The Zero Marginal Cost Society | Jeremy Rifkin | Talks at Google

PRESENTER: Welcome, everybody. Today’s author Googleguest is Jeremy Rifkin. The book is titled “ZeroMarginal Cost Society: The Internet of Things,the Collaborative Commons, and the Eclipse of Capitalism.” Jeremy is thebest-selling author of 19 books on the impact ofscientific and technological changes. His books have been translatedinto more than 35 languages, and are used in hundreds ofuniversities, corporations, and government agenciesaround the world.In 2001, Jeremy Rifkin publishedthe New York Times bestseller, “The Third IndustrialRevolution.” Presented in thisbook, his vision of a sustainablepost-carbon economic era has been endorsed by theEuropean Union and the United Nations, and embraced byworld leaders– including chancellor AngelaMerkel of Germany, president FrancoisHollande of France, and premiere LiKeqiang of China. Rifkin’s otherrecent titles include “The Empathic of Civilization:the Age of Excess,” “The End of Work,” “The EuropeanDream,” “The Biotech Century,” and “The Hydrogen Economy.” Jeremy Rifkin has been anadvisor to the European Union for the past decade. He also served as an advisorto President Nicolas Sarkozy of France, chancellorAngela Merkel of Germany, prime minister JoseSocrates of Portugal, prime minister Jose LuisRodriguez Zapatero of Spain, and prime ministerJanez Jansa of Slovania, during their respectiveEuropean Council presidencies. Mr. Rifkin is theprincipal architect of the European Union’s ThirdIndustrial Revolution Long-Term Economic Sustainability planto address the triple challenge of the global economic crisis,energy security, and climate change. The Third Industrial Revolutionwas formally endorsed by the EuropeanParliament in 2007, and is now being implementedby various agencies within the European Commission,as well as in the 27 member states.Jeremy Rifkin is the presidentof the TIR Consulting Group, comprised of many of theleading renewable energy companies, electricitytransmission companies, constructioncompanies, architectural firms, IT and electronics companies,and transport and logistics companies. Mr. Rifkin is a seniorlecturer all the Wharton School executive education program atthe University of Pennsylvania. His monthly columnon global issues has appeared overmany years in many of the world’s leadingnewspapers and magazines, including the Los AngelesTimes, The Guardian, Die Deutsch Zeitung, and the Handelsblatts,Le Soir Arnaque, L’Espresso, El Mundo, and El Pais inSpain, and many others.Mr. Rifkin holds a degree ineconomics from the Wharton School of the Universityof Pennsylvania, and a degree in internationalaffairs from the Fletcher School of Law and Diplomacyat Tufts University. After this somewhatlong introduction, but worth reading it, pleasewelcome to Google, Mr. Jeremy Rifkin. [APPLAUSE] JEREMY RIFKIN: Goodafternoon, everyone. It’s a pleasure to be with youhere at Google this afternoon. We’re just beginning toglimpse the bare outlines of a new economic systementering onto the world stage. This is the firstnew economic system to emerge since theadvent of capitalism– and its antagonist, socialism–in the early 19th century. It’s a remarkablehistorical event. It has long-termimplications for every one of us, our children,and our grandchildren. This new economic system isthe collaborative commons. And what’s triggering this shiftto a new economic paradigm, a collaborative commons economicsystem, is something called zero marginal cost.Now, zero marginalcost is something you’re very familiarwith here at Google, and certainly we arethe business community– not very well knownin the public. Marginal cost– the cost ofproducing an additional unit of a good and service afteryour fixed costs are covered. Business people have alwayswanted to reduce marginal cost, and they’re always insearch of doing that. And here’s why. And I want to introduceto you a paradox. There’s really aparadox deeply embedded in the heart of thecapitalist system– previously undisclosed, really.This paradox hasbeen responsible for the greatsuccess of capitalism and the invisible handof the marketplace. The paradox is thisinvisible hand success is now leading toits potential demise, and the advent ofa new successor paradigm to replace it. Let me explain. Sellers in a capitalistmarket are always attempting to findnew technologies that can increase their productivity,reduce their marginal cost so they can put outcheaper products, win over consumersin market share, bring home profitsfor their investors. Clear? So business people havealways welcomed the reduction of marginal cost in theproduction and distribution of goods and services. It’s just that thebusiness community never anticipated in theirwildest imagination the prospect of a technologyrevolution so extreme in its productivitythat it could reduce those marginal costs to nearzero across the value chain, making goods and servicesessentially priceless, nearly free, abundant, and beyondthe market exchange economy. That’s beginninggetting to happen. The first inkling ofthis paradox, of course, was Napster, back in 1999. All of a sudden,millions of young people that apparently had nothingelse to do after school but figure out new softwarein order to share music and bypass providing royaltiesto the music industry. Then this zeromarginal cost phenomena went on to invade the entireinformation goods industry. Millions of consumersbecame prosumers. And they began producing theirown information goods– videos on YouTube, news blogs,e-books, and decimated the newspaper and magazinepublishing industry. Newspapers went out of business. Magazines went out of business. And I’m in book publishing. I can tell you that freee-books have decimated the book publishing industry. For a long time,industry watchers said, well, this is fine. We understand that more and morepeople are becoming prosumers. And they’reproducing and sharing their own audio, their ownvideos, their own text, their news blogs. They’re working togetherand sharing information on Wikipedia. We understand that. But we think that more andmore free goods and services provides the basis so thatthe premiums will allow people to then go up to this– thefreemiums will allow people to go up and have premiums.In other words, ifyou’re a musician, you give away your music. And then you hope thatthe long tail will set in, and enough people will thendecide to go from the freemium to the premium, goto your concert, and pay a lot of money. Or the New YourTimes will say, look, we’ll