January 2008

"Peer production is viable when: 1. capital costs (needed for production) fall far enough and 2. coordination costs fall far enough. Cheap computing and communication reduce both of these exponentially, so peer production becomes inevitable."

Jed Harris

Open source software (OSS) is just one part of a much wider social and economic ecosystem that is evolving around increased participation of what-used-to-be consumers. New roles are emerging, including "produsers", with an intentional 's', to refer to the amalgamation of being both a user and a producer, and "end-makers", another intentional concept to be contrasted with end-users.

In this new ecosystem, produsers and end-makers either partially, but sometimes fully, produce value, aided or unaided by institutions and companies. This creates new dynamics that need to be understood. One way of increasing our understanding is to look at the inter-locking dynamics of both businesses and the participant-communities, for which the following article constructs a model of interaction. Each distinct type of relationship generates different dynamics and associated business models.

Three New Economies

More and more, end-users of business products are demanding an active say in what kind of products are delivered and are increasingly creating value for and by themselves. The peer to peer dynamics that emerge in an increasingly networked society and that enable citizens to self-organize and create value for themselves are so far creating at least three major economic models. In the "sharing economy", individuals congregate over participatory platforms that allow them to share their creative expression. While the sharing itself is mostly not monetary, the platforms are proprietary and their owners sell the aggregated attention of their user communities to advertisers. This is essentially the business model behind the thriving Web 2.0 world with YouTube as the paradigmatic example.

In the "commons economy", individuals congregate into communities that explicitly produce common artifacts, such as OSS, that are universally available for use through commons-oriented property licenses. These artifacts generate vibrant business ecosystems, with businesses creating added value that can be monetized. The Linux model follows this economy.

Finally, in the "crowdsourcing economy", businesses or platforms integrate participatory dynamics in their own production and value chains, under the form of unwaged distributed labour which remains under their overall control. Think of the Lego Factory model. Contributors are only paid after their product has been purchased or chosen.

The above triune distinction is a first approach; we believe we can offer a much more fine-grained approach to participatory business models, once we factor in more consciously the dynamic between the communities and the institutions.

The Ladder of Participation: Corporate View

Peer to peer as a social logic means that instead of institutions dealing with atomized individuals through mass media, directing products to passive consumers, individuals are now considered as already connected through peer groups. These peer groups include both pre-existing and intensional networks that are purposely formed at various points in order to achieve specific goals. This turns institutions into facilitators and enablers.

To see what this means in terms of relationships between institution and community, we have created a two-part ladder of participation model, inspired by Roger Hart's Ladder of Youth Participation. The model starts from the point of view of the for-profit institution, and considers the degree of participation that will be allowed. In this context, the initiative comes from the company, and though there may be pressure by its consumers, the political framework is controlled by the corporation. Such a model has been proposed by Xavier Comtesse, which he calls the direct economy model. This model defines five categories of consumer:

  1. Passive consumption: the consumer receives the available products or services with no real interaction and choice
  2. Self service: the consumer is given the ability to choose between various products or services
  3. DIY (do it yourself): the consumer is involved in the value chain. An example of this first disruption from the standard retail value chain is IKEA, where the consumer buys a product and also self-delivers and assembles the product
  4. Co-design: the consumer starts adding value by customizing the product as defined by his needs; this is what Dell is asking from customers when they choose options to build a computer
  5. Co-creation: the consumer is involved in the design of the product or service itself. For example, Procter and Gamble has a Connect and Develop program that lets innovators define products

Xavier Comtesse believes that open source belongs to this fifth model. We believe this will only be the case for corporate-initiated open source initiatives, but not for those initiated by open source communities.

It seems clear that the first three models have been well established for several decennia. The fourth model is already used in many corporate strategies. The fifth model would seem the current cutting edge which is being embraced by many of the more advanced players of the marketplace.

The Ladder of Participation: Community View

The Comtesse direct economy model leaves out half the story, the agency of the peer producing communities, and the for-benefit institutions associated with them. Production communities are not just followers, neither Linux nor Wikipedia were initiated by companies, but active creators of new production models representing forms of "production without a manufacturer", which companies can or can not join.

Clearly, if a project is started by a community, with its own institutional choices and history, companies who join will not be in control of the framework of participation. On the contrary, it is the community which can allow various levels of corporate involvement. A new model is needed, starting from a different polarity, and which complements the model proposed by Comtesse. These models are not contradictory, but as they start from different polarities, they are complementary and both necessary for a full understanding of the new hybrid forms that are emerging.

