The Zero Marginal Cost Society

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RIFKIN J., The Zero Marginal Cost Society. The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, New York, Palgrave Macmillan, 2014

Type Book
Abstract In The Zero Marginal Cost Society, New York Times bestselling author Jeremy Rifkin describes how the emerging Internet of Things is speeding us to an era of nearly free goods and services, precipitating the meteoric rise of a global Collaborative Commons and the eclipse of capitalism.

Rifkin uncovers a paradox at the heart of capitalism that has propelled it to greatness but is now taking it to its death--the inherent entrepreneurial dynamism of competitive markets that drives productivity up and marginal costs down, enabling businesses to reduce the price of their goods and services in order to win over consumers and market share. (Marginal cost is 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.

Now, a formidable new technology infrastructure--the Internet of things (IoT)--is emerging with the potential of pushing large segments of economic life to near zero marginal cost in the years ahead. Rifkin describes how the Communication Internet is converging with a nascent Energy Internet and Logistics Internet to create a new technology platform that connects everything and everyone. Billions of sensors are being attached to natural resources, production lines, the electricity grid, logistics networks, recycling flows, and implanted in homes, offices, stores, vehicles, and even human beings, feeding Big Data into an IoT global neural network. Prosumers can connect to the network and use Big Data, analytics, and algorithms to accelerate efficiency, dramatically increase productivity, and lower the marginal cost of producing and sharing a wide range of products and services to near zero, just like they now do with information goods.

The plummeting of marginal costs is spawning a hybrid economy--part capitalist market and part Collaborative Commons--with far reaching implications for society, according to Rifkin. Hundreds of millions of people are already transferring parts of their economic lives to the global Collaborative Commons. Prosumers are plugging into the fledgling IoT and making and sharing their own information, entertainment, green energy, and 3D-printed products at near zero marginal cost. They are also sharing cars, homes, clothes and other items via social media sites, rentals, redistribution clubs, and cooperatives at low or near zero marginal cost. Students are enrolling in free massive open online courses (MOOCs) that operate at near zero marginal cost. Social entrepreneurs are even bypassing the banking establishment and using crowdfunding to finance startup businesses as well as creating alternative currencies in the fledgling sharing economy. In this new world, social capital is as important as financial capital, access trumps ownership, sustainability supersedes consumerism, cooperation ousts competition, and "exchange value" in the capitalist marketplace is increasingly replaced by "sharable value" on the Collaborative Commons.

Rifkin concludes that capitalism will remain with us, albeit in an increasingly streamlined role, primarily as an aggregator of network services and solutions, allowing it to flourish as a powerful niche player in the coming era. We are, however, says Rifkin, entering a world beyond markets where we are learning how to live together in an increasingly interdependent global Collaborative Commons.

Topics Miscellaneous, Property


For J. RIFKIN, the IoT is a "general purpose technology platform" (Chapter Nine, p. 138),"connecting everyone and everything in a global network" (Chapter One). "People, machines, natural resources, production lines, logistics networks, consumption habits, recycling flows, and virtually every other aspect of economic and social life will be linked via sensors and software to the IoT platform, continually feeding Big Data to every node — businesses, homes, vehicles — moment to moment, in real time" (Chapter One). It is "the first smart-infrastructure revolution in history: one that will connect every machine, business, residence, and vehicle in an intelligent network comprised of a Communications Internet, Energy Internet, and Logistics Internet, all embedded in a single operating system" (Chapter Five, p. 73). "The coming together of the Communications Internet with the fledgling Energy Internet and Logistics Internet in a seamless twenty-first-century intelligent infrastructure — the Internet of Things (IoT) — is giving rise to a Third Industrial Revolution" (Chapter One). The Internet of Things has a "distributed, collaborative, and laterally scaled nature" (Chapter Six, p.89).

Nick Valéry has calculated that "[t]o reach the threshold of 2 trillion devices connected to the Internet in less than ten years, each person would only need to have "1,000 of their possessions talking to the Internet". In developed economies, most people have approximately 1,000 to 5,000 possessions. [...] Many of these devices will be tagged over the next decade or so" (pp. 74-75). So think about the information costs we'll have to sustain (see Personal Property Servitudes on the Internet of Things) if for each of these objects there will be different privately ordered property rights (see Creating Ubiquitous Computing, Virtual Worlds, and the Displacement of Property Rights).