give out 20articles a month free. And we hope that the freemiumwill encourage a certain number of people to subscribe toour new service, the premium.It hasn’t happened. This was wishfulthinking, or naive. The more and more weare able, as prosumers, to produce and share ourown information goods, the less likely we are to movefrom freemiums to premiums. Because our attentionspan is limited, and there are so much freegoods that they really don’t push us intothe premium category. And the proof is in the pudding. If you take a look at thenewspaper industry, magazines, book publishing, andthe recording industry, they’ve never come backfrom zero marginal cost. Economists, however,have– up until the moment now– our economistshave thought, well, we think there’sa firewall here.And that is, even though moreand more information goods are heading toward near zeromarginal cost in virtual worlds that they will notcross the firewall into the physical world of brickand mortar goods and services. No longer. What’s happening now is that thecommunication internet is now expanding to an internet ofthings, a physical internet. So what we’re beginning to seeis the communication internet is just beginning inEurope, where I work, to converge with anemerging energy internet that we’re laying acrossEurope, and a nascent automated logistics andtransport internet. The internet of thingsis an expansive internet that allows us to gofrom the world of bits to the world of atoms.And when we have thesethree internets embedded in one system– acommunication internet that’s interacting continuallywith an energy internet and a transport and logisticsinternet in one platform– this internet ofthings allows us to begin moving near zeromarginal cost from information goods to physical goods. The internet of things, threeinteroperable internets, then connect outwith sensors across the entire economic value chain. Even though thisinternet of things is just in its early stages,we have 14 billion sensors now connecting resource flows. We have sensors connectingwarehouses, distribution centers. We have sensors alongsmart road systems. We have sensors connecting theproduction lines on the factory floor. We have sensors connectingthe new energy internet so we know the price ofelectricity moment to moment. We have sensors connectingoffices and vehicles and homes and appliances, continuallyfeeding big data to these three internets that operateas one platform– the communication, internet,the fledgling energy internet, the nascent automatedtransport and logistics internet. By 2020, IBM says we’llbe at 30 billion sensors. And a recent forecaststudy a few months ago says that by 2030, we will have100 trillion sensors connecting everything with everyone inone global neural network. When we move from the internetto the internet of things, and we move frombits to atoms, we began to see a completelynew economic model they can get us to near zeromarginal cost in the production and distribution of physicalenergy and physical products. So a prosumer, and millions ofprosumers– and pretty soon, billions ofprosumers– are going to be able to go up on thisexpanded internet which is already here. And they’ll be able to accessthe big data flowing back from all the sensorsto the three internets operating in that generalpurpose technology platform. And with the apps that companieslike Google will provide and others, they’llbe able to use that data withtheir own analytics to create their own algorithms,because you can program it right into the app. You don’t have to bea rocket scientist.And then any one ofmillions of prosumers will be able to increasetheir productivity, dramatically reducetheir marginal cost, and produce, consume, andshare their own physical energy and manufacturedgoods with each other, just like we now dowith information goods. While this is early on, thetrajectory is already clear. So if I had said to you in 1989,a year before the World Wide Web went online, that 24 yearslater 40% of the human race, equipped with a cheapcellphone, a raspberry computer, could send their ownaudio, video, and text, create their ownentertainment, their own news, their own knowledge– any oneof those 40% of the human race– and then share it witheach other at near zero marginal cost onthe World Wide Web, what would youhave said in 1989? We did it in less than 20 years.As we move to the expansiveinternet of things, and from bits to atoms, whatI’m suggesting to you here at Google is we’re going tobe able, in the next 20 years, to move to near zero marginalcost in the production of energy and somemanufactured goods. Let me preface this. The big wild card here is foodand water and climate change. Because if we can’taddress climate change and we continue on this road,if we can’t produce food and don’t have access towater in a reliable fashion, everything I’m tellingyou is derailed. Let me give you an example ofhow this new system is already in place in Europe.Let’s take energy. We now have millionsand millions of players, urbandwellers, small businesses, large companieswho are producing their own solar and wind greenelectricity on site in Europe. And that’s at near zeromarginal cost right now. So it’s not academic. The technology forharvesting solar and wind is still a littlepricey, but the price is on an evolutionary curve,just like computer chips. We never expected in1960 that computer chips would be on anexponential curve. And here’s where I agreewith Ray Kurzweil who I know is now herewith you at Google. Send him my regards. We did a lecturetogether a few years ago. The pricing technology–a solar watt cost $60 to producea solar watt in 1970. It’s $0.66 today,and it’s going down. We’re in a 20-year exponentialcurve for solar and wind technologies. So we’re going to see theprice of these technologies be as cheap as theprice that we now have for cellphones, mobile,et cetera in 20 years.We see the curve. Ray Kurzweil says thatif we are doubling on the exponentialcurve every two years, eight more doublings, 16years, we’re in the solar age. He may be little optimistic. I’d say within 25years we’re there. But here’s theinteresting thing. The moment you putup a solar panel on your building,or a wind turbine on-site, evenbefore you pay back the fixed cost– and that’susually three to eight years, so it’s not a long time. Immediately though,your marginal costs are near zero, because thesun off your roof is free. The wind off the side ofyour building is free. The geothermal heat coming upfrom under the ground is free.Your garbage convertedin