The Age of Ecologies

Something just happened. It was not noticed by many people. But despite being relatively obscure, it is very important.

That thing has to do with a change in how we will find value. In the old days (and now I mean the really, really, really old days), you could create value just by owning lots of land. Why? Because just about everything that was valuable (food, shelter, transport, etc.) was found in or on the land itself. So it was no surprise that people got very excited about owning and controlling land. It is, btw, one of the oldest areas of law. Then came the industrial revolution. The relative value of land changed. It became just where resources came from. Factories added much more value by creating finished products (like trains and planes). So it was not an illogical goal to own factories, right? Right!

But here is the funny thing. When everyone fights over ownership rights, no one pays attention to “commonality”. Economists talk about this as the “tragedy of the commons”. And it was argued that only government can deal with the tragedy of the commons. Well, this leads to all sorts of arguments about how rational markets are and how big the commons is.

But something has just changed. And that change may change everything. The change arises from the emergent “internet of things”. The internet of things is about making objects talk to each other. To make them “smart”. But to produce things that are smart means (1) giving them a brain, (2) creating a common language that produces value added messaging and (3) adding value through shared messaging. In other words, things will take on a social dimension.

How will that work? HBR points out the challenge

The (internet of things) … threatens how companies have historically made money. Hardware companies traditionally derive profits by balancing product revenues with the costs associated with materials, manufacturing, and fulfillment. On the flip side, digital companies usually leverage service business models, often with recurring revenue streams. For connected devices, the two worlds collide in a confusing way: the hardware company has to begin accounting for the costs of tracking data and supporting a service, while the software company has to start managing the costs of making and distributing physical products.

The answer? Building ecologies through partnering. This type of partnering has happened before. But not on the scale that will happen now. And if it scales, we will see a vast re-ordering of where value comes from. Less in owning production facilities and more in managing partnering, which in turn affects our interest in “commonality”. This is a big story that is just starting to unfold. Watch this space!

If you are interested, here is a link from my friend on the tragedy of the commons from Learn Liberty.

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