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Policy Options Magazine: Get Ready for the Next Economy

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Originally Published in Policy Options Magazine

Get Ready for the Next Economy

By Nicco Mele

Within the next 10 to 20 years, the day will come when you awake and, to get ready for work, don clothes designed not by large subcontractors for the big fashion brands but by self-employed artisans from around North America. You will have found your attire (which I assure you will be quite fashionable) not at a large suburban mall owned by a major real estate company, but through an online “platform” retailer like Etsy, delivered to your doorstep by a robotic drone. How about shoes? Well, your brother will have recommended a shoe design he discovered through social networks — the shoe was created by his wife’s sister’s roommate’s nephew. After purchasing the shoe’s blueprints online, you will have fed them to your 3-D printer, which overnight will have sprayed plastic into the shape provided by the blueprints, allowing you to wake up, get dressed, open the oven-shaped printer and take out your new shoes.

What about your house? It will draw its electric power from a shared neighbourhood renewable power station using both wind and solar, which you will have built with the help of a site like One Block Off The Grid (you can sign up your neighbourhood now at 1bog.org). Your electric car will have been charged overnight in your garage, which was designed and manufactured at a factory in a nearby town, not by one of the Big Three automakers. Thanks to advances in small-run fabrication and manufacturing, there will soon be thousands of car companies producing vehicles customized for the geography and weather of every locale.

This vision of the future may seem far-fetched but, in fact, much of it has already arrived. The technology to spray plastic into that shoe design already exists. Bespoke cars are no pipe dream; there are hundreds of car companies in the US that produce small numbers of vehicles. In the immortal words of speculative novelist William Gibson, “The future is already here — it’s just not very evenly distributed.” And the upheavals in our consumer behaviour are just part of a wider transformation that is leaving our economy almost unrecognizable compared with that of decades past.

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“Jobs” as we traditionally conceived them are increasingly obsolete. The Freelancers Union estimates that 42 million Americans — approximately one-third of the US work force — are self-employed. A coalition of nascent and growing trends adds further layers of change: increased mobility thanks to information technology, increasingly sophisticated robots and drones in industrial and service settings, alternative currencies like Bitcoin, the growth of the sharing-barter economy as facilitated by technology, and the intensifying trend for 3-D printing and on-demand fabrication.

Taken together, these revolutionary developments add up to a profound reordering of our economic and social arrangements. They weaken big institutions, from governments to corporations and media, and devolve power to individuals. Digital technologies have an inherent logic that is anti-establishment, a philosophy expressed in the name of democracy in Tahrir Square, in the shoes designed by that nephew of your wife’s sister’s roommate, and in the way WikiLeaks whisked aside the longstanding norms and conventions of international diplomacy.

This atomization presents challenges for policy–makers. Power is leaking out of our established political, governmental, and social structures. It has happened, in part, from the shattering of faith in politics and from the unsatisfying outcomes of current policies for broad swaths of the population. But the shift away from big institutions gets oxygen from the powerful personal technology of the Internet and mobile phones, which are the building blocks of social media and the foundation of radical connectivity. Technology allows individuals to route around many of the traditional tools of policy-makers, to communicate directly in large numbers without the old intermediaries of political parties or media plutocrats, and to gum up the best-laid plans of the slow-moving established policy process.

We are at a crucial moment. As emerging technologies and radical connectivity up-end the existing order, we need to start thinking about alternative ways of organizing our economies. We need new approaches to the way we work and how we do politics. It starts by understanding the power of these technologies to help us find the new approaches.

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In their 2006 book Revolutionary Wealth: How It Will Be Created and How It Will Change Our Lives, futurists Alvin and Heidi Toffler imagined work without firms, a world where everyone is essentially a freelancer. When you had a project that needed doing, you’d collect the best bunch of freelance experts to do the job, and when the project was done, the opportunity seized, you’d disperse. As business and management writer Daniel Pink demonstrated in Free Agent Nation: The Future of Working for Yourself, that day was already starting to arrive in the 1990s. Today, it’s upon us in full force. The number of self-employed people who are essentially one-person consulting shops has skyrocketed since 2001; by some estimates more than 42 million people work part-time or on their own, more than the total number of autoworkers, teachers and doctors combined. Why is that? Because the efficiencies provided by “cloud” computing for sharing resources and collaboration dramatically reduces the advantages of scale, and will continue to reduce them in the coming decades.

But the advances of technology are not only affecting white collar jobs, they are also hammering manufacturing and the service industry. Amazon has created a stir with its “Prime Air” research and development project, which proposes to use drones to deliver packages directly to customers’ homes. Already many large warehouses use robots to manage the logistics of warehouse operations. Robots and drones are getting both cheaper and more complicated by the day, and promise to significantly alter the shape of the workforce.

Andrew McAfee at MIT has written at some length about the “great decoupling” of productivity/output and jobs/wages. The economy is growing, with increased output and increased productivity — but jobs aren’t being created and median household income is actually dropping. A number of factors are involved in this (domestic policy and globalization, to name two big factors), but our technology is getting faster, cheaper, and more and more capable of doing complex jobs.

