Keynote "Learning Across Boundaries: Exploring the Diversity of Systemic Theory and Practice". Presented at the 58th Conference of the ISSS at GWU School of Business at George Washington University, Washington, DC., from the 27th of July to the 1st of August, 2014.

1. 58th. Conference of the ISSS
July
2014

2. On
Network
Capitalism
By Ernesto van Peborgh

3. This is Paul Baran, a Polish-American engineer who was a
pioneer in the development of computer networks.

4. At the most critical and tense moment in the Cold War and in the
face of an imminent nuclear attack, the Department of Defense of
the United States asked Baran to develop a means of
communication capable of resisting a such attack.

5. His logic evolved from that of a centralized network to a
distributed one.
These are the drawings Baran published in his work “On
Distributed Communications”.

6. He was able to prove that, even when 50% of the distributed
network’s nodes were destroyed, the system did not collapse.
What’s more, it was much more resilient than the previous
network.

7. by Paul Butler
Fifty years later, humankind has braided itself into a networked of
interconnected minds. This is Facebook – almost 1.5 billion
people connected exchanging knowledge, ideas and solutions
without pause.
by Paul Butler

8. by Paul Butler
This photograph marks the change and speed of the times. In just
eight years, each one of us is carrying an amazingly high-tech
communications device connected to a cloud of minds.
!
Vatican City, 2007,
Benedicto
Vatican City, 2013,
Francisco

9. Our underlying Matrix has evolved, as Baran’s did. We are
standing on a new behavioral matrix for humankind, and this
affects all our social, economic and cultural processes.
!

10. 2007
Time magazine clearly illustrates this with its “person of the year”; in
2007 “We” (You, Me) became the person of the year – Broadcasting
shifted into the hands of citizens, we acquired the ability to reach the
world from our computers.
A Home computer had the same communications potential as a TV
Broadcasting Channel, both in audience scope and editing capabilities.

11. 2011
In 2011, the same magazine shows a new character: the protester, a
person who understood how social networks could be used for
organizing oneself differently –it began with the Indignados in
Puerta del Sol, Tahir Square, Zuccoty Park with OWS, and recently
in Brazil. Below the traditional media’s radar are people
organizing themselves to generate a change.

12. Our socioeconomic and cultural structures don’t change in a linear
manner they do so in exponential leaps.
We are now experiencing “new normals”: knowledge and
communication capabilities that did not exist ten years ago, today have
become a necessity. WhatsApp was hardly known six months ago –
today it’s valued at US$ 19 billion and over 500 million people using it.
Towards a new balance system
2000 2010 2020

13. We drive into the future using only our rearview mirror.
Marshall McLuhan

14. Marshall McLuhan, perhaps the finest theorist of communications
in the last century, said that we go towards the future gripping the
rearview mirror, because we can’t, we are unable or we don’t
want to see that the world has changed and we are unable to
leave the ancient logic.

15. At present a new communications and organization matrix is
replacing our logic. As a result, a new cosmology rules our social
order and this change has essential implications for our culture
and our socioeconomic structures.

16. This change in the matrix will have a deep impact on the structure
of one of the most powerful forces dominating humankind –
capitalism.

17. Capitalism is at a crossroad ………….or so the Capitalists are
saying.

18. Thinking Capitalism as a System
In order to understand its scope and assess its effects, we need to
analyze it from a systemic perspective.
Thinking of capitalism as a system will enable us to understand how a
change in its underlying matrix impacts its morphology and workings.

19. Elements Interconnected PurposeSystem = * *
A system is a group of interconnected elements that
fulfills a purpose

20. Elements Interconnected PurposeSystem = * *
!
The systems theory argues that when one of the elements is changed
there is a change in the system.
A change in the system triggers feedback loops that again change
the elements and again change the purpose.
!

21. Elements Interconnected PurposeSystem = * *
!
We are in the midst of the greatest interconnectivity process ever
experienced by civilization in such a short time.
!
The “I” is what is driving the system at this time.
!

22. The great difference between these two paradigms is
interconnectivity.
In the one on the left everything has to go through a central node.
!
!
How will that affect capitalism?

23. Our organizations – all the companies – all our communications in
the last century were based on this matrix logic.

24. This centralized structure not only enabled the accommodation of the
hierarchical rationale and power dynamics of capitalism, but also
drove its vertical integration and economies of scale.

25. Interconnectivity is limited, since communication flows must pass
through the central node.

26. Broadcasting replicates this logic: It consists of mass messages issued
from a powerful power central node to passive nodes which do not
communicate with each other and which receive the message without
being able to modify or retransmit it.

27. Our new distributed matrix on the other hand, has far ampler and
deeper possibilities and derivations, not just at the communications
and organizational levels, but also because of the potential
generated by the interaction among the network’s nodes.

28. In the distributed matrix communication flows independently of the
nodes, as Paul Baran demonstrated with his experiment.

29. Elements
Interconnections
Emergent
A system’s greatest property is not found in its separate elements,
but that which emerges from the system.
The emergent is the system’s unique property.
!
Emergence is the system’s unique property

30. Elements
Interconnections
Emergent properties are found for example in
Water: oxygen and hydrogen cannot separately achieve the
properties of water.
!
H2
O
Emergent

31. We are in the midst of the greatest interconnectivity process ever
experienced by civilization.
by Paul Butler
The “I” is what is driving the system at this time.

