Economic theorist Jeremy Rifkin joined German Chancellor Angela Merkel, EU President Jean-Claude Juncker, and president of the European Investment Bank Werner Hoyer at a conference in Germany this month, and delivered the keynote address. Rifkin asks the leasing industry and the wider world of business: are you ready for the Third Industrial Revolution?

Here Leasing Life has reproduced some of Jeremy Rifkin’s speech, Digital Europe: The Rise of the Internet of Things and the transition to a third industrial revolution in the EU. It covers economic factors affecting the sharing economy, which was discussed at the Davos World Economic Forum in relation to leasing.


Today, Europe is laying the groundwork for the Third Industrial Revolution. The digitalised communication internet is converging with a digitalised renewable energy internet, and a digitalised automated transportation and logistics internet, to create a super-Internet of Things (IoT).

In the IoT era, sensors will be embedded into every device and appliance, allowing them to communicate with each other and internet users, providing up-to-the-moment data on the managing, powering, and moving of economic activity in a smart digital Europe.

Distributed manufacturing

Virtually every industry will be transformed by the IoT platform and the ushering-in of a ‘Third Industrial Revolution’.

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For example, a new generation of micro manufacturers are beginning to plug into the incipient IoT, and dramatically increasing their productivity while reducing their marginal costs to near zero, enabling them to outcompete the formerly invincible global manufacturing firms, organized around vertically integrated economies of scale.

It’s called 3D printing and it’s the manufacturing model that accompanies an IoT economy.

Software directs molten feedstocks inside a printer to build up a physical product layer by layer, creating a fully formed object, even with moveable parts, which then pops out of the printer. Like the replicator in the Star Trek television series, the printer can be programmed to produce an infinite variety of products.

Printers are already producing products from jewellery and aircraft parts to human prostheses, and even parts of cars and buildings. And cheap printers are being purchased by hobbyists interested in printing out their own parts and products. The consumer is beginning to give way to the prosumer, as increasing numbers of people become both the producer and consumer of their own products.

3D printing differs from conventional centralised manufacturing in several important ways. To begin with, there’s little human involvement aside from creating the software. The software does all the work, which is why it’s more appropriate to think of the process as ‘info-facture’ rather than ‘manufacture.’

The early practitioners of 3D printing have made strides to ensure that the software used to program and print physical products remains open source, allowing prosumers to share new ideas with one another in do-it-yourself hobbyist networks.

The open design concept conceives of the production of goods as a dynamic process in which thousands – even millions – of players learn from one another by making things together. The elimination of intellectual-property protection also significantly reduces the cost of printing products, giving the 3D printing enterprise an edge over traditional manufacturing enterprises, which must factor in the cost of myriad patents. The open-source production model has encouraged exponential growth.

The 3D printing production process is organised completely differently than the manufacturing process of the First and Second Industrial Revolutions.

Traditional factory manufacturing is a subtractive process. Raw materials are cut down and winnowed and then assembled to manufacture the final product. In the process, a significant amount of the material is wasted and never finds its way into the end-product.

3D printing, by contrast, is additive info-facturing. The software is directing the molten material to add layer upon layer, creating the product as a whole piece. Additive info-facturing uses one-tenth of the material of subtractive manufacturing, giving the 3D printer a dramatic leg up in efficiency and productivity.

3D printing is projected to grow at a blistering compound annual rate of 106% between 2012 and 2018. 3D printers can print their own spare parts without having to invest in expensive retooling and the time delays that go with it. With 3D printers, products can also be customised to create a single product or small batches designed to order, at minimum cost.

Centralised factories, with their capital-intensive economies of scale and expensive fixed production lines designed for mass production, lack the agility to compete with a 3D production process that can create a single customised product at virtually the same unit cost as producing 100,000 copies of the same item.

Making 3D printing a truly local, self-sufficient process requires that the feedstock used to create the filament is abundant and locally available. Staples, the office supply company, has introduced a 3D printer manufactured by Mcor Technologies in its store in Almere in the Netherlands, that uses cheap paper as feedstock.

The process, called selective deposition lamination (SDL), prints out hard 3D objects in full colour with the consistency of wood. The 3D printers are used to info-facture craft products, architectural designs, and even surgical models for facial reconstruction. The paper feedstock costs a mere 5% of previous feedstocks. Other 3D printers are using recycled plastic, paper, and metal objects as feedstock at near-zero marginal cost.

A local 3D printer can also power his or her fabrication lab with green electricity harvested from renewable energy on-site, or generated by local producer cooperatives.

Small and medium-sized enterprises in Europe and elsewhere are already beginning to collaborate in regional green-electricity cooperatives to take advantage of lateral scaling.

With the cost of centralised fossil fuels and nuclear power constantly increasing, the advantage skews to small and medium-sized enterprises that can power their factories with renewable energies whose marginal cost is nearly free.

Marketing costs also plummet in an IoT economy. The high cost of centralised communications in both the First and Second Industrial Revolutions – in the form of magazines, newspapers, radio, and television – meant that only the bigger manufacturing firms with integrated national operations could afford advertising across national and global markets, greatly limiting the market reach of smaller manufacturing enterprises.

In the Third Industrial Revolution, a small 3D printing operation anywhere in the world can advertise info-factured products on the growing number of global internet marketing sites at nearly zero marginal cost.

