Thursday, December 11, 2014

notes on "zero marginal cost"

Out of many recent books, this is the best and most smooth-listening (I converted the pdf to 320 words per minute by TTS program, 7 hours).  The quality of the writing is on-par to his classic "End of Work" and both are far superior to "Rise of the Machines" and  "Superintelligence".  "What Technology Wants" by Kevin Kelly is still a distant second, the first 1/3 of it being a great book.

You could write a book correcting the factual errors and questioning the bold assertions. But considering the enormous scope of material and the tremendous quantity of new ideas, true or not, all should be forgiven. For me, encountering a book that has new ideas is a breath of fresh air.  To leave out half the book to make sure 15% is not in error would be a mistake. Here's two gaffs that made left me dumbfounded: 1) misidentified bitcoin founder  2) Earth 4.5 million instead of billion years old. There is a reason the first mistake is hard to make and incredible, and the 2nd mistake should never be made (as it often occurs in economic talk) because of the history of people being really far off in knowing the age of the Earth. Mr Sutter, a reviewer, has convinced me his attempts to apply entropy to economics were very wrong.

I'm going to use three different definitions of "the commons" in this review, which I think he does too:
1) a resource "common" to the community
2) the organization that manages the resource(s).
3) the sum total of all instances 1) and 2) across the world

If you want more precise programmer's view of what a "commons" is, I recommend reading wikipedia's article on Decentralized Autonomous Organizations, and the image there created by Vitalik Buterin of "Bitcoin" fame that logically divides up the way people and computers can work together: 1) guided internally by human or computer, 2) using an internal currency or not, and 3) controlling either human or computer "output" connected to the external world at the "edges" of the organization.

Going towards the commons way of managing society's resources is going away from traditional market place and government. It gets away from hierarchy, capital investment, private property, individual profit, and secrets in order to more efficiently use resources for the common good. This process is being accelerated by post-2008 unemployed young who grew up with sharing technologies. He uses catch phrases are "the sharing economy" and "collaborative consumption."

