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The Clothesline Paradox and the Sharing Economy

This was my keynote yesterday at #oscon , the O'Reilly Open Source Convention.  I talk about what's wrong with our economy - the ecosystem failure that occurs when companies think it's OK to take more value out than they create - and contrast that with sharing economies like open source software.  I use the analogy of "the Clothesline Paradox" - Steve Baer's wonderful account of how solar energy is left out of our energy accounting, treated as if it were a tiny slice when in fact it is the root of all - to explore how creative economies create value that they don't capture.

I talk about my conversation with Hari Ravichandran of hosting company Endurance International Group, which led to a partnership to study Bluehost customer data to examine the impact of open source software and web hosting on small business ( as an example of how value created but not captured by innovators shows up elsewhere in the economy.

I also talk about evidence of economic acceleration coming out of other sharing economies.

(P.S. If you just want to look at the slides, a PDF with notes is here: )

Let me know what you think.
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Nice talk - you're such a wonderful speaker.  Thumbs up! :)
I like the premise ... A business should create more value than it captures.
I think the economy should be about resource management. The people who run things, seem to think the economy is about taking as much as possible, whilst giving as little as possible.
Thank you for the positive impact you have on so many people!! You are making a difference! :-)
I'm trying to get past the Victor Hugo reference. Gawd he is such a horrible writer. :P
+Brandon Atkinson Absolutely. I strive to live this on a personal level every day. I give, I share, I learn ... WE succeed!
Wonderful talk about one of the true "beacons of hope" in our world today -- people who truly create value rather than extract it and the tremendous impact they have 
Thanks to you for the material your company has produced that has been a foundation for everything I do today.
Thanks Tim.  This dovetails very nicely with the topics at Smart Disclosures Summit in March.  We're building out our infrastructure in support of some of the things you speak about.  If we can thread the needle, it's going to piss some corporates off, but it'll be better for society.  Sorry, but I can't let the cat out of the bag quite yet!
Thank you for posting this. The more people that hear the message the better. 
No success after 5 tries.  Will explore after vacation (and ask some of the social networking addicts I'll see in New Mexico).  
+Tim O'Reilly, you've pinpointed a central problem (the central problem?) with our current economy by reprimanding companies that prioritize profits over value. I especially appreciated the use of Les Mis in illustrating how it should be done. 

The second part of the speech begs a question, though: How do we define value? You use VidCon as an example of a community that seems to be getting it right, but I question how much value that community creates. From my perspective it seems like much of what gets oodles of hits on YouTube (except for most videos by the Gregory Brothers!) consists of empty calories. Soma.  

I wonder if communities such as VidCon generally distract us from more valuable activities and therefore, like the megabanks on Wall Street (though to a much smaller degree), take more than they create.
Thanks for the gift, Tim.

And thanks for showing us how anyone can "Work on Stuff that Matters".

Your presentation provides a useful perspective on the problems with our economy, and simple guidance for positive change:

Create More Value than You Capture.

This message matters.
"Thinking about open source community as an ecosystem yields lessons for innovation, growth, and renewal.'" is the takeaway, Mr. O'Reilly thanks for sharing.
There are number of conservation laws which people study at Physics classes. I wonder why people do not apply this very natural logic to the economics, or even society itself.

You can never "make money" from nothing. If you doesn't see where it comes from, it means you either missed the transformation of the one type of "energy" to another somewhere, or just looking at a small piece of a big isolated system.

And though if you are small enough you can try to live in this particular corner, which is "warmer" then others, but eventually, if you take too much, the disbalance with the "colder" corners will strike you back making everything unstable.
"Space... the final frontier. These are the voyages of the Starship Enterprise its five-year explore strange new seek out new life and new boldly go where no man has gone before." - Gene Roddenberry (August 10, 1966)

Gene Roddenberry’s concept of sharing economic resources with no capital existence is similar to open sharing. Would it be possible that such a world can exist?

Tim your concept of giving something back is not a new concept, but I am glad to see it is growing and working. Regardless, the issue of helping our economy by giving the small business a chance to succeed to assist our economic troubles is indeed a good concept. Unfortunately, not all big business thinks in same avenue.

A little birdie told me that a major oil company is planning on out-bidding all new small developing oil businesses in order to place them out of business. The strategy is to monopolize in the oil business and then be in control of fuel resources pricing. As I stated, a little birdie told me and therefore rumored and cannot be proven at this time.

Now, I do know that major oil businesses do give back to the communities. I am only using this as an example. Greed is one of the seven deadly sins and still exists in our economy. In order to repair our economy we must first repair ourselves, and the way we do business. I believe your concept of sharing will indeed spread and grow and hopefully be adapted to help repair the economy. Tim you are diffidently seeking out new life and boldly going where no man has gone before.