Plugging into an IoT infrastructure at the local level gives the small info-facturers one final, critical advantage over the vertically integrated, centralised enterprises of the nineteenth and twentieth centuries: they can power their vehicles with renewable energy whose marginal cost is nearly free, significantly reducing their logistics costs along the supply chain and in the delivery of their finished products to users.

The new 3D printing revolution is an example of ‘extreme productivity’. The distributed nature of manufacturing means that anyone and eventually everyone can access the means of production, making the question of who should own and control the means of production increasingly irrelevant for a growing number of goods.

The peer-to-peer nature of the IoT platform allows millions of disparate players – small and medium-sized businesses, social enterprises, and individuals – to come together and produce and exchange goods and services directly with one another, eliminating the remaining middle men that kept marginal costs high in the Second Industrial Revolution.

This fundamental technological transformation in the way economic activity is organised and scaled portends a great shift in the flow of economic power from the few to the multitudes and the democratisation of economic life.

It’s important to emphasise that the transition from the Second to the Third Industrial Revolution will not occur overnight, but, rather, take place of over 30 to 40 years.

Many of today’s global corporations will successfully manage the transition by adopting the new distributed and collaborative business model of the Third Industrial Revolution while continuing their traditional Second Industrial Revolution business
practices.

In the future, capitalist enterprises will likely find more value in aggregating and managing laterally scaled networks than in selling discrete products and services in vertically integrated markets.

The distributed features of the new economic paradigm also enable the least developed regions – that were largely excluded from the First and Second Industrial Revolutions – to ‘leapfrog’ into a Third Industrial Revolution.

The lack of infrastructure is both a liability, and a potential asset. It’s often cheaper and quicker to erect virgin infrastructure than to reconfigure existing infrastructure.

We’re already witnessing a surge of activity in some of the poorer regions of the world with the introduction of solar, wind, geothermal, and biomass harvesting technologies and the installation of distributed renewable energy micro grids. This process is likely to accelerate in the coming years, giving rise to exponential curves and a qualitative ‘leap’ into the Third Industrial Revolution era in previously underdeveloped regions.

The rise of the sharing economy

While the developing digital infrastructure is making the traditional capitalist market more productive and competitive, it is also spurring the meteoric growth of the sharing economy.

In the sharing economy, social capital is as vital as finance capital, access is as important as ownership, sustainability supersedes consumerism, cooperation is as crucial as competition, and ‘exchange value’ in the capitalist marketplace is increasingly supplemented by ‘shareable value’ on the Collaborative Commons (a new socioeconomic production model in which large numbers of people work together cooperativley).

Millions of people are already transferring bits and pieces of their economic life to the sharing economy. Prosumers are producing and sharing their own information, news, knowledge, entertainment, green energy, transportation, and 3D-printed products in the sharing economy at near-zero marginal cost.

Forty per cent of the US population is actively engaged in sharing homes, toys, tools, and countless other items. For example, millions of apartment dwellers and home owners are sharing their living quarters with millions of travellers, at near-zero marginal cost, using online services like Airbnb and Couchsurfing.

In New York City alone, Airbnb’s 416,000 guests who stayed in houses and apartments between 2012 and 2013 cost the New York hotel industry one million lost room nights.

Recent surveys underscore the broad economic potential of the sharing economy. A comprehensive study found that 62% of Generation Xers and Millennials are attracted to the notion of sharing goods, services and experiences in Collaborative Commons.

These two generations differ significantly from the baby boomers and World War II generation in favouring access over ownership.

When asked to rank the advantages of a sharing economy, respondents to the survey listed saving money at the top of the list, followed by the impact on the environment, life style flexibility, the practicality of sharing, and easy access to goods and services.

As for the emotional benefits, respondents ranked generosity first, followed by a feeling of being a valued part of a community, being smart, being more responsible, and being a part of a movement.

How likely is it that the sharing economy will play an ever-larger role in the economic life of society in the coming decades?

According to an survey conducted by Latitude Research, 75% of respondents predicted their sharing of physical objects and spaces will increase in the next five years.

Many industry analysts agree with these optimistic forecasts. Time magazine declared collaborative consumption to be one of its "10 ideas that will change the world".

In a fully digitalised economy, extreme productivity, triggered by the optimisation of aggregate energy efficiency and the reduction of marginal cost toward zero in the managing, powering and moving of economic activity across every sector of the economic value chain, decreases the amount of information, energy, material resources, labour and logistics costs, necessary to produce, store, distribute, consume, and recycle economic goods and services, once fixed costs are absorbed.

The partial shift from ownership to access in a growing sharing economy also means more people are sharing fewer items – the birth of the circular economy – significantly reducing the number of new products sold, resulting in fewer resources being used up and less global warming gases being emitted into the earth’s atmosphere.

In other words, the headlong push to a near-zero-marginal-cost society and the sharing of nearly free green energy and redistributed goods and services in the sharing economy is the most ecologically efficient economy achievable.

The drive to near-zero marginal cost is the ultimate benchmark for establishing a sustainable future for the human race on earth. The IoT infrastructure enables Europe to achieve its long-term 2020, 2030 and 2050 goals of creating a low-carbon society and slowing climate change.