a bioconverter to energy in yourkitchen, that’s all free. And in Germany,we’ve now seen this. I’ve been advising thechancellor, some of you know, and working with theGerman government for a number ofyears, many years. We’re now at 25% greenelectricity in Germany in seven years. We’re heading to 35% greenelectricity in four more years. And you know who’sproducing it all? We have a millionbuildings that have been converted tomicro power plants. And millions of smallplayers have joined together in cooperatives– small andmedium-sized businesses, homeowners. They’re generatingthe new electricity.What about the big,huge, global electricity companies out ofGermany, EnBW, E.ON? They’re gone in lessthan seven years. Remember what happened tothe recording industry, what happened to newspapers,what happened to magazines and publishing? This is happening tothe huge global power companies in Germany. And they acknowledge it. This last week, one ofthe directors of E.ON said, we’re out of it.They’re producing lessthan 7% of the new power, and going down, down, down. They can’t scale it. Because in the first andsecond industrial revolution, we have to scale withvertically-integrated companies that put everythingunder one roof in order to geteconomies of scale. The internet of things isdesigned to be distributed, collaborative, peer-directed. And it scales to lateraleconomies of scale. Think of millionsof young people sharing music, wiping outthe recording industry. Or think of millions of peoplesharing knowledge on Wikipedia and wiping out theEncyclopedia Britannica. Now this is actuallyhappening in Germany right now with green electricity. It’s a disruptive revolutionin the best sense of the term. Then let’s take 3Dprinted products. We now have severalhundred thousand hobbyists, thousands of small andmedium-sized startup companies that are printing out theirown 3D printed products.And they’re attaching their3D printing operation, at least in Europe, intothis new internet of things, this third IndustrialRevolution. So if you were a 3Dprinter, whether you’re in Senegal or Berlin, yougo up on the internet. You download your software. It’s all free. Most of this softwareis free, open source. Then you use for your feedstock recycled plastic. They’re now usingrecycled paper, or even using sand andgravel and melting it down. So you can get local feed stockat near zero marginal cost. Then they’re poweringtheir 3D printing factory with green energy fromtheir energy internet that’s generated atnear zero marginal cost. Then they’re marketingtheir products on global websites like Etsywith very little advertising cost. You just pay a shortfee, low marginal cost. And then we’re just beginning toput in the logistics internet.So we have nowelectric vehicles. And two or three years fromnow, all the six major auto companies will havefuel cell vehicles out– trucks, cars, andbuses, mass production. You’ll be able to power yourvehicle to send your 3D printed product to market withyour own green electricity from the energy internet,nearly free marginal cost. And the electric vehiclesin a few years from now will be printed out.The first printed vehiclenow exists Canada, the URBI. You’ve probably seen it. It runs on solar. It’s pretty impressive. And then you’llhave GPS guidance. And thanks to Google, wewill have driverless vehicles that can move acrossthe system at will near zero marginal cost. This is a revolution. The question becomes this. If millions, then hundredsof millions of people can begin to produce, consume,or share their own information goods, energy, and a lotof their manufactured goods at near zero marginal cost,making them nearly free and beyond the exchange modelof the capitalist market, what kind of neweconomic system do we have to envision here atGoogle, and other places, to organize the world, theone that I’m laying out here? Economists will usuallysay there’s only two ways to organize the economy–either the government or private enterprise, orsome combination of both.Capitalism, socialism,or in Europe, a social market economy. Our economists ignorea third institution, which is responsible in ourdaily lives for a whole range of goods and servicesyou and I rely on. And it’s not market,and it’s not government. It’s the social commons. Part of it’s the formalizednot-for-profit sector. But it’s the social commons fromcooperatives to credit unions. And a huge partof the human race is engaged in activitiesin the social commons. And with cooperatives,you share. And when people say,how do you make money if you’re not in aprofit-making organization? How do you make profit? Wake up call– there arehundreds of millions of people, actually billions of people,who are parts of cooperatives. The entire worldelectricity system, the US, are world electric cooperatives. And it’s almost 50% ofour transmission lines.When you get foodat the store, it’s coming from agriculturalcooperatives. Most people around the worldlive in housing cooperatives. In Europe, bankingcooperatives– if you’re fromEurope, they’re bigger than the commercial banks. And it goes on, and on, and on. So the social commonsis ignored by economists because it doesn’tcreate finance capital. It creates social capital. But it’s a big revenue player. In 40 countries surveyed,the social commons is responsible for about$2.2 trillion in revenue, and it’s responsible for over5% of the GDP in many countries, including the US. What’s happening nowis the social commons– which is a venerableinstitution that we rely on for educationalinstitutions that are nonprofit, healthservices, day care centers for ourchildren, assisted living for the elderly,environmental organizations, cultural sports, arts,it goes on and on. If they were eliminated andwe just had the marketplace, we would not have muchof a life on the planet.What’s making this socialcommons now more relevant than anytime in the pastis this internet of things. Because the internet of thingsis a general purpose technology platform that’s designed tobe the technological soul mate of a social commons. The whole design is to bedistributed, collaborative, scales laterally not vertically,and it rewards collaboration across these lateral networks. It creates a sharing community. And of course, who understandsthis better than Google? Because you helped uscreate a sharing community. When we were kids, wealways said, boy, it would be nice ifthere was a magic box. And all we have to do isclick in, and all of a sudden, within three seconds, theknowledge of the world. You did it. You