This book makes a strong distinction between the distributed and non-capitalistic nature of the commons and the hierarchical and capitalistic nature of traditional organizations (corporations). He says both are still needed, but does not delineate where and why. My view is that the hierarchical nature of organizations is the result of having different experts in the specifics and in the more general, where the specific work needs to be guided by more general considerations such as market forces. His previous book mentioned how Japanese car manufacturers turned this idea on its head to make sure feedback came back from the factory floor to optimize production in concert with market changes (market and technological changes), flattening the hierarchy. However, there is still a hierarchy of experts. Commons have management, and they are usually the elected experts if it is a commons that is complex or undergoing rapid change, but a commons does not usually need monthly and daily work that needs to be intelligently changed (planned and guided) by a management structure.
 Looked at another way, capital is supposed to be accumulated by the "wisest" of investors or companies. By "wise" I mean they are supposed to have helped society the most as measured by the votes of consumer purchases. This gives the investor and company more power to allocate more of society's resource for more "good". So our market system, guided by rules enforced by government, is discovery and implementation of intelligence for the betterment of society.  But now that we have so much technology and easily shared smarts and ideas and it's all advancing so rapidly, do we need these wise investors and dominant companies now as much as in the past?  We're getting close to designing, producing, distributing, and sharing so efficiently that all the "middle men" and "decision makers" between worker and consumer seems to be going away.  With programs implementing our mutual cooperation via the internet, even the government seems more and more unnecessary.
The commons uses a different type of that is needed to implement ideas that everyone agrees are good. But the common's methods can work very well on accumulating this type of capital to ultimately control capital that controls the external world.
"The commons" and "zero marginal cost" and other catch phrases are the flags under which he expresses his thoughts about how we are organizing ourselves.  But he never gives exact definitions for most of his phrases and mixes and matches things where the reader will not get a simple coherent picture.  I've tried to develop a simpler, big picture view for this review, but it's long and jumping around, so I've also mostly failed. 
Commons can use "social capital" or "reputation capital". One function of this is create a hierarchy (he will not cal it that) of decision-making, including where to allocate real capital inside or external to the commons. These reviews are ranked by reputation capital of reviewers such as myself, and this type of currency has the effect of replacing traditional marketing and advertising. I am using my reputation capital (if enough people vote up this review) to convince members of our "commons" here (that is managed and supported by amazon) to spend real money on the external world, the book and writer. But more and more you can see the writers engage with this commons and adjust writing accordingly, so the border of our commons here is fuzzy. I've long thought amazon should pay reviewers based on up votes (logarithmic, outlier, and price-adjusted). Like open source, just the ranking feature is a payment in pride to those of us who are competitive, enjoy helping others, have too high or low self-esteem, and/or are desperately seeking societal approval without other equal-or-better sources of self-fulfillment, so currently it is a currency-based DAO that does not use dollars as the currency.
 He mentions that "commons" methods predate market and money-based economics and governments, such as a tribe deciding how to use a common resource. He mentions that commons management methods are more naturally suited to a circular flow of resources, rather than trying to extract money, commodities, or labor out of a larger world for personal profit. By circular, he is referring to Alvin Toffler's 1980 book "The 3rd Wave" which indicated that we should be seeing a return to keeping production and consumption tied closely together, even needing less currency. He says  we're seeing the 3rd Industrial Revolution. Agriculture was 1st, manufacture 2nd, and the internet of things is 3rd.  He mentions that capitalist thinking has promoted a view that humans are more selfish than they really are, which is one reason people have been desperate to form commons groups, trying to escape corporate thinking that is selfish and depends on its employees to think selfishly which (in my my view) helps control them. Commons in contrast are more about sharing and working together instead of competing for domination of resources and labor.   He mentions the all the different types of commons which shows they are more prevalent than we generally realize. Cooperatives of many sorts, even 2 companies I thought were large corporations, are commons.  It ranges from credit unions to open source, and we generally experience better service from them.
