by Aaron Lazenby, June 2014
When Jeremy Rifkin, economic theorist and author of The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism thinks about the changing economy, one of the things he thinks about is the car.
“The car is the basis for the Second Industrial Revolution,” he tells Profit. “It was the economic engine for making prosperity in the 20th century, because all the other industries surrounded the automobile. It’s made suburban build-out possible. I am 69, and for my generation ownership was the essential way we defined our relationship to economic activity. “
Not so with the next generation of workers (and consumers) he says. “Millennials couldn’t care less about owning a car. They want short-term mobility,” Rifkin says. “They prefer access over ownership. And now we've got several million kids doing car sharing.” And this sharing will have a ripple effect, he says, changing the automobile industry, most obviously, but also the energy industry and more.
And this is just one example of how the economy will change. How can business leaders best be prepared for the future? Rifkin offers his advice for what to expect, and create a business built to survive.
Profit: So, let’s get this out of the way: Is Capitalism dead?
Rifkin: The second Industrial Revolution of the 20th century is sunsetting. I'm being charitable. It's really on life support. Fossil fuel energies are mature, their prices are going down and destabilizing the global economy. And the technologies based on those energies — like the internal combustion engine and centralized electrification — have exhausted their S-curve. There's almost no productivity we can wring out of them at this point.
I don't think capitalism is going to disappear, but what we're beginning to see is a new economic system entering onto the world stage. It’s a hybrid economic system, which is part capitalist market. It’s also part collaborative commons, which is made up of millions of people producing and sharing things with each other, with information building at near-zero marginal cost.
None of us expected, in our wildest imagination, a technology revolution that could reduce marginal cost to near zero, making communication technologies, energies, and goods and services nearly free. But we’ve seen this change in music sharing, book publishing, and the news industry.
This is the first new economic system to emerge since the advent of Capitalism and Socialism in the early 19th century, and there are deep implications for the way we organize our day-to-day economic and social life.
Profit: Is Gross Domestic Product (GDP) still an accurate measure of the health of the economy?
None of us expected, in our wildest imagination, a technology revolution that could reduce marginal cost to near zero, making communication technologies, energies, and goods and services nearly free.
Rifkin: There are a lot of reasons why GDP is growing at a slowing rate around the world today, from the price of energy on world markets, to increasing maldistribution of income, to consumers being leery of spending because of the Great Recession aftermath, government policies, a stalling of the old economy. All of that's true.
But the collaborative commons is another factor. It isn’t really impacting the GDP broadly yet, but it is going to be more and more important. If millions of young people are producing their own information for near-zero marginal cost, and sharing it with each other, how does that impact, for example, the television industry? We're beginning to see that impact of this sharing, but we're not measuring it. It's not caught in the GDP.
Profit: What role do you see the Internet of Things playing?
Rifkin: The Internet of Things is a new technology revolution that's bringing together new source of communication, power and energy, and logistics and transport, into a third industrial revolution.
What is interesting about the Internet of Things is more than just how information will flow to increase our ability to use analytics. What we're seeing now is the mature communication Internet beginning to converge with a nascent energy Internet and the automated transport and logistics Internet, to create a seamless platform. And these three Internets now, operating as a seamless platform, are sending out across the economic value chain.
We now have 13 billion sensors connecting resource flows. They are monitoring what's going on in our agricultural fields, as well as in our production lines in the factories, and sending big data back to these three Internets. By 2030, that number will be100 trillion sensors, and they will be connecting everything with everyone, in a seamless and distributed neural intelligent network.
Profit: What do you see as the biggest threats to this new economic model?
Rifkin: The big wild card is climate change. You can have near-zero marginal cost for energy and 3-D printed cars, but if we can't feed ourselves, this is all for naught. Of course, the Internet of Things and a Third Industrial Revolution platform can move us quickly to address climate change, because it gets us to near-zero marginal cost renewable energy, and it allows us to be hyper-productive. Because if you can produce at near-zero marginal cost, you are limiting the amount of the earth's resources you're using. And then if the things you do produce at near-zero marginal cost are shared over and over again on the collaborative commons — tools, toys, clothes, cars, homes — it means less of the earth's resources are being used and less CO2 emissions.
Cyberterrorism is less of a wild card, because I believe eventually that can be addressed, especially if we can create an Internet of Things that is distributive, so if any part of the system goes down, the rest of the system can function more locally, off-grid.
Privacy is going to be a challenge. We don't want a 1984 situation, but if we can figure out how to govern the system so that people's data is used with their permission, but not without it, and keep it open and network neutral — the younger generation likes to be more open and transparent. They're not as fixed on privacy, but they do want their data to be secure – the actual technology is there to connect the human race and democratize economic life in ways that you'll see in 30 years from now could be pretty significant, even if we only get 10 percent of it.
If the Internet stays network neutral, we could begin to imagine the democratization of energy and the democratization of manufacturing and hundreds of millions of people being able to produce and share on a collaborative commons.
Profit: How do people prepare for the coming economy?
Jeremy Rifkin is an economist and author of The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism.
Rifkin: At the corporate level, business leaders have to see how they can find value. There’s a scramble for businesses in industries such as transport and logistics, Internet and IT, big data and electronics, and the construction industry.
Companies that actually survive and flourish are going to change their business model from production to aggregating the networks and the network services and solutions. If you're a construction company or an IT company or a logistics company or an information data operation, to the extent that you can find ways to help build the commons, you can get some commercial value in that.
Aaron Lazenby is editor in chief of Profit.