did it by cueing into acommunication internet that allowed us to laterally scale. But that’s just thebeginning of the story. So what’s happeningnow is this expansive of internet of thingsallows millions and millions and millions of consumersto be prosumers and join with small andmedium-sized enterprises and connect directly,eliminate all the middle men of vertically-integratedglobal companies. It’s the middle men invertically-integrated global corporations, the Fortune 1,000,that mark up their transaction costs along the value chainin order to have the margins.If you eliminate the middle manwith laterally-scaled networks, you eliminate allof those margins. And you can directlyengage each other. But it creates a new system. What I suspect we’re seeinghere is a hybrid system– part capitalist market, partcollaborative commons. The capitalist market isnot going to disappear. There will be many goods thatare sophisticated and will require a capitalistexchange economy. And there’ll be sufficientmargins for profit and return. But I do believe thatby the time some of you are my age, mid-century,most of our economic life is going to be on thecollaborative commons. It’s just toosweet to say no to. There’ll be attempts to stop itand thwart it and hold it up.But when thetechnology’s available, people will get itone way or the other. The recording industrywas not able to stop file sharing of music. The newspaper and magazineindustry and book publishing, very powerfulindustries, they were not able to stop lateraleconomies of scale. So I think thecapitalist market’s going to be a verypowerful player here, but probably a niche player ina more dominant collaborative commons. And it will be an aggregatorof networks– the Googles, the Facebooks, the Twitters. There’ll be a lot of thisaggregating of networks to provide the technologicalbase for the internet of things expansion, because that’ssophisticated software and hardware. That’s where you findthe edge in order to have the capitalistmarket work together with a collaborative commons. In economics, we’vealways believed that the mostefficient economy is where you sell at marginal cost. We just never expectedzero marginal cost.I’ll let you in on something. This’ll amuse you. And Larry Summers, if you’rehear this, my little thing here with the folks at Google,this is pretty interesting. Larry Summers was the presidentof Harvard University, past US Secretary of the Treasury. In 2001, after the bubbleburst, the dot com, the Federal Reserve of KansasCity held a special seminar. They wanted to talk aboutthe new data and information industries that were emerging. And Larry Summers– andis it Bradford DeLong here at the Universityof California?– issued a paper tostart the conversation. They got what was happening. They glimpsed the paradox. And so Summers andDeLong said, we have this newtechnology revolution that’s going to be asimportant as electricity– data, information,and computing. Now the problem we face,though, is marginal cost.Because as this newtechnology comes on board, we’re heading to nearzero marginal cost in information goods. But when you get tozero marginal cost, we can’t returninvestment and get profit. So what do we do? You know what he suggested? He did say that we agreethat the marginal cost is the most efficient place inwhich to price your product. But he said we can’tdo this anymore. We’re going to have to favormonopolies– monopolies. temporary monopolies–to keep the marginal cost above near zero cost sowe can return profits to the investors. You all got this? He said the competitive market–that’s private enterprise capitalism– doesnot work when you get to near zero marginal cost.And he said, we don’t knowwhat the replacement paradigm will be. The fact that theformer Secretary Treasurer and Presidentof Harvard University actually suggestedthere’s a replacement paradigm that the competitivemarket doesn’t function and we need monopolyis astounding. But he thought he was talkingto a small group of people inside the Federal Reserve.It’s in my book in chapter one. Yeah, it’s amusing. So I’m waiting to hear from him. I did an opinion piecein The Guardian on this about a week ago. I haven’t heard from him yet. He may say silent on this. But what’s interesting ishe understood the dilemma. He and Bradford DeLong,they understood it. But the dilemma isalso an opportunity. And there will be manycompanies like Google who can find ways toaggregate networks to allow this collaborativecommons to flourish and find some value in doing that. Nowhere will the impactof near zero marginal cost have a bigger reach thenin labor employment. This is what comes upevery time I raise this. We’re heading to nearzero marginal cost labor with these new technologies–with analytics, algorithms, artificialintelligence, robotics, pattern recognition technology. Some of the olderpeople remember– well, we talked aboutit at lunch– you read my book “The End of Work.” Well, I projected in 1995–you don’t look that old, either– 1995 that we wouldbe moving to a workless world.It was controversialat the time. But I notice thatnow, in the last year, this new spate of bookscoming out at least acknowledged that that wasright on target, that book. We have workerlessfactories right now. We have virtualretailing right now. We have eliminatedmassive amounts of blue collar, whitecollar, and service workers, and we’re just beginning toshift into an analytical world that’s basically supervisedwith advanced analytics an robotics and AI. We’re now eliminatingknowledge workers.We don’t need allthe accountants, the attorneys, the radiologists. We can do it with the software. So the question thenbecomes, in a world where we’re heading towardszero marginal cost labor, what do people do throughout life,if they’re no longer needed in the marketplace? In the mid-term,short to mid-term, we have one silver lining. There’s going tobe one last surge of mass and professionalwage labor in the next 30 years, one last surge. That’s to do the build outof the internet of things. It takes labor intensivity tobuild out this infrastructure. In Germany, when we got10% green electricity, we’d already createdas many jobs– 350,000 jobs– as theentire rest of the energy industry combined, only at 10%.So we have to build out andchange the whole energy system from fossil fuels andnuclear to renewables. We have to convertevery building in the world, existing and newones, to your own power plant. We have to insulate them, sealthem up, get them efficient, and put the technology on. As I say