To understand this second half of the ladder of participation, please note that we make the distinction between: i) the direct creation of use value, for direct use, not sale; and ii) the direct creation of exchange value without powerful corporate intermediaries who would own and direct the production process as part of their own value chain.

Peer production occurs when produsers freely engage, without direct payment, in a productive activity which is made universally available. While exchange value is therefore not peer production, it is part of the same trend towards participation and the distribution of production that is an effect of lowering the capital requirements of productive machinery. We are entering a period where the automatic linkage between capital and entrepreneurship is no longer a given, and where both can go their separate ways, giving rise to entrepreneurs operating outside the framework of capital.

However, our proposed model does not exclude proprietary platforms which enable and empower such cooperation to take place. Finally, as we explained in our introduction, it is important to distinguish the sharing economy of individuals sharing their creative expression, from a commons economy where a common product is created.

Seen from the polarity of the community dynamic of peer production, the following six hybrid models may be added, and we would argue, are already taking place:

  1. Direct peer production of use value with no concern for monetization: an example is the adventure economy of couchsurfing.com, a direct and non-reciprocal exchange of use value (hospitality), outside of the monetary sphere. Wikipedia and Craigslist refuse advertising and its enormous monetary gains as a conscious decision
  2. Direct peer production of use value with concern for equitable monetization: communities develop a commons where a business ecology may be formed but the peer producers control this monetization process and choose equity-based formats, such as cooperatives
  3. Direct production of use value by groups with commons-oriented business ecology: a community of peer producers, usually combined with a non-profit foundation in charge of its infrastructure, creates a commons from which emerges a business ecology to create marketable scarcities around the freely available common value
  4. Direct production of use value by individuals with monetization of attention through proprietary platforms: this is the Web 2.0 model in which individuals share their expressive production, using a proprietary platform which in turn sells their attention
  5. Direct production of exchange value by groups as cooperative production: an example is Mondragon
  6. Direct production of exchange value by individuals: An example is eBay, playing the role of a universal platform with specialized platforms for minipreneurs around the design of products

The last category also refers to local distributed manufacturing and design by independent individuals using a growing infrastructure for distributed production. They may design a product on their own, use a platform to present it to the world, use three dimensional fabbing printers to create physical models, and be connected with production units that can be mobilized anywhere in the world. Such individuals can form networked micro agencies seeking platforms to market their production.

Where are we now? There are many non-monetary exchanges thriving on the Internet (model six). Equitable monetization of peer production is only in a seed phase, but it is a concern that has already substantially changed the material economy with fair trade, social entrepreneurship, and blended value approaches, so we believe it will develop in the immaterial economy as well. The Linux and Web 2.0 economies attest to the vibrancy of models eight and nine; these are presently the dominant business models which include the OSS industry. While there is a thriving world of cooperatives in the material economy (with more employees than multinationals!), it has barely gotten a foothold in the immaterial economy so far. Apart from the success of eBay, there are a number of other platforms doing well, such as iStockphoto. The number of platforms for minipreneurial communities is growing rapidly.

Conclusion

The above modelling is not perfect yet, but we believe that, combined with the direct economy model of Xavier Comtesse, it gives a more comprehensive idea of the many different hybrid models being created. Obviously, business and marketing practices will differ according to which pole is being addressed, and we can expect the emergence of a new set of businesses and marketing agents catering directly to the peer production polarity.

At the Foundation for Peer to Peer Alternatives, we believe that distributed network infrastructures are becoming the mainstay of our economic and social/technical organization, and that these engender bottom-up, self-organized dynamics that will profoundly change not only our economy, but the very form of our civilization. It is a mistake to believe that such changes are limited to the immaterial economy of knowledge and software only, as every physical production is also first and foremost a function of design, which is an immaterial process. So, peer production and peer produser communities will influence the totality of our social and economic life, including physical production. It is expected that in an increased number of sectors, production will partly derive from open design communities.

It is our intent to document, research and promote such P2P-based alternatives, and so far we have collated more than 5,000 pages of finely grained but structured information, which have been consulted over 2.5 million times.

We invite all readers who are interested in understanding such developments, to consult our website's resource base, and, better yet, to collaborate in building it. Figure 1 is a preliminary visualization of the P2P business trends that we have catalogued and described in 2007. A poster sized version of this image is available.

Figure 1: P2P Business Visualization

Recommended Reading

Bauwens, Michel. The Political Economy of Peer Production. CTheory, 2005.

Peer to Peer Business Trends

P2P in Physical Production

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