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As jobs become scarce and decent pay cheques even more so, people are seeking alternatives. Your car spends a lot of its time parked and not being used. What if you could rent it out during the time it spends idle? The Web makes that possible, and a number of companies are out there to enable you to do exactly that; for example, RelayRides, which allows consumers to “rent cars from people in your community.” Unlike traditional car rental companies, platforms like RelayRides, Zimride, Spride and Getaround don’t actually own any cars but rather provide a suite of tools — reputation ratings, scheduling tools, payment systems — that let you share your car.

Collaborative consumption might sound idealistic, but it isn’t a passing fad. Millions of Americans have used shared consumption sites to rent space on peoples’ couches or to share bikes. More than $3 billion worth of goods and services have been exchanged — without money — on Bartercard. Freecycle has 6.7 million members across 85 countries. (Once, while working on a political campaign and short on cash, I furnished an entire apartment, complete with refrigerator and washing machine, from Freecycle).

By 2015, more than 10 million people in the United States and Europe will belong to car-sharing services like Zipcar. AirBnB, one of several Web sites that allow people to share their empty guest bedrooms with strangers, now lists more available rooms in New York City than the largest hotel in Manhattan. There is even a growing industry association for the sharing economy — Peers. It invites not only the companies built around sharing but the participants in the sharing to join them to craft legislative policies and shape regulatory actions that might affect their growing sector.

Coinciding with the rise of new online mechanisms for facilitating barter transactions and resource sharing is the rise of digital currencies. A host of alternative currencies are blossoming on the Internet, and one in particular — an open-source project called BitCoin — has been gaining steam.

Bitcoin uses peer-to-peer technology to operate with no central authority, allowing anyone to send “money” (the BitCoin currency) to anyone, anywhere, at any time, and beyond the reach of governments. BitCoin enlists participants in the community to manage transactions and issue money; the network collectively creates the money, instead of a central bank. Lest you think BitCoin is a nerd pipe dream, many companies — even large, publicly traded ones likes LaCie — accept BitCoin as payment. I recently paid for dinner at a local restaurant in Central Square in Cambridge, Massachusetts, with BitCoin.

BitCoin undoubtedly has a rocky road ahead of it, but it is a promising opening salvo in the advent of alternative, postgovernment currency. Since gaining mainstream attention, Bitcoin’s currency value rose from around $0.30 at the start of 2011 to around $1,200 as of this writing. There are almost 12 million bitcoins in existence, putting the worth of Bitcoin “money supply” at around $14 billion.

A final significant trend in our emerging economy is on-demand fabrication or, as it sometimes colloquially known, 3-D printing. I’ve had a 3-D printer for about a year and a half. I have two little boys and, as an experiment, I’ve been trying to keep up with their rapidly growing feet by printing shoes for them. I download blueprints from Web sites that crowd source design, and print the designs in a biodegradable hard plastic.

While the at-home 3-D printer is a few years away from being ready for the average household, the nature of manufacturing has changed dramatically.Time Magazine recently profiled ExOne, a company that specializes in industrial 3-D printing and on-demand fabrication machines. The article described an ExOne shop with 12 metal-printing machines that needs only two employees per shift, supported by a design engineer.

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These trends strike at the very nature of money, and challenge fundamental assumptions about our economy. If I am able to live a reasonably high quality of life using these technologies, I can essentially bypass the existing, entrenched financial system (or at least engage with it minimally). As the existing “big banks” system continues to abuse its power and resist accountability, alternative systems look more and more compelling to those not in on the giant profit margins generated by investment banks.

But the new technologies strip away our sense that the world will remain as we know it. No longer stuck with static assumptions, policy-making has an opportunity to be simultaneous wildly imaginative and grounded in fundamental realities. Take the example of Switzerland’s pursuit of a “basic income” policy, perhaps the beginning of the end of traditional assumptions about income, employment, and economies. The proposal would guarantee a monthly basic income of CHF2,500 ($2,728) to the entire Swiss population, regardless of personal financial standing. It is a policy idea born out of a sense of abundance rather than scarcity, implicitly acknowledging the increasingly episodic nature of work for white and blue collar workers.

The time has come to engineer structures that bring the hard-won liberal democratic values of the 20th century together with the brilliant, game-changing technology of the 21st. The next decade will belong to those who can take the ground-up, grassroots energy unleashed by radical connectivity; marry it with effective, engaged leadership; and craft stable and responsive institutions.

To try to imagine what the institutions of the future might look like, I’ve been casting about for some hints from the present: Wikipedia, BitCoin, Anonymous (the hacker collective), even Meetup. These disparate projects are emerging as “digital native” institutions and offer potential insights into the future of policy-making. They are built substantially on shared, internally consistent cultural norms and technological vehicles for broad participation. This is a form of “computational management,” using “cloud” computing and technological process to bring integrity to managing volunteers and workers, with tremendous gains in mana-gerial efficiency.

The key to making our traditional institutions relevant again is to look at them with new eyes, recognizing that every person they touch — the people they serve, and the people who work for them — carries enormous personal power thanks to digital life. With this insight in mind, how do we reimagine representative government? What about big companies, or big media? We must move institutions from the hub-and-spoke model — the “big” will do this for “you,” the small, powerless individual — to new models that acknowledge and harness the individual’s intense power and connectivity.

Nicco Mele is a faculty member at the Harvard Kennedy School of Government and author of The End of Big: How the Internet Makes David the New Goliath. He is also the co-founder of EchoDitto, a leading Internet strategy and consulting firm. Follow him on Twitter @nicco.

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