in Germany, we’vedone a million buildings, and lots of jobs. We have to transform the entireelectricity grid of the world from servomechanical to adigital laterally-scaled internet. That’s a huge amount ofprofessional and semi-skilled and skilled work to lay it down. And we have to put inthe automated logistics and transport network, andchange from internal combustion engine transport todriverless fuel cell vehicles. So in the next 30 to 40 years,we have to do the build out.My global consultingteam, TR Consulting, has some of the major companiesin the world involved– logistics, IT, electronics. We’re actually working withentire countries and regions in the world rightnow, and laying out this internet of thingsThird Industrial Revolution. It’s not academic. Where will the new jobs be? Well, first of all, ifmillions and millions of people are producing andsharing their own energy in 3D printed productsand information goods, they’re going to need lessincome at zero marginal cost. They’re still goingto need employment. If the marketplacedoesn’t need them, because we can produce theenergy and the products in the marketplace withjust high technology, where will you getthe employment? In the social commons.The social commons createssocial capital, human beings with the other humanbeings, creating communities– cultural,sports, arts, wellness, health, quality of life. Those are, the moreimportant employments. Making widgets isnot as intellectually challenging and motivatingto the young mind as it is trying to createa sense of human community, a sense oftranscendence and sense of finding meaning in the world. Between 2000 and 2010, thesocial commons grew by 42% in revenue. The GDP grew by 16% in revenue. Did you catch that? It’s already happening. And in the last 15years, employment in the social commonskept going up, up, up. Employment in the marketplacekept going down, down, down. And during the GreatRecession, employment in the social commons went up. Employment in themarketplace went down. When you surveyhigh school kids, it’s interesting where they wantto be– the millennials, not the X’ers. Because themillennials have gone through the Great Recession. And this is kind of adifferent group now. They asked 9,000 honorstudents, the best and brightest high school students, lastyear, what kind of employment do you want? And they said, we don’t careso much about the money.We want meaningfuljobs that challenge us. And when they surveyed 200companies or institutions they could workfor, many of them chose those institutions thatwere in the social commons. And do you know what thenumber one institution they all chose to be employed in,9,000 honor students? It wasn’t Google. It wasn’t General Motors. It was St Jude’s Hospital. Isn’t that interesting? I wouldn’t haveeven gotten that. A hospital where yougo in, you don’t pay, and you are provided for. Interesting. Now, economists willsay, well, wait a minute. Isn’t this socialcommons a parasite? It isn’t aself-sufficient sector, because it relies on governmentgrants and private philanthropy to maintain itself.That’s a myth. The Johns Hopkins Universitysurvey of 40 countries shows that 50% ormore of the revenue in the nonprofitsocial commons world is fees for servicesrendered– health care centers, educationalorganizations, environmental groups, et cetera. Only 35% of the revenue comesfrom government entitlement, and maybe 10%, 15%from philanthropy. Well, on this scale,you’d have to then ask about the marketplace. Because 36% percent of allthe GDP in the United States goes from the governmenttaxpayers to private enterprise so that they can engagein building out things that we need. So is that parasitic? We provide more for themthan we do this sector. So I think what we havehere is a very interesting dynamic unfolding. It’s going to raise verysubstantial questions about who will control thisinternet of things.Will it be open and transparent? And let me say, Google has avery big responsibility here to lead. We are very worriedabout network neutrality. And I know you are, as well. You know, network neutralitywas critical to the idea of the World Wide Web. And if we’re havingan internet of things without networkneutrality, it fails. It will be enclosed,privatized, monopolized, and we will not get to anear zero marginal cost collaborative commons world. In January, the US Court ofAppeals– the second highest court in the country– five tofour, you can guess the vote.They struck downnetwork neutrality, the central principle ofthe Federal Communication Commission overseeingthe internet. Because they said this wasnot within their mandate. So now the FCC hasto go back and try to recast this idea of networkneutrality with new protocols. But already, as you wellknow, the cable and telecom companies are saying, waita minute, we own the pipes. We’re getting tired of this. We want to make sure thatwe get some return here. So we feel we ought to be ableto charge different prices.And network neutrality meanseveryone’s treated the same. You get a serviceprovider, you go up there. No one’s left behind. No one’s put at theback of the line. No one’s put at thefront of the line. But now the telecom andcable companies say, we want to change that. We want to provide differentkinds of premium services. So we can discriminateand decide who gets what, and on what time schedule. And we even would like tocontrol some of the data. It’s going through our pipes. So it’s going to be essentialthat the internet companies that have brought usthis social commons make sure that we keep anopen network neutrality.Now let me say one more thingthat may step on a few toes here. I love Google. I use Google every day. I don’t know what I’d dowithout Google as a research tool for my office. I love Facebook. I love Twitter. I use Amazon. But we are now reachinga point now where these institutions which haveprovided the social commons are starting to look likeglobal public utilities, social utilities. There’s what, sixbillion queries on Google a day, I think? And I think you’re about–I think you’re around 67% of the research engine marketin the US, and 90% in Europe. $50 billion in revenue,you’re doing well. And then you takea look at Facebook, one out of every sixpeople on the planet almost is on Facebook. That’s amazing. And Twitter, you have640 million people. And on Amazon, one outof every three purchases start on Amazon, including mine. So we love these internetcompanies, because they’ve allowed us to create,and began to facilitate a collaborative commons. But