Peer Production

From writer Erick Schonfeld in last month‘s Business 2.0 comes another twist on the Gift Economy & Open Source Business: Peer Production,.”allowing individuals to create products for themselves and others to enjoy” independent of organization or pricing considerations. The term was coined by Yale professor Yochai Benckler. Schonfeld worries that to the extent Peer Production replaces market economy need and order fulfillment, it will eat into ‘market economy’ profits, “allowing people to specialize in a way that is not economical in the ‘real’ world”. He says that Peer Production is best suited to products made up of bits rather than atoms.

But why? Suppose I want a chair that has the attributes of an Aeron without the $1800 price tag, or one with some additional attribute (e.g. a laptop holder) the brand name doesn’t offer? I could go online to a Peer Production site and create an instant market, contributing the specifications, a bunch of technical links available online about just what makes this chair so special, and, perhaps a maximum price I would be willing to pay. People with some of the expertise needed to produce it could indicate their capabilities and self-organize into a consortium that would keep talking and refining until they could meet this price — and, if not, they might counter-offer something close. Other potential buyers could chime in, offering more or less than my suggested price. Based on the number of ‘orders’ at each price, the Peer Production group could then accept orders and start manufacturing. The possibilities are endless — somebody might want customization or some other attribute, to which the same or some other Peer Production group might respond. Another Peer Production group might self-form and come in with a lower price, perhaps creating a new or larger market. People might ‘subscribe’ to this market to watch bids and offers progress, or put in ‘silent’ bids if the offer fell to a certain point. Perhaps Herman Miller (maker of the Aeron) might enter the bidding itself, meeting my bid and offering the intangible value of their brand as well. Perhaps eBay would chime in with used Aeron chairs that meet my specifications at an even lower price (in fact eBay would be a natural host for these virtual instant markets), bringing their reputation systems into play.

As Schonfeld suggests, the intellectual capital associated with this instant market becomes part of the market archive, available for everyone to see, stripping this intellectual capital cost, and the executive salaries, dividends and corporate overhead out of the cost of this and other similar product requests and fulfillments, so that all that is left is the lowest possible cost of material, labour and delivery to fill the order. And the order is exactly what the customer wants, not the closest thing in the mass-producer’s warehouse. See a fashion design by a big-name designer on FTV that you really like, but which sells for $10,000? Get a generic for $200, with your own custom modifications, before the big-name designer can even get the originals into the stores.

What is the downside here? Is this an online manifestation of the Wal-Mart Dilemma? Would this allow cheap labour from China to steal even more manufacturing and craft jobs from the affluent nations? Would it facilitate easier sale of materials and products by socially and environmentally irresponsible vendors? Would customers be willing to pay a premium if the labour and/or materials came from the customer’s own country? What ways (certification, warranties etc.) are there of specifying a minimum quality of materials and workmanship so that these can be factored into the buying decisions? To what extent would the reduced ability to recapture R&D costs in retail price hurt product innovation (there are already far too few companies with the innovativeness of Herman Miller)? To what extent would retirees with comfortable nest eggs ‘steal’ work and wages from younger people by undercutting even their most modest price?

Now, imagine that this instant market/Peer Production model were extended to also cover services, especially those that don’t need to be rendered physically. Could I get complete architectural plans, specs and drawings for my space- and energy-efficient dream house for $200? $100? Or imagine it could tap into the wisdom of crowds to tell me that the full-priced Aeron is worth the 800% premium over the Peer Production knock-off. Or that, in an implementation of the Gift Economy, someone builds my dream chair for free, with the simple request that I pay it forward? The end of the world, or just the World of Ends?

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7 Responses to Peer Production

  1. Andrew says:

    What intrigues me more is the next stage, the Personal Fabrication approach as described in Neil Gershfeld’s book “FAB”. I imagine it will be a while before there’s “a personal fab in every house”, but what if every community had a fab facility, where recyclables (plastics, glass and metals) and renewables serve as raw material+energy input? People would be paid for input – raw materials, plans, etc. – and pay for output – the custom chair. See also

  2. Andy M says:

    <quote>there are already far too companies with the innovativeness of Herman Miller</quote>Far too many, or far too few? ;-)

  3. Dave Pollard says:

    Oops, missed the ‘few’, thanks — corrected. Andrew, absolutely, and in fact ‘add-ons’ to our PCs will soon allow us to use them (the PCs) as the ‘brains’ of community/personal fabrication equipment — sewing and embroidering our own clothes, for example.

  4. Mike says:

    Glad to see more optimistic, technical-oriented posts, Dave. I’ve been thinking similar things but from a more low-level perspective. You might want to check Bruce Sterling’s new book ‘Shaping Things’ (ISBN: 0262693267) and his lecture here:

  5. Dave Pollard says:

    Mike: re: Sterling on spimes: Interesting lecture. This is so full of holes that I don’t know where to start, but it’s an important presentation because it shows where current thinking on ‘aware devices’ is in the minds of those (like most futurists and sci-fi writers) who continue to project (as the people did who foresaw a Jetsons-style world in 2005) without taking into account the discontinuities (which weak signals can reveal) — political, economic, social, educational, technological, environmental discontinuities.It is these discontinuities that will determine how the future differs from where we are currently headed. The only thing we know for sure is that we will not end up where we are currently headed, which is why spimes are already fiction, ancient history, a drag on innovative thinking.

  6. Mike says:

    Jeez, Dave. I guess there’s certainly discontinuities among the Saving the World set. I think we’re all on the same side here. The most innovative thing I’ve seen today is the Hippo Roller. ( ) Looks somewhat splime-like to me.

  7. Mike says:

    Ooops I meant spime. Though splime sounds better for wet things.

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