Reading of Jeremy Rifkin: The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism

When a very experienced author like Rifkin presents his ideas on how the Internet of Things changes everything, we can expect an abundance of beautifully crafted sentences. Since the mind of a budding reviewer might suffer from scarcity thereof, I have decided to quote a lot from the book.
Explorations of the topic of abundance and scarcity are plentiful: Every serious alternative to capitalism wishes to replace its “economics of scarcity” with an economics of abundance. Rifkin is quick to point out the radical implications for the capitalist world order:

“Many, though not all, of the old guard in the commercial arena can’t imagine how economic life would proceed in a world where most goods and services are nearly free, profit is defunct, property is meaningless, and the market is superfluous. What then?”

In the book, he develops a fundamental historical narrative that understands societal change as an effect of its material circumstances. Every pivotal economic shift in society has occurred because of a new energy-communication matrix. In the early civilizations in the fertile crescent, that energy-communication matrix was agriculture (storage of grain) and writing (accounting system). He points out that before the First Industrial Revolution, in the Middle Ages, the invention of the water mill and the printing press constituted as much of a revolution as the later industrial revolutions. The water mill empowered the burgeoning bourgeois, and the printing press caused a surge in literacy. Together, they prepared the emancipation of society away from the old feudal structures. In the First Industrial Revolution, the availability of coal converged with the steam-powered printing press, while the Second Industrial Revolution’s energy-communication matrix was centralized electricity, the telephone and later radio and tv broadcasting, which enabled the consumer society. The third Industrial Revolution is about the coming together of the Internet and distributed energy production.

Although Rifkin doesn’t call it by that name in a 2014 interview with a business magazine[ref]Rifkin is a scholar with substantial practical involvement: His book titles sprout commissions, institutes, and think tanks, and he is busy implementing the Third Industrial Revolution together with a host of sustainable energy companies. When I read in his impressive biography – on the Collaborative Commons called Wikipedia – I was a little bit confused. In a speech in 2012 for the EU he seems to conflate “sustainable economic growth” and “sustained economic growth”. Of course in his role as the government advisor of many EU-countries he has no other choice than to speak the language of growth, but given the European austerity drama it’s hard to imagine the man who writes about The Empathic Society and the eclipse of capitalism serves as an advisor to their governments. See speech.[/ref], the Third Industrial Revolution and the new economic paradigm of peer production and lateral power will push capitalism to the fringe of society:

“Although the indicators of the great transformation to a new economic system are still soft and largely anecdotal, the Collaborative Commons is ascendant and, by 2050, it will likely settle in as the primary arbiter of economic life in most of the world. An increasingly streamlined and savvy capitalist system will continue to soldier on at the edges of the new economy[…]”

This time, the leap forward in efficiency brings us to a near-zero marginal cost society. Rifkin explains how the market inevitably strives for efficiency, and thus for near zero marginal cost, yet the availability of basic goods for essentially free will dry up the profit margin, and thereby tearing down the capitalist system.
In other words:

“After nearly two centuries of industrial curricula that emphasized the idea of the Earth as a passive reservoir of useful resources to be harnessed, exploited, manufactured, and transformed into productive capital and private property for individual gain, a new collaborative curricula is beginning to re-envision the biosphere as a Commons made up of myriad relationships that act in symbiotic ways to allow the whole of life to flourish on Earth.”

The first and second industrial revolutions were times of big infrastructure buildup (highways, railroads, power plants) that required large capital input and hierarchical organization, symbolized by broadcasting. The third industrial revolution, on the other hand, is a network of distributed, interconnected hubs spanning the globe. Rifkin talks about the “abhorrence of hierarchical power and the fierce commitment to peer-to-peer lateral power.”

The Internet of Things

The Internet of Things consists of the communications internet that started around 1990 and had matured by 2014, the energy internet, that is taking off exponentially, and the logistics internet. Creating and sharing information in a distributed fashion feels already so natural, that the old, centralized “mainstream media” lose a bit of their justification every day. The same will happen in the forseeable future to the energy internet: large power plants with their inefficiencies and inherent exploitation of their customers for profit, will give way to versatile microplants (rooftop solar panels, collecting wind, geothermal energy, energy from waste, etc) that democratize the energy internet (and make it less vulnerable to cyber attacks, too). The logistics internet will massively improve the efficiency of our economy. Pallets are things, too, and the IoT infrastructure will enable every pallet to travel to its destination using the most efficient route (read: no more empty trucks).