we’re going to have tofind some way as you mature as global institutionsthat there’s the appropriate regulationsboth internally and externally to make sure that we facilitateopen, transparent sharing on this collaborative commons.And that’s the responsibility ofa younger generation and Google to make that happen. Then we can have thebest of the new world. Last thought. I think is goingto be a rough road. I have to tell you thatthe real wild card here s climate changeand cyber terrorism. The latter is moreaddressable than the former. We can get tonearly free energy. We’re already there, nearlyfree goods and services. But without food andwater, we don’t survive. What’s terrifying aboutclimate change is it changes the water cycle of the earth. That’s what this is all about. It’s not well-knownin the public, but for every 1 degree thatthe temperature goes up on the planet fromclimate change from industrialactivity, the atmosphere is absorbing 7% moreprecipitation from the ground.The heat sucks upthat precipitation so you get more dramatic andconcentrated precipitation, and more violent water events,more violent winter snows, more violent spring flooding,more prolonged summer droughts, more category 3, 4, and5 hurricanes, tsunamis, and typhoons. Sound familiar? And here in California, drought,the breadbasket of the world. And we don’t know if we can evenfeed people and provide water for people. How do we repopulatemillions of people in the western partof the US in 30 years? So climate change is theelephant in the room.What’s importantto acknowledge here is that the Third IndustrialRevolution, this internet of things, allows us to movequickly out of fossil fuels and have millions of peoplebegin to produce and share their own green energy. And this internet of things,because its entire purpose is to increase efficiencies,to reduce marginal costs, it means it shows us how to useless resources more effectively so we don’t put a big burdenon the planet that we live in. So we have young people here notonly sharing information goods and energy now, and3D printed products. We’ve got youngpeople sharing cars. The front page of theSan Francisco paper today is providingparking spaces for car sharing services. Young people don’twant to own a car. They just want to haveaccess to mobility. And for every car you share,we take 10 cars off the road.And when we move toelectric vehicles shared, we move to clean energy. And we have youngpeople now sharing their homes and apartments. The big issue in SanFrancisco this week? Airbnb. And Airbnb’s success isnear zero marginal cost. They have the web up. That doesn’t cost themanything after they put it up. And how much doesit cost somewhere who owns an apartment or a home? They’ve already coveredtheir fixed cost.They’re paying their mortgage. The marginal cost in rentingout the room is near zero. How do the hotel chainscompete with that? They have to puttogether a physical room. That costs money. But so we have carsharing and bike sharing. And now we’re sharing apartmentsand homes and clothes and tools and toys. So we have a generationthat’s beginning to believe it’s notabout ownership. It’s access. And if more peopleshare what they have, less has to be produced. It does have anegative impact on GDP. But it has a positiveimpact on quality of life, and that’s the way tomeasure a good economy. Last thought. It isn’t just about technology. Google is a tremendousplace to be. You’ve provided alot of technology that’s really helped uscreate a better world.It isn’t just technology. We need to changethe human narrative. We need a new storyfor the human race to go with the technologycoming out of technology places like Google. We have to move from geopoliticsto biosphere consciousness in one generation, orwe’re not going to make it. I’m telling you, I’m almost 70. Some of you in your20s and 30s, I really shudder at the possible worldwe are creating with climate change, unless we reversethis quickly, really quickly. What is the biosphere? That’s the sheath from thestratosphere to the ocean depths, where– 40 miles–where all life interacts with the chemicals ofthe planet to maintain this Earth and life on it. I’m guardedlyhopeful, because we have young 15-year-oldscoming home from school, and they actually have biosphereconsciousness, a new thing.They’re askingtheir parents, why do you use so much waterwhen you’re in the bathroom? Why do you have the TV on? We don’t use it. Why two cars? Why not car share? And here’s theone I particularly like– why is thathamburger on my plate? A lot of 14-year-oldkids aren’t eating. They’re on strike. Did the hamburger comefrom a tropical rainforest in Central America? Did they have todestroy the tree canopy for four inches oftopsoil for my burger? And the kids are smart enoughto know that those trees are the habitats for rarespecies that go extinct when the tree canopyis knocked out.And the kids also understandwhen the trees are knocked out to graze the cow for theburger, the trees are no longer absorbing CO2 fromindustrial climate change. So the temperature ofthe planet goes up, and some farmer, shecan’t feed her kids because she has floodsand droughts on her land. They’re learningecological footprint. It’s a metric. They’re learning thateverything we do intimately impacts some other human,some other ecosystem, some other specieson this Earth.So I’m guardedly hopeful. We’ve got a younggeneration here that’s beginning tosee we live in one indivisible community,the biosphere. And if we canfacilitate the process where the Googles of thisworld can help connect us in a neural network so thatwe can dramatically increase efficiencies, reduceour marginal cost, and that means using lessresources more effectively and taking a lessburden on the planet, we may get to a betterworld by mid-century. I don’t know if we will. You will be thejudges on your watch. So it’s essential that Google,and the other companies like Google, you needto help lead this so we have a chance ofrehealing the planet and creating a futurefor our children. Thank you. [APPLAUSE] You want to do a few questions? AUDIENCE: I’m not an economist.But I thought I hada good understanding of what zeromarginal cost meant. JEREMY RIFKIN: Nearzero, it’s near zero. AUDIENCE: Near zero. But at least– so I havetwo questions on this. With regards to energy, youkept talking about solar. I have solar on my house. It’s not zero marginal cost. I cannot produce more energythat I want without putting on more panels,which has a cost. But it’s zero inthe sense of