 He believes capitalism has shown signs of failing many times because it succeeded too well, producing what we sought nearly for free and then getting confused, unable to employ the people it needed to buy the things being produced.  The result since 1930 has been big government and pushing consumption, a word that used to have strictly bad connotations instead of being marketed in economics as a savior. Commons in contrast tries to conserve, and to spread information based on merit and need instead of marketing for conspicuous consumption.
What could fall under the rubric of "the commons"? Everything, but not that everything should. Everything belongs to all of us, and should be managed by all of us for the common good. Here and there he'll throw out partial lists of about 10 things that are commonly already managed by commons methodology.  But I want to be a lot more fundamental and not need to remember so many details: "economics" is about using intellectual property and communication to more efficiently use energy to move matter in order to extend society's domination over the natural world, if not directly make copies of itself like genes.  This is the evolution of memes in action.  Bear with me for a minute. Evolution breaks down power structures as part of flattening out energy differences. Even by observation we know societies with less disparity in wealth are healthier and more powerful as a whole. Books increase communication and intelligence, possibly enabling democracies to overthrow lords and kingdoms. A movement to a distributed commons away from hierarchies is natural and might be expected from a deep physics point of view.  I think there must be a physics principle at work, but physicists have not yet blessed my answer:  "the principle of least action" which is a more general form of newton, hamiltonian, and lagrangian mechnics.  This form of mechanics has an explicit bias towards lower entropy if excess entropy is being emitted to space and there is a constant influx of energy from the Sun. In order follow this principle, the highest energy bonds available must be used, which means a bias towards copies since there are a limited number of high energy bonds. So individuals interacting directly with each other in production and consumption is more efficient, and their basic needs are the same.  The problem we have now is that refined metals, silicon, and carbon-carbon bonds among many other things, are higher-energy bonds of more identical than we are. These are used to capture energy from the sum (silicon solar cells), move matter (electrical motors), to form strong structures (cement, steel, carbon-carbon), and to model and think about how to do it most efficiently (silicon-silicon bonds in computers moving electons 40,000 times lighter than the ions our brains use to model much larger physical objects)
 Several times and in detail he mentions the similarities and concurrence of 3 key industries (he calls them "internets"). He calls the "coming together" of these three the Internet of Things (IOT). 
 1) energy channels,
 2) communication channels, and
 3) transportation channels ("logisitics").
He very interestingly mentions they all of "packets" that can be divided up and assembled many times during "transport" to a final "destination".   I would have added: 4) intellectual property and 5) labor which are also packets that we combine and disassemble.  The transport and destination are more explicitly spatial in his categories than in intellectual property, but there is a presence, movement, and combing of  things like patents, pieces of code, a design for a screw, a piece of music, or a sentence from a book, and they can be combined with each other across categories like music on a device in a greeting card.   Labor can also be divided and assembled by packet, our bodies. An assembly of which means "organization".
I'll pause here to go off the deep end again for a minute. Remember I said this whole process is evolution in action. Could all these "packets" moving around and combining and breaking apart in different ways for greater efficiency be another example of gene-like memes?  By the definition of "meme", this is what is occurring in the intellectual property landscape. But to what extent are the packets of transportation, communication, and energy also memes? Could quantum mechnics be the ultimate source of these packets? Just a thought to ponder.
Although he list many things, I think the primary efficiencies that result are improved efficiency in the use of infrastructure and resources, and better choices.  In terms of intellectual property, the efficiencies are more options and less design time.
There is also a return to community that is inherent to commons methods that makes me wonder to what extent loneliness (at least the U.S.) is the result of a capitalist society, maybe even a necessary evil in order to get us to purchase more to keep the profits rolling in to the coporate machine.
 He emphasizes movement towards the commons is a movement away from the assets of the world being divided up among people and business, aka private property, and towards SHARING.  He says this was the way things originally were. I'll agree that was true in the pre-agriculture period where our brains had did most of our social evolving, before agriculture allowed such an accumulation of assets.
 He also discusses at length how going towards the commons is going away from privacy which I'll call secrets. I'll only mention that secrets often enable unfairness, not just reducing efficiency and maintaining privates for the inventor or content provider.