Thank you for sharing.
Humm...  giving back seems to come after getting it in our current system.
The more I hear the more I wonder... the human personality is not going to work with this one. War was invented when two hunters wanted the same animal.  
Too bad a handful of greedy people have ruined everything.
Agree that our present definition of value has no way to account for what people who give freely accomplish...but intuitively, it's huge. We have to choose our focus. Will it be: scraping together enough for our livelihood or creating richness in how we live our life. The latter, in my opinion, is way more valuable for those around us, and I believe they'll find ways to pay us for having creating all this value.
"the Clothesline Paradox" sounds like something made up a couple of days ago :)
excellent, Tim.  Just what I needed.  Thank you for the examples, the explanations of gift culture, the clothesline paradox, the monetization of gift economies (Youtube), etc.  ...And mentioning the sheer joy of creating something.  
Frank M
People used to grow a business having a long term plan, wanting to leave a legacy behind for future generations. Now shareholders demand instant gratification, shares "drop" in "value" because some estimate for a freakin' quarter was off by 1%.
Now, Now, Now. Me, Me, Me. I think that may be the root cause :(

Great speech.
Great message, especially the part about adding value to a community that will persist over the years.
+Jon Ogden I am often a critic of mindless entertainment, but entertainment is a big part of our economy, and likely growing bigger as robots take over more work (See Race Against the Machine by Brynjolfsson and McAfee).  And when that entertainment is produced by users for users, you get odd and wonderful new genres, like the "Thomas the Tank Engine Train Crash" video genre that my 3 year old grandson enjoys - content produced by his peers.
IF companies can take more value than they create, those people selling their "stake" don't know the value of what they have. That makes them stupid or ignorant (same result). 

The more "complicated" we make things the harder it is for anyone except those that are gaming the system. IF we strip away all the complications and move to a more simple model, then we can return to balance. 

Case in point, all the Derivatives in the sub prime lending fiasco was caused by people not understanding the very complicated instruments of debt that were created to facilitate the stealing of trillions from the market. 

People didn't know what they were doing, but pretended. All those people got caught with their pants around their ankles bend over picking up the soap. It looked good on paper, and ended up being nothing more than a complicated Ponzi Scheme that eventually popped the bubble.
Ah Ha
What would happen if we removed all these barriers to quickly? Are we heroin
addicts? Would the economy just crash? Rich people do not like change, LOL.
Thank you so much! I found this both enlightening and inspiring.
Confusing. My understanding of economic growth is adding value by creating. The examples cited though include some entity getting revenue piggy backing on open source stuff and getting off without creating real wealth- bluntly encouraging more opportunistic culture than real giveaway.
Ah Ha
Yes, but most do not create. The Libor scandal, Madoff, Enron, etc... Apple
is built on open source they took something and created something new. If
you remember from the Corporation documentary, efficiency is the enemy of
profit and so is creativity. The internet is the only place where we can be
virtually free to create all types of useless stuff on a journey to
something useful that people will pay for. A real breakthrough in cancer,
energy, or education, might get you whacked. Mercedes-Benz cars where
lasting too long and they were not making enough money, so what did they do?
They dumbed it down, now they are hot again!
rightly pointed out that we are not contributing to society or to ecosystem/humanity in return.but here the ethics comes which needs to be addressed in such like condition as here might prevail in our ecosystem.regard to all.
Great video, and I went on to watch Rodney Mullen's TEDx talk after the video. It is really inspiring. Both videos gave a fresh perspective of my own life. Thank you.
+Gopalan Sampath I think that ISPs and hosting companies do create value on the back of open source.  That's a good thing. It's good because the open source software creators explicitly did things that other people can build businesses with. And it's good because people downstream find ways to use that to create additional economic value.

My point was that we tend to measure only the explicit value capture by open source companies like Red Hat. We give lip service to value created by companies like Google and Apple, who built on open source. Few people think of the ways that ISPs and hosting companies also build business models around open source.  And almost noone has been talking about the positive impact on small business and the economy as a whole.
It's an interesting talk, and one where I find myself agreeing with everything that is said, but concluding with a sense of "yes, but..?"

I'm not sure that what we are confronting today is really about sources so much as it is about utilization. (Oddly, as I write this, I feel myself becoming exceptionally sad.) What open source has done is to provide us with the tools needed to propose and ask some key questions. I do not believe, however, that  the answers to those questions can arise from open source itself.

