Does peer production destroy profits?

[Michel Bauwens]

Members of this community and readers of the P2P Foundation blog are probably familiar with the thesis of Adam Arvidsson and myself on the crisis of value.

In my own formulation it says that we now have a society, where the creation of use value grows exponentially, but the growth of monetization of this use value grows only linearly. This creates a non-monetary surplus of value, which is at the same time a boon for society, but also a crisis for the monetary system, and a problem for all of us engaged in the creation of use value. We indeed still need money to survive.

Tom Evslin has another variant of this argument:

"If you're doing well but running at or close to breakeven, you've made it impossible for anybody to undercut you without running at a deficit which is hard to get funding for – at least in this market. "

Let me rephrase that argument.

Any company that is working around a freely available commons, necessarily forsakes any surplus profits and monopoly rents.

This can be a disadvantage, since lesser profits mean lesser possibilities of growth and re-investment.

But what Tom points out in this article, which is located here but I couldn't access it, is that it can also be an advantage.

The very fact that profits are lower, but robust as based on a whole business and community ecology, is also a guarantee against the rise of competitors, as it actually destroys the possibility of them getting funding.

Is this perhaps what is happening in the Linux economy, of which it is said that it creates about $36b, but also destroys about $60b in the value of proprietary companies?

Your input would be very much appreciated.

[Sepp Hasslberger]

I would say rather than peer production "destroys profits", it decreases the necessity for them. Peer production can work close to cost because the motivation is the act of producing, not money.

Our current system necessitates profits. Any large corporation's shareholders hold their CEO responsible for squeezing as much profit as he can, out of the operation. It's the money system, where the means to invest already come with a cost = interest.

Even a single business owner with good intentions needs to take account of the necessity to pay the bank its interest or any private partners their profit.

I believe communities often have businesses they need for the community to properly function, and they run as close to cost as possible. It is almost like a form of peer production, where an investment is made and profits are foregone for the benefit of the community.

[AGNUcius]

Production can occur without profit, so why do you consider it a required result?

Profit can safely be 0 when the users own the physical infrastructure required that production.

There is no crisis when the consumers are the owners, because they are seeking product instead of profit.

[Sepp Hasslberger]

I am not considering profit a required result.

What I said about the necessity of profit is strictly in terms of the current economic set-up. When money is created as a debt it does not become available to us unless we agree to pay interest for it.

Profit is merely a way to secure funds to pay that interest.

Both banks and investors expect that return.

So as long as money is owned by the banks and they can ask us to either pay interest for it or do without it, profit will be a necessity.

Peer to peer production can avoid this to some degree, as long as no large investments are needed.

Consumer ownership could also avoid that ubiquitous tax (profit) because the consumer-owners would presumably not look for any return on their initial investment but rather for the products they are helping produce.

[AGNUcius]

Pardon Sepp, I was responding to Michel and should have named him.

But your defense for profit being necessary for as long as interest is necessary makes very good sense.

I guess we can fix that problem when we become smart enough to be our own bankers and issue our own currency.

But before that we could come together as consumers to purchase and co-own Physical Sources by each paying an amount they could afford as an investment in that corporation toward "at cost" product.

Would you pre-pay $200 toward owning the equipment needed to create the kinds of portable communication and computing systems we are always wanting?

What about $2000 toward local, organic food, medicine, soap, cloth?

Larger investors would have more vote-weight because control is determined by percentage of ownership.

If we could get 10,000 consumers to pre-pay for a cell-phone we might have the funding to begin.



Extended ideas (theory):

I think we need language in "The Contract" (mentioned on other discussions) to fix the majority overrule problem by providing any minority subgroup the "Right to Fork" or "Rights of Secession" within some sort of realistic divisibility.

You cannot both spray a tree and not spray a tree, but you might be able to spray one tree at a time. Secessionists (the losing minority) must pay the extra costs needed for the division and the finer granularity.

[Sepp Hasslberger]

"Would you pre-pay $200 toward owning the equipment needed to create the kinds of portable communication and computing systems we are always wanting?"

Yes I would, also the 2000 for proper organic food and stuff.

But I must add that I wouldn't want to be the one to organize it. Call it lazy, but I am kind of easy going on these things. If it's there, I will take part. If it isn't, well, I wouldn't break my backside to be one of the core organizers.

[AGNUcius]

Michel Bauwens wrote: This can be a disadvantage, since lesser profits mean lesser possibilities of growth and re-investment.

I agree Profit measures the need for growth.

But who should be the owners of that new property?

Should it be the originators, or should it be the workers, or should it be the consumers?

I'm just saying profit can safely approach and even hold at zero (price can meet cost) when the consumers are the initial investors and perpetual collective owners of the Means of that Production.

[Michel Bauwens]

I am of course, in my comments, referring to the current environment, and not to a possible future idealized possiblity,

Michel

[alf holm]

profit is a mutant term and easily applies to any transaction-even to the sharing of words
not only to how that becomes cash credits.