In Chapter Six, RIFKIN deals with 3D printing and the Makers Movement.

Chapter Thirteen: The Transformation from Ownership to Access (p. 225)

"[P]rivate property is the defining characteristic of a capitalist system. [...] In the capitalist era, we came to define freedom in negative terms as the right to exclude" (p. 225) (see Creating Ubiquitous Computing, Virtual Worlds, and the Displacement of Property Rights, when he deals with "possession", and he says that ability to exclude of the person who traditionally would be considered the "possessor" of an item is highly limited in an Ubiquitous Computing world, because the ability to exclude is no further linked to the physical proximity to the item). "The Internet generation, however, has come to think of freedom not in the negative sense - the right to exclude others - but rather in the positive sense of the right to be included with others. [...] Freedom is measured more by access to others in networks than ownership of property in markets. [...] Freedom for an Internet generation is the ability to collaborate with others, without restriction, in a peer-to-peer world" (p. 226) (we should therefore underline that - if the decline of property caused by IoT may not be a problem per se for the younger generation - the fact that the privately ordered system that has replaced traditional property might impede collaboration could conversely be perceived as really negative consequence of IoT). "The moniker of the younger generation is transparency, its modus operandi is collaboration" (Chapter Five, p. 76).

"A generation of young people are transforming their relationship to the automobile, preferring access over ownership. Car sharing has become popular among millennials all over the world " (p. 226). A type of car-sharing service is the peer-to-peer car sharing practice (where individual owners of cars registers their vehicle online) (p. 228). And what happens to automakers? In the short term, they must participate to the new business model, to prevent competitors from jumping in. But it is undoubtful that car-sharing will reduce the number of cars sold. Car-sharing is in fact cheaper for customers than buying a car. Car-sharing may reduce automakers' revenues, but it optimizes general welfare: "from an efficiency perspective, shared vehicles provid[e] comparable mobility at 20 percent of the cost of owning a vehicle", and this "optimizes the general welfare" (p. 229) (see Creating Ubiquitous Computing, Virtual Worlds, and the Displacement of Property Rights, p. 153).

I've found in The Devil Shares Prada: Consumers Want Experiences, Not Products the echo of Rifkin's "Zero Marginal Cost Society": in the book, it is indeed possible to find a chapter expressly dedicated to "the transformation from ownership to access", in which the author highlights the new business models - different from sale - which are emerging.

They are a consequence of the fact that, for consumers - especially the younger ones -, ownership in an "old-fashioned" concept. However, Rifkin stresses the economic crisis (p. 233) and the sustainability concern (p. 236) as the main causes of this shift.

"Sustainability is the new frugality", he states. The author of The Devil Shares Prada: Consumers Want Experiences, Not Products seems to say the opposite: "the sharing economy [...] isn't about frugality", but maybe they are expressing the same concept with different words: in the past, the tendency was to enjoy only the things you owned, and frugality meant owning few things; today, we may own few things - and therefore behave in a sustainable way -, anyway enjoying a much greater amount of things thanks to the sharing economy and its business models.

Reading Rifkin's book, I've found very interesting, however, the fact that two of the major effects of this intensified concern for sustainability and of the economic crisis have been 1. the booming of rentables, and 2. the booming of redistribution networks. This means that people are willing i. either to rent things instead of owning them, if that means enjoying them paying less and knowing that they will be enjoyed in the future by other people also, or ii. to purchase them knowing that the resale would be possible and that, therefore, a part of the sum paid would be retrieved and the items would be enjoyed by other people also.

I've found it interesting because the current business model prevailing when dealing with IoT products is one in which, on the contrary, i. the price grants the consumer the right to own/possess the thing, but not to enjoy it (the provider reserves the right to discontinue at any time the service that makes the thing usable), and ii. the resale is often forbidden (or, anyway, it is difficult to establish if it is forbidden or not by the contractual terms) or at least discouraged.

See also FRISCHMANN B., Who Will Pay for the Zero Marginal Cost Society?, The Huffington Post, 10.04.2014.