.
And the goods and services that are produced at near zero marginal cost are redistributed and shared over and over again on the collaborative commons, dramatically reducing the number of things sold, meaning fewer resources are used up and less global warming gases are emitted into the Earth’s atmosphere.
The shift from the exchange economy in the conventional marketplace to the shareable economy on the collaborative commons offers the possibility of dramatically narrowing the income divide and democratizing the global economy in the first half of the 21st century.
Global companies, operating in the profit-driven capitalist marketplace, will likely remain far into the future, albeit in an increasingly streamlined role, primarily as an aggregator of network services and solutions, allowing them to flourish alongside the collaborative commons as powerful partners in the coming era.
The capitalist market, however, will no longer be the exclusive arbiter of economic life. People are entering a world partially beyond markets where they are learning how to live together in an increasingly interdependent global collaborative commons.
Jeremy Rifkin is the author of The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism. He is a principal architect of the European Union’s long-term economic-development plan and the president of the Foundation on Economic Trends in Washington, D.C.