I’m not consuming things–like with coal, right? So I wasn’t sure whichof those two distinctions you were talking about, and howyou get to zero in that regard. And then I didn’t understandit at all in logistics, because as far as I know, youstill have to drive miles. And that cost isn’treally changing. JEREMY RIFKIN: Let’s talkabout the solar panel or the wind turbine orthe geothermal heat pump.You have to pay the fixed costof the harvesting technology. It probably is going to takeyou somewhere between three and nine years to payback on the solar panels. But the moment that channel’sup, you keep it clean, the sun is free. Coal is not free. Natural gas, shale gas, uranium? None of that’s free. But the sun is free. You just capture it. The wind is free. You capture it. The geothermal heat’s free. You capture it. So in that sense,it’s near zero. But you’re onlyadvantaged if you’re in an energy internet that’spart of an internet of things. Because you mayhave a lull one day where the sun isn’tshining, and you haven’t stored thatgreen electricity. Or maybe the wind’sblowing at night, but you need electricityduring the day. So we have to createan energy internet that crosses continents.And that way, let’s say inEastern Europe, where it’s night time, theyhave a lot of wind? The surplus goes upon the energy internet to the places whichare still daytime. Or if you have a lot ofsun somewhere in Europe, in Western Europe,during the day, you put the surplus up onthe net and that energy, and then it would take itto another part of Europe. So these energiesare intermittent. And they change indifferent times of day in different partsof a continent. To the extent that wehave an energy internet, we can share our surpluseswhen other has lulls. And we can– if we storeit correctly, hydrogen and other storage technologies–we can deal with peak loads, base loads across continents. That’s we’re attempting todo in Germany and in Europe right now. And I was just in China. That was a big surpriseto me with China, because I didn’t think theywere going to be players. “The Third IndustrialRevolution,” my former book, was published theretwo years ago.And the new premiereread it in English, and instructed thegovernment to now move on a distributedenergy internet and to move toward aninternet of things. I was there in Septemberwith the leadership. 10 weeks later– 10 weekslater– after my meetings with government leadership,the Chinese government announced an $80 billionfour-year commitment to move the distributedenergy internet across China so everyone couldproduce their own energy. By contrast, the US is goingto try to raise $3.5 billion over 20 years for acentralized smart grid. So I’m guardedly hopeful. But I think that theseare real challenges. And for you, the challengeis your up-front cost. So you can pay them off, andget to your marginal cost being nearly free.It’s a challenge. AUDIENCE: Whatabout the logistics? Can you explain that? JEREMY RIFKIN: That’s the newestone, that’s the newest one. And I deal withthat in the book. It’s brand new, last 24 months. We’re dealing withnow, in Nord Calais, we’re doing a master plan forthe oldest industrial region of France. And they have Dunkirk,a port facility. The logistics is themost inefficient part of the value chain. That’s why it’s costly. You have freightacross the country. When you see a truck, sometimesit’s only 20%, 30% full. Or it’s dead and headingback with no cargo. It’s not systematized. It’s not efficient. What we’re lookingat now is a transport and logisticsautomated internet. And this would allow you tohave everything modularized so that you can moveshipments to any distribution center you want. For example, there are 5,000warehouse is in the US. So what? If you’re a big company,vertically integrated, you own maybe 20 of them. So you have to send yourstuff way out of the way, hold it there, and thentake it to the destination.But what if all 5,000warehouses, privately-owned, came together in a cooperative? So when they had space, itwould be open to anybody. You follow me? Then with 5,000distribution centers, you could move towhichever one you wanted, and save a huge amountof your transport time moving it through thesystem with GPS guidance. But you’d have to have allthe containers modularized. Everything would have tobe on the same standards, so you can move the packageacross that internet like you move all the packagesacross the communication internet. And then if you can move todriverless vehicles and drones, that’s going to reduce yourlabor costs substantially. So you’ll get towardzero, but it’ll still be marginal cost, butfairly low compared to the cost we have now. It’s exciting. We’re just beginning thisdiscussion in the last 24 months.We’re laying down the firstplan in northern France now. So we’re on a learning curve. AUDIENCE: Hi. I have twointerrelated questions. One is, you’rementioning Europe, United States, and China. How about other countries, maybein the developing or emerging nations, either because ofthe access to technology, or because theireconomical situation? And the secondquestion would be, how about the disparity betweenany given society between those that have a lot and those thathave little in the present? Is it going to be differentin the next economic system that you envision? JEREMY RIFKIN: In thebusiness community, we did not see cell phonescoming to sub-Saharan Africa and rural India.We didn’t. It was never in the equation. All of a sudden, without anymarketing, millions of people starting getting cell phones. Then the cell towers came. And what we realized there wasthe liability in the developing world is actually their asset. They have no infrastructure. It’s easier and quickerfinancially to build from scratch then to mendan old infrastructure. It’s like a home. My wife and I have abeautiful old home. We spent 24 years tryingto renovate this home. It’s a big entropicpit– sorry, honey– but it’s an entropic pit. Had we built a newhouse from scratch in six months, much cheaper. So the UnitedNations has embraced the five-pillar, ThirdIndustrial Revolution plan we’ve laid out towardthis internet of things. Why? They think the developingworld can move quicker. Now in rural India, in thelast 24 months, and now sub-Saharan Africa, young peopleyour age, startup companies, are all over the mapin the rural areas. And they’re settingup little micro grids. $2,000 for a village,you wire up the huts.You put solar panels on. You lease the panel. When it’s paid back, it’s yours. And a village, a small