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The Clothesline Paradox and the Sharing Economy (Keynote file)

by Tim O'Reilly on Jul 19, 2012

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My keynote at OSCON 2012 in Portland, July 18, 2012. Focuses on the contribution of open source software to the economy, using the metaphor of "the clothesline paradox" first articulated by Steve Baer ...

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The Clothesline Paradox and the Sharing Economy (Keynote file) Presentation Transcript

The Clothesline Paradox:How Sharing Economies Create Value +Tim O’Reilly @timoreilly O’Reilly Media OSCON July 18, 2012

Create More Value Than You Capture

I call it “the big lie” of modernbusiness

Looting "…the normal economics of maximizing economic value is replaced by the topsy-turvy economics of maximizing current extractable value, which tends to drive the firms economic net worth deeply negative. Once owners have decided they can extract more from a firm by maximizing their present take, any action that allows them to extract more currently will be attractive--even if it causes a large reduction in the true economic net worth of the firm. A dollar in increased dividends today is worth a dollar to owners, but a dollar in increased future earnings is worth nothing because future payments accrue to the creditors who will be left holding the bag." George Akerlof and Paul Romer, Looting (1996) http://papers.ssrn.com/sol3/papers.cfm?abstract-id=227162

“There’s a wonderful section in Les Miserables about thegood that Jean Valjean does as a businessman (operatingunder the pseudonym of Father Madeleine). Through hisindustry and vision, he makes an entire regionprosperous, so that “there was no pocket so obscure thatit had not a little money in it; no dwelling so lowly thatthere was not some little joy within it.”And the key point: “Father Madeleine made his fortune;but a singular thing in a simple man of business, it didnot seem as though that were his chief care. Heappeared to be thinking much of others, and little ofhimself.”

 Income inequality

“We all do better whenwe all do better.”

Income Inequality

How do we make the economy betterwhile also creating a richer, fairer world?

Create More Value Than You Capture

An economy is an ecosystem

If you take more out than you put in, the ecosystem eventually fails

That’s something these guys didn’t care about Bernie Madoff Allen Stanford Charles PonziAnd these guys seem to have forgotten Lloyd Blankfein Jamie Dimon Vikram Pandit Goldman Sachs JP Morgan Citigroup

But it’s something these people all deeply understood!

And their work has been re-used to create even more value

There are all kinds of unexpected beneficiaries “I built my business on open source software, and I want to give something back.” - Hari Ravichandran Endurance International Group

The Clothesline Paradox If you put your clothes in the dryer, the energy you use is measured and counted, but if you hang them on the clothesline to be dried by the sun, the energy saved disappears from our accounting!

WordPress

ISP Services - a $79 Billionmarket in the US aloneWeb hosting and domainname registration - a $5Billion market

Having a web siteincreases theproductivity of smallbusinesses by 10%

So that’s where the value gets captured - by everyone!

We worked with EIG’s Bluehost unit on a study to show the benefits of open source software in the SMB markethttp://oreilly.com/opensource/radarreports/economic-impact-of-open-source.csp

Of the 700,000 SMBs in the Bluehost data...

Then I started thinking about other“clothesline paradox” economies

Why do people keep saying that users won’t pay forcontent when they are paying the same amount forInternet access as they pay for Cable TV?

Who is getting the free ride? When Comcast (or other Cable Company) customers view cable TV content, Comcast pays content providers When Comcast customers watch YouTube, spend time on Facebook or Twitter, or visit websites, Comcast gets its content for free, much of it created by the very customers who are paying for access!

 Khan Academy

"theres an intrinsic value to creating something forthe sake of creating it…"there is this beauty in dropping it into a communityof your own making and seeing it dispersed andseeing younger talent take it to levels you could neverimagine, because that lives on" -Rodney Mullen

In a gift culture, you gain status by what you give away,by the value you create, not the value you take

Thank you for showing the way

Haroon Saleemi, Project Manager at Physician Designs Very nicely put that an economy is an ecosystem. 2 months ago

Are you sure you want to

Bonnie Sanders, Student at Home Brilliant!! 2 months ago

Cathy Rice, Self-employed at Home Thanks for sharing. 3 months ago

Andrew Kraus, Self-employed at Home This is what I need. 3 months ago

Lulu McGee, Student This is so nice. 3 months ago

Vera University, Self-employed at Home Interesting. :) 3 months ago

Lydia Moore at Physician Designs I like this slides. 3 months ago

Sara Salano i love this.. 3 months ago

Louis Pearce, Self-employed Awesome slides. 3 months ago

Mike Zavala Informative slides. 4 months ago