“When linked together in a single interactive system – the Internet of Things – these three Internets provide a stream of Big Data on the comings and goings of society that can be accessed and shared collaboratively on an open global Commons by the whole of humanity in the pursuit of “extreme productivity” and a zero marginal cost society.”

Cultural change

Rifkin is working hard on bringing about economic change[ref]See this article. Here, there is no talk about the eclipse of capitalism, and the impending Third Industrial Revolution is framed as “just another opportunity”. But isn’t it the fundamental change in the very nature of opportunity?
[/ref], but he is well aware that we need a much deeper cultural change, and that efficiency gains alone aren’t enough. The four guiding principles of the collaborative economy are not about privacy, profit and economic growth, but about sharing, collaboration, and community:

“The movement has been driven by four principles: the open-source sharing of new inventions, the promotion of a collaborative learning culture, a belief in community self-sufficiency, and a commitment to sustainable production practices.”

When our author describes the coming Age, he sounds like a true visionary:

“In the coming era, deep play in the Collaborative Commons becomes as important as hard work was in the market economy, and the amassing of social capital becomes as valued as the accumulation of market capital.”

“the steam engine freed human beings from feudal bondage to pursue material self-interest in the capitalist marketplace, the Internet of Things frees human beings from the market economy to pursue nonmaterial shared interests on the Collaborative Commons.”

“IT’S UNDERSTANDABLE THAT IN A SOCIETY where the market imperative and capitalist mystique are so firmly entrenched in popular lore, not to mention in government subsidies, that the slew of new economic initiatives and institutional arrangements flooding onto the Collaborative Commons are still being treated as mere supplements to the main economic currents.”

Rifkin says in his afterword that he grew up as the son of a plastics entrepreneur, and he holds the entrepreneurial spirit in high esteem. In economic theory (and economic culture) however, it was reduced to the invisible hand of Adam Smith, where every individual is ultimately only concerned with their own utility, and this narrow self-interest “inadvertently” leads to the best possible outcome via the invisible hand of supply and demand. He questions that myth by pointing out that a real-life entrepreneur is not primarily concerned with his own narrow self-interest, but with promoting an idea in the form of a product he believes in. The “invisible hand” is indeed a very narrow description of economic activity, because it fails to capture the fact that many people are left out of the game, while many more are locked into it. They won’t benefit from the invisible hand, simply because they lack the power to access the marketplace and play the game of supply and demand.

That brings us back to the cultural change that is absolutely vital on this next “step of the human journey”. The book ends with beautiful words on an empathic civilization, that could have come from authors with a much more esoteric track-record. Indeed, the convergence of hard-nosed economics with spiritual guidance is an interesting development that might open some eyes by raising the eyebrows above them[ref]A well-known figure in the American debunking of religion, Sam Harris, is very much inspired by spirituality and meditation and accepts that his books are shelved next to Deepak Chopra’s.[/ref].

“We seek to belong, not to possess and devour – all of which puts into doubt the two governing assumptions of economics: that the things we want most in life are scarce, and that our wants are unlimited. In reality, the things we want most are not scarce but infinitely abundant – love, acceptance, and recognition of our humanity.”

“We will need to leave behind the parochialisms of the past and begin to think and act as a single extended family living in a common biosphere.”

“To empathize is to root for the other to flourish and experience the full potential of their short abide. Compassion is our way of celebrating each other’s existence, acknowledging our common bond as fellow travelers here on Earth.”

Critical appreciation

This book is a wonderful fast-paced read that stems hopeful about our collective ability to change for the better. The idea of a triple information – energy – logistics Internet and its capacity to bring the marginal cost of our production, and hence profit and the raison d’etre of capitalism, to near zero can be overwhelming, but Rifkin’s narrative is very convincing.

On some pages I felt that there is some naivety in the idea that complete interconnectedness automatically leads to the transformation away from hierarchies to lateral peer-to-peer societies. When he writes that we can “pass on a note to a billion people simultaneously” he seems to ignore that not all connections are equal. We should be aware that when everything is connected, nothing is said about the “weight” of the connections. Too much enthusiasm for the mind-boggling achievement of production at near zero marginal cost, and we might forget that “near zero” doesn’t mean “equal zero” and the issue of equal distribution remains a challenge.
And of course one could ask if the connection of everyone and everything with everything else is always a good thing. Leaving alone privacy concerns, that might indeed become much less pressing when we abandon private property as an organizing principle, overconnectedness can lead to stress and attention deficit (ADHD). Should we worry about a “survival of the connected”, and the – inadvertent – emergence of a digital class society? I missed this critical self-assessment. It could have made the case for culture of empathy much stronger. That said, I can recommend this book to everyone who wonders what’s coming next.