 The following are notes I made while listening to things I found interesting and have relevance to other things on my mind, but I did not know before, or had not congealed the thoughts.
 "...capitalism’s dynamism feeds off scarcity."  Interesting.
 Ghandi: “Earth provides enough to satisfy every man’s need but not for every man’s greed.” I would add "including their greed for children".
 Keynes coined "technological unemployment".  Keynes said competitive  capitalism would find lower production and marginal cost until the only way to make a profit would be to create a monopoly, and he cites some free market capitalists who surprisingly cast a vote for government-supported monopolistic behavior in some circumstances.  Concerns about this were first expressed by Marx and then later by Ghandi. Ghandi believe production and consumption must be done locally like Alvin Toffler promoted in 1980 in "The 3rd Wave".
He goes into great detail about advances in technology causing local or short term problems in unemployment, from the middle ages and on.  His description of the current-day debates and knowledge in the 1920's were a surprise to me, making it seem very clear the 1930's problems were caused by technology advancing too rapidly, displacing workers who were previously able to buy the output.  Waves of the problem seem to have been coming back to haunt us ever since. Machines replaced muscle on the farm and factory in the 1920's. We needed higher education to remain relevant, and are not necessairly happier despite 10 times more energy per person and 10,000 times more technology.  But now our brains are being replaced by computers which are 10 million times more efficient at any programmable task instead of 100 times more efficient like electrical motors over muscle.  Every economically-relevant task can be programmed.  So where do people fit in an economic machine that may soon not need us?
Just like all other writers of this "rise of the machines" genre, he does not mention a clear solution: just allow the number of people to be reduced. Why not let the machines work, and fewer and fewer people live without needing to work?  The problem is that we are not going to get organized enough to decide who gets to breed.  We ultimately will fight to the death to breed, and that may be the core, unsolvable problem.
He says Darwin was against the phrase "survival of the fittest". He says this false idea was used to promote the utility of private property as the sole measure of value that should be paid, without regard to the cost of labor. He says Herbert Spencer promoted competition in marketplace on this theory which was embraced by more vertical, centrally managed (and financed) companies.   I only agree that wholistic evolution is what occurs from large energy differentials, not from "selfish genes" because genes have no energy or force behind them, and randomness is not a creative "force".  I also agree the source of strength in an economy that overtakes other economies is in the number and health of efficient laborers, not the extent to which ideas (selfish genes) can be used to extract profit out of them. Winnign genes are those that work together, not those that act like a virus or cancer. So competition is not everything. Symbioses occurs more in natural systems than war. Ritualized war can maintain health without real war.
He says we can increase energy efficiency 40% or more in next 40 years, more than in the 20th century, getting off fossil fuels rapidly. This is thanks to the "internet of things" connecting every machine, business, and residence in networks of energy, communications, and logistics.  10 million to 3 billion connected "things" from 2007 to 2013. Maybe 100 trillion by 2030.
He gives a detailed discussion on the commons, including Hardin's 1968 example of a community field for grazing that leads to a "tragedy of the commons".  Then he goes on to mention a rebuttle called the "comedy of the commons" in which people benefit by more and more people engaging (reminding me of "Metcalf's Law" where the value of the network is nodes^2).
He's great at giving all kinds of examples on all kinds of things, but I would like to see an explicitly stated simple theory or idea at the beginning that could help me classify all the his comments into a bigger picture. He shows a million trees, but  I do not have any feel for the forest.  To what extent is an electric cooperative like an open source project?  If the biggest family album on Earth (Facebook) is a commons that should not be turned into a profit machine, how would it be manged via a commons resource?  How would I design a specific commons management process for a given problem or goal? 
There are a few things I've thought about in order to give a better "big picture" view of what he's talking about. The commons are typically managed by an elected association that  can makes keys decisions on allocation of the resources, so it's like the government and marketplace combined.  Generally it seems the primary way the commons has been historically used  is that it's locally based and needing to manage a limited resource (he gives Swiss Alps and Japan's tree conservation as examples).  He repeats a list of 7 attributes of a successful commons, but it's kind of obvious overlapping and has an artificial feel. Seven is too many for finding a deeper truth so here's my attempt:  The limited resource element may not be as important as the transparent nature of "transactions" and "actions" involving the commons, and the social pressure of knowing your neighbor will know what you've done.  He mentions when things can be done in secret to a higher degree either by the individual or in the governing association, the commons projects are more likely to fail by the same degree. Lack of communication does encourages various forms of "war".  With the internet eliminating distance and computers monitoring things for us, the methods of managing common resources can be brought to bear on more aspects of society.  If things are free, then market mechanisms can't be applied, so commons methods may also be applied to things that are not limited.  A fixed-quantity currency that represents the fixed quantity of the resource is an idea taken from artificial intelligence and mathematical optimization.  Or use an decreasing/increasing quantity of currency if the resource (like "happiness") is decreasing/increasing.  But asset values should be legally required to follow suit so that the old asset holders do not profit or lose from changes to the currency. 
Inflation by the way is a slow measured way of erasing old debts which forgives the mistakes of poor forbearers and reduces the amount the wealthy can be entrenched in wealth without needing to work. Forgiveness of debts since Persian times has resulted in economic expansion, hated the most by the political elite who do not even need monopolistic profits, and prevents civil breakdown (war).
 An international committee specified 7 rules that commons should have. I am simply repeating these.  These are too complicated and over-lapping for the deeper understanding I am interested in.
 1) All-inclusive
 2) democratically elect management
 3) fee-based
 4) can enter contracts, but remain autonomous
 5) educate members, to maintain participation
 6) help expand the commons experience across all regions
 7) sustainable activity
 His comments about everyone copying, modifying, and sharing all types of media, and it being billions instead of a small community, implies that we should be going through a fantastic evolution of culture and society and all other thoughts (including scientific, although too much noise can be more destruction to new understand, hiding all true advances). [My thoughts:] Our scientific institutions (peer-review through journals) is an algorithm for letting intelligence rise to the top, creating a nurturing environment.
 Final note from me:
 There is an impending Earthquake that is central to the future implementation of much (if not everything) in this book.  The Bitcoin technology is only an example "commons" that can be implemented on the "blockchain", a new cryptographic technology that can form a consensus on the truth of data that is changing without having a single or central database. The blockchain on peer-to-peer networks can define, enforce, and evolve all conceivable contracts, enabling it to replace all governments and corporations without any human participation except where needed and defined. "Contracts" of all sorts like social and legal contracts can be viewed as the medium by which all people and organizations interact with all others.  The contracts on the blockchain can be public or private.  Trusts that no one knows the content of until needed can be implemented. Even the creator can be blind to the outcome of the contract if it is based on unknown present or future conditions. Contracts can use their programming to create other contracts without human intervention. The contracts can be one-to-one, one-to-many, many-to-one, or many-to-many. They can use reasoning of any complexity, being Turing complete. They can be enforced by currency or other contracts. The current weakness is that the contracts often need to refer to data that is gathered from the external world, and thereby trust an "oracle" to provide the data.  In the interim an "n-of-m" agreement from a set of m oracles has been proposed. The peer-to-peer network is used to guarantee (agree upon) what the contract says, even if no one knows what is inside it (cryptographic data). So the network may also be used to agree upon external world data that contracts commonly use without having to resort to oracles individually.

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