January 23, 2016

Peers Inc by Robin Chase

Peers Inc by Robin Chase
How people and platform are inventing the collaborative economy and reinventing capitalism

The sharing economy of this transformation of capitalism, enabled by Web 2.0 - crowd-sourcing, collaborative production, collaborative consumption, and network effects are simply terms we have created along the way in an effort to capture what is going on. There is one structure that underlies all these - excess capacity + a platform for participation + diverse peers - and it is fundamentally changing the way we work, build business and shape economies.

Peer inc combines the best of people power with the best of corporate power. The ‘Inc’ delivers only on industrial strengths and the ‘Peers’ deliver on their individual strengths (localization, specialization, customization). When Inc and Peers focus only on what they do best, each handling what is difficult, annoying, or just plain impossible for the other, the resulting collaboration is compelling and sometimes miraculous.

In a world of scarcity, Peers Inc organization creates abundance. Peers Inc is driving the transition from the industrial to the collaborative economy. In our volatile world, Peers Inc collaborations can create change with a pace, scale, and quality we previously thought impossible.

My three most fundamental beliefs, which gave me faith Zipcar would work, gave most investors and business reports pause.

  1. People are willing to ‘share’ cars instead of owning them because the economies make sense
  2. A technology platform leveraging the internet and wireless technologies makes sharing effortless.
  3. The company can trust people to pick up and drop off the cars without supervision, fill them up with gas using the company credit card, and take their trash when they go.

Some of the attributes of collaborative economy:

Diversity, Distributed, Experiments-learns-adapts-evolves,. Seeks to maximize participation, thrives of economics of free (excess capacity), idea exchange & open standards, and intangibles are visible and valued.

Different ways platforms use excess capacity:
  • Slicing or aggregating it for right sizing supply
Both Zipcar and Airbnb are examples of access platforms that through slicing or aggregation of excess capacity, enable users to get more values out of an asset by using it more conveniently and cheaply than they could before.

  • Opening up: enabling co-creators to generate entirely new ideas, process and products & services: inviting new value creation.
President Reagan freeing up Geo satellites for public use that created many GSP based solution globally (GPS enabled Map, GPS enabled apps: Uber)

FOSS - The free and open source software - movement taps into excess capacity in all multiple ways. FOSS aggregates engineers and their work. Coders volunteer their efforts and work on thousands of projects around the world (e.g. GitHub, Drupal). While aggregating m, FOSS also lets you slice the code you are interested in working on into very small pieces.

Companies like Uber & Airbnb created freedom and joy to people by providing empowerment, which they never knew they had. Airbnb has tapped into the enthusiasm felt by people doing what they want to do on their own terms, rather than what they are assigned to do. As per Reid Hoffman, co-founder and former CEO of LinkedIn, “ I actually think every individual is now an entrepreneur,whether they recognize it or not”.

Three miracles:
  1. Excess capacity let us defy the laws of physics
  2. Smart platform produce exponential learning
  3. Diverse networked peers means instant access to the right mind

“You cannot solve exponential problems with linear solutions”, says Banny Banerjee, director of Stanford's Change lab and professor of mechanical engineering.

Consider the Hilton Hotels has been in the business for more than 95 years and has amassed only 610K room in 3,800 hotels in 88 countries. Yet Airbnb did it just four years - by business standards, this is a miracle. Airbnb’s platform unlocked excess capacity, built a compelling platform for participation and the peers collaborated to provide the service in almost every place where people live. This pace of growth could not have happened in any other way.

Elinor Ostrom won the Nobel Prize in economics in 2009 for her analysis of economic governance esp., for commons. Lots of us have heard about the tragedy of commons: when people share a resource but don’t own it, everything goes to hell because they don’t care. Ostrom identifies ‘common pool resources’ which have two characteristics : they produce a steady stream of benefits accruing from the resource and it is very difficult to exclude individuals.

Barbara Van Schewick - professor of law at Stanford Law School and also an associate professor of electrical engineering in Stanford University), identifies four key factors underlying the internet’s success, all of which must be present:

  1. Users get to choose which applications they want to use, without influence by the network providers
  2. Innovation on the network does not require permission from the network providers
  3. The network itself is blind to applications or use. it does not know or care how it is used
  4. The costs of innovation on the network are low.

For example, these four factors were the foundations of GPS’s success.

The STANDARD & POOR’s 500 lists the 500 most valuable companies in the USA, based on market capitalization. Dick Foster, retired McKinsey consultant, studied their average life span. In 1937, the average tenure of companies on the list was 75 years, By 1960, it was sixty-one years. In 1980, 37 years. In 2000, 26 years. Today, it is an average of 15 years.

The new companies’ attributes: innovate, and adapt or disappear. That disappearance might be the result of bankruptcy, or it might come about because of acquisition.

Recent research used the last 40 years of financial data for the S&P 500 to examine how business models have evolved over time, and which were the most successful. The researchers compared four business models, Asset Builders, Service providers, Technology creators and network orchestrators, which closely mirrors Peers Inc. Their findings were published in the HBR: “Our analysis indicates that as of 2013, Network orchestrators receive valuation 2 to 4 times higher on average, than companies with the other business models. We also found that Network orchestras outperform companies with other business models on both compound annual growth and profit margin>

What happens to economy as Peers Inc structures expand and grow? If we take the case of Airbnb, we see that many mid range hotels might go out of business as people opt for Airbnb for everything except luxury market. Full-time jobs in hotels will be lost, and the wealth will be distributed between homeowners making additional money in independent contractors and Airbnb, the platform operator, sitting in the center making a healthy profit. In the future, these kinds of collaborations between efficient platform and participants peers will spread to all walks of life. Let’s see what Roxanne Googin, a leading technology analyst who advises fund managers, who move billions of dollars, said in a recent issue of her newsletter, High Tech Observer, about where this will lead us.

“The concentrations effect is extreme. The centralized processing engine is a bear to develop, but once it works, the next transaction is effectively free. It therefore devours all the less efficient and smaller scale operations because it is both cheaper and more effective. Then, the profits of all the failed companies, along with the difference in efficiency between the manual and the automated business, accrue to center. And, it leans. If managed correctly, it because a recursive learning machine that just gets more effective with every measures mistake.”

the principles of the collaborative economy:

  1. Open accessible assets > closed assets:
Open assets deliver more value than closed assets because they are more efficiently used and let us continually uncover new valuable uses

2. More networked minds > fewer walled-in minds
More people are smarter than fewer people, but only when they are networked together

3. Benefits of openness > problems of openness
Collectively the upside opportunities of innovation and shared learning are much larger than the downside problems such as bad behavior, which we can identify and address with rating, comment and trust networks

4. I get > I give
As individuals, each person who contributes assets to a platform necessarily gets more than she gives this is how Wikipedia, potluck dinners, and taxes that pay for public libraries and national defense work.

Following are the governance based my conclusions:

  • Gov. must create and open up assets for value extractions by all
  • We need to tax heavily at the platform level because most everything will be turned into a platform and we want to keep fluidity within the peers
  • Gov. regulations need to protect autonomous individuals against the power of the platform and benefits need to be tied to people and not jobs
  • Everyone should be an independent contractor to give maximum flexibility and resilience to both companies and workers to match the rate of change
  • We must have a minimum basic income so that the enormous productivity gains are spread throughout the economy instead of increasing the unemployment
  • We should emulate the potential and promise of the free and open-source software movement and the block chain to create and govern by communities themselves.

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