 I have to believe that there are quite a few people in the technical area that feel as I do, that the current "financial crisis" and all the real misery it is producing is somehow simply unnecessary. What is at the core of the situation is less to do with the overpricing of certain key assets leading to a collapse. It's really something to do with our having adopted a half-yes/half-no global economy that wants to "exploit" many of the benefits of technology, without having to accept the cultural, social and political changes that such technology brings with it. In effect, we have the equivalent of something like skeuomorphism in our institutions (though i think that analogy is a delicate one, and does collapse at a certain point). Filling in a Government form with a pencil that will later be scanned into a database, for example, is highly skeuomorphic in this sense.

In this view, it's not just open source that is a kind of unappreciated, unseen, unmeasured "clothesline" source of value (value as in "doing things" rather than money). Open source is, after all, not really just about making some things that are "free"; it's really about a certain way of building things. It's a good way of building some things, but even its strongest proponents will admit it's not the best way to build everything. And it is the things that get built, not the method of their building, that really count in the end. Likewise, "free" is a particular system of distribution and sharing. So is monetary exchange, so is "pirating", so is "sharing" a la YouTube. (Though it is important to add that these relationships would be almost impossible to discern were it not for the perspective granted by open source.)

We know that when we add an iPhone, Android phone, Windows phone to a particular economic ecosystem, the value in that ecosystem tends to increase. But where does that value go? In most cases it does not flow to the direct participants in the system intact, but rather to semi-external institutions associated with it. Government bodies, banks, stock-markets, and so forth.  In previous, non-technology cultures, this flow to institutions was beneficial. Today this is no longer the case. So that new value, from the point of view of the productive ecosystem is wasted.

You could respond by "revolution", but this seems an unlikely tactic, and one that will simply waste resources. In the end all I can determine to do, personally, is to continue a kind of long struggle, continue to try to build the next generation of software and the systems that go with it. At some point, the inner contradictions will reach a point where they have to collapse.

In the end it feels as though Douglas Engelbart predicted much of this. Yet it is so different to draw this kind of map, and to live in it every day.
Part of the problem with leaving a legacy behind for future generations, is typically those future generations have had stuff handed to them on a silver platter. When this happens they couldn't care less about the corporation and typically have driven it into the ground.
I think what's important for all Americans to keep in mind is the creation of two political parties was for the reason of divideing America and to keep the eyes off the problems. If you can keep a group of people bickering about who's right, than you can keep them looking at what is not important.  It's a shame that some people don't realize that by making it harder for those living at the bottom of the financial ladder. They  are already making tough choices like should I buy a chicken so the family can eat meat 3 days, or buy pasta, sauce,raman noodle and everyone will have food for the whole week, never mind that the price of food is raised every month and the government lowers the monthly allotment. How can a senator or congress person sit there and believe they deserve the raise they get every year and then expect the people who put them there to just get over it and closes our eyes to allow the all the players invovled continue to distroy the American dream. I think what's important for all Americans to keep in mind is we shouldn't be divided, there was a purpose to  the  creation of the two political parties, the reason of divideing America and to keep the eyes off the problems. If you can keep a group of people bickering about who's right, than you can keep them looking at what is not important. It needs to be that each person should be voteing instead of representatives. Because as soon as their foot hits the big house that's it, we all know they are not voting for what we want, but what (who) makes it better for them.
   When the people who hold an important place whether in a corporation or government make the choices that effect only the people who are at the bottom and then refuse to see or acknowledge that their actions are causing the downfall of the very people they exploited to buy their products, service,or won votes from. Our government stands there whistling, twitling their thumbs, and rocking back and forth on the souls of their shoes while gazing at the clouds waiting for the bottom to fall out. It was only then when they choose to take action. The truth be told anyone who could be apart of this type of scam knew all along what was going to happen, especially when they were messing with the housing situation.
 How  many people knew about what  the impact would be  on the planet with toxins, taking oil, coal from under the earths crust. Come on, just the thought of it, Iam no geologist ... but removing anything whether liquid or solid and especially removing too much causes reactions, such as the earths crust to shift causing earthquakes. I am so sorry and pisted off that my parents and their parents blindly allowed these selffish, selfcentered, dangerous people run such important offices and compnies. Because my daughter is going to pay for their choices, all of us will.
  Our government is suppose to protect it's people, not screw them at every chance they get. Fight against those who do wrong, and not just the little person but those at corperations. My mother came here from Newfoundland. The right way, she became a citizen and was proud of it. when us kids got older and my dad became disabled after 6 back surgeries, she went to work. now she is in her 80's and she can't afford the medications the doctors write. My mom paid for the American dream that too many are stealing today, from too many people, ways, and systems. Well, although I am one who believes in having hope and in keeping the faith. My wish or should I say prayers are for change. If I knew how I  could change all of this. iIt would of been done already! Stay strong everyone, and if any of you are the ones with the power to make the change. You have no excuse, start making changes now!! God Bless. Moezart 
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