villageof several hundred? $2,000. So you can set up micro grids,and it works like Wi-Fi. You start connecting thesesmall players together, and all of a sudden,you have a network. Just like a Wi-Fi network, youhave a near zero marginal cost energy micro grid network,and you create from the bottom out, not from the top down.That’s beginning to happen. It’s pretty encouraging. As to the haves andhave nots, let me say, I taught the advancedmanagement program at Wharton for 16 years, ourCEO program, nearly 16 years. We all believed– in theFirst and Second Industrial Revolution, we had tovertically integrate our business activity. Every society needsthree things in order to organize itselfas a society– a form of communication,a form of power, and a form of mobility. When communication comestogether with energy, they create new systems. For example, the 19thcentury, the communication, we went to steam-poweredprinting– cheap, efficient, mass-producedprinting– and the telegraph. That allowed us to managea complex coal power industrial revolution. That was the power source.And then we introduced thelocomotive for the mobility so we could bring dense urbanareas together and create national markets. 20th century, SecondIndustrial Revolution, the form of communicationwas centralized electricity, the telephone, thenradio and television, to organize a powersource– oil– and a new mobility factor calledthe internal combustion engine. The Third IndustrialRevolution, the communication is the internet andthe internet of things. The power source isthe energy internet and renewables that aredistributed energies. And the mobility is anautomated, driverless transport and logistics systemin one platform. So I think the trendlines are there. But what it allowsus to do now is eliminate vertically-integratedglobal companies where– they were essentially inthe First and Second Industrial Revolution, because theyreduced marginal cost. They eliminated alot of middle men. You put everythingunder one roof. But now the internet of thingsallows millions of people to even bypass those typesof vertical organizations, scale laterally, eliminateall the middle men, and you directlyengage each other. That’s what theinternet’s about.Millions of people go up therein lateral economies of scale. They are bypassing– thanks toGoogle and all these others– they’re bypassingall the middlemen with information goods. Now they’re going to be able,with these lateral economies of scale, to alsomove to the world– the physical world– energyand 3D printed products. And so I should say, thingslike CouchSurfing and Airbnb are just the beginningof this shift. But what it does is itdemocratizes the economy. And hopefully, you’llbe in a world in 2050 that won’t be the 1% or the 99%. It’ll be a shared economy,a sustainable good quality of life, where noone’s left behind. Now, is it Utopia? No. Will we actually geteverything I’m laying out? Doubtful. But if we can at least seethis as a possible narrative, it’s a pretty good journeyto be on even if we only get half of it done.And it’s a lot betterjourney than we’re on now, where we have a SecondIndustrial Revolution that’s bringing us mass unemployment,a greater disparity between rich and poor, andclimate change threatening our survival. So I think this new journeyis a positive journey. It’s going to be fraughtwith problems and challenges. But it’s worthyof your generation to help reheal theplanet and create a more just world for allof us, hopefully. AUDIENCE: So I hada question again about zero marginal cost– JEREMY RIFKIN: Near zero. AUDIENCE: Or new zero. I work in manufacturing, andwe use 3D printing quite a bit. But the thing that welike about 3D printing is that it’s a very lowfixed cost in exchange for a much higher marginal cost. So marginal cost forcurrent manufacturing is already very, verylow– much, much lower than 3D printing will ever get. So I guess maybeI’m misunderstanding what you mean by the near zeromarginal cost on manufacturing? JEREMY RIFKIN: Myunderstanding– of course, the printers are pretty cheap. But they’re notvery sophisticated.You can get a printernow for $1,200. The big, sophisticatedprinters cost more. But you’re right. It’s an exponential curve. The fixed costs are going toreally go down, especially because it’s addedat manufacturing. AUDIENCE: They’realready much, much lower. JEREMY RIFKIN: Yeah. AUDIENCE: And thisis in a typical, like a traditionalmanufacturing line. JEREMY RIFKIN: Whatbrings the marginal cost down is its additivemanufacturing. I always taughtsubtractive manufacturing would, in centralized first andsecond Industrial Revolution factories, you take a big hunkof a material from nature, cut it up, tear it down,winnow it, and then put the product together.And you throw a lot out. All right? As you know, with 3D printing,the software is directing the molten materialto, layer by layer, build up a three dimensionalproduct with moving parts. It’s additive manufacturing. It uses, what, 1/10of the material? With additive manufacturing, youare using a lot less materials. But you’re talking aboutthe materials themselves. What I’m sayingis that what I’ve been seeing in theindustry– in Europe, at least– is they’re usinga lot of recycled plastic now, which is very low cost. And they’re nowusing, as you know, in the Scandinaviancountries they’re using recycled paper,which is low marginal cost. And we now have some printersthat are using gravel, rocks, and sand for variousthings, which is just locally available.I think it’s goingto be a while. This is so new– and you’re atthe cutting edge of it here– it’s going to be a while before3D planning is on center stage. But at least the kindof work you’re doing, I’m sure you feel verypositive that it’s going to lead to a new kindof manufacturing that’s going to reduce both fixed andmarginal cost down the line. It’s going to take a while. Otherwise, why do it? I’m hopeful thathere at Google, help lead us into this new world. We need to jointogether, all the people on the planet, withthis new technology, and hopefully create some hope.Because I see a lot ofdespair, a lot of cynicism, a sense that nothing can happen. But we’re right now on the cuspof a great economic revolution, this shift to the collaboratecomments and an internet of things platform that allowus to begin to produce and share goods and services withlow or zero marginal cost, and in a sustainableway for the planet. It’s the journey weall ought to be on. Thank you. [APPLAUSE].

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