32. It is impossible for Capitalism to remain outside the impact of this
matrix structure.
As an open system it shall necessarily be affected in its logics and
primordial function.
The dramatic changes we are experiencing in interconnectivity imply
a dramatic impact on Capitalism as a system.

33. Internet of
knowledge
Internet of
Collaboration
This impact can be analyzed from a dual perspective: the Internet of
knowledge and Internet of Collaboration

34. Internet of
knowledge

35. Elinor Ostrom was awarded the Nobel Prize in Economics in 2009
On the basis of tools present the Web 2.0 she resolved some
Governance issues of what is known as the “tragedy of the
commons”.
What is the tragedy of the commons? Any system human beings use,
where the benefits are individual, but the cost is shared among
everyone, deteriorates: a meadow, a fishing area, an irrigation area,
the oceans, the Amazonia, the planet…
This lady installed in our agendas a new governance system which
goes beyond the State and the Markets.

36. In her new book, “Understanding Knowledge as a Commons”
Ostrom argues that there is an emergent in the networks which is
being created by humankind – a collective knowledge which is a
commons available for everyone.

37. Networks are not just about interconnectivity between persons (which
is what traditional marketing seeks) but the emergent of this system,
which is a new capital. It’s a social capital that didn’t exist 4 or 5
years ago, which today is available for everyone – and which may
be managed from system level.

38. 0
10.000.000
20.000.000
30.000.000
40.000.000
2007 2012 2020
Volume of information humans shall be creating in the next eight years (MM GB)
This is the volume of information which we humans shall be creating
in the next eight years; it is exponential and being created
collectively.
Each piece of information is uniting persons and creating a collective
consensus on that knowledge. It is a knowledge that is different, it is
a knowledge emerging from the network. Those of us who have been
raised under the centric logic don’t really see it, but there is a
generation who does; Lets see some examples.

39. This is Jack Andraka, who was 15 years old last year. He created a
device for detecting early pancreatic cancer. When they ask him,
“How did you do it?”, he replied: “All the information is on
Wikipedia or Google”.

40. Easton LaChappelle created a kind of bionic arm which he operates
from his phone
But since it was too expensive to produce, He turned to a 3D printer,
and for US$ 300, he himself created this device, exemplifying a new
trend: the democratization of production.

41. This girl created a flashlight that is turned on by a hand’s energy.
…………. she is fifteen years old.

42. Examples abound for this generation that is demonstrating that the
information necessary to hack science is available today from a
collective knowledge commons. They are also demonstrating that
knowledge for innovation is a commodity and that there is a logic
and a language for detecting it. This generation of young people
who don’t yet occupy spaces of power in governments, markets or
companies will very soon be there.

43. “The basic economic resource is
no longer capital, nor
natural resources, nor labour. It
is and will be knowledge.”
!
Peter Drucker
Knowledge is Capital
Capital is knowledge – but the question is this: if knowledge is
available to everyone, where will differentiation come from?
!
In order to access knowledge we need a different language and
logic.

44. Internet of
Collaboration

45. by Paul Butler
Again, a cortex of minds – this huge network is exchanging ideas
and solutions.

46. Something else is exchanged over this network: and here lies the
basis of change in financial industry.
The network is exchanging collaborative money.
The Pebble watch hit the market before the Samsung Gear 2,
68,929 people invested on this idea to make it possible.
15,482 comments, which show that these people did not only provide
money, but also knowledge and ideas to improve that product.

47. 2013

48. Through the Lending Club people lend money to others. Its growth is
exponential. 83% of this money refinances bank money – thus, there
is a migration of individuals who, through this platform, are
refinancing money formerly financed by banks.

49. This little device recently appeared on Kickstarter – when one aims it
towards any kind of food, in this case cheese, it tells us we have 28
grams of cheese, 71 calories, 6 grams of fat. This will change our
diets, we will start seeing people strolling along supermarket aisles
with their little devices, checking the apples’ for pesticides or ripeness
levels. And all that information will be on the cloud.

50. Moore’s law
is Flat
Cost of human genome sequencing
Gordon Moore, CEO of Intel, popularized Moore’s Law, which holds
that a microchip doubles its capacity and halves its price every 18
month.
This is the curve of the cost of human genome sequencing. This is the
new Moore’s curve. Supercomputers plus new and intelligent
algorithms have made the cost of sequencing genome disappear.
!

51. We need to understand how this new Matrix works.
It works under a different logic, what Jeremy Rifkin in his new book
calls zero marginal cost.
The marginal cost of production is practically zero.
Lets look at some examples:

52. The New York Times stock price dropped 87% by 2009 after
Facebook appeared; like every broadcast company they are
currently trying to find an economic model. The charts to the right
show 70% drops in newspaper advertising and the production of
CDs. Information and the production of information became free, and
it’s very difficult to charge for that.
!
In the information model:

53. The same impact was felt in the music and entertainment industry with
Napster or uTorrent. The paradigmatic issue here is not that we have
free access to music or movies. If you have ever downloaded a movie
from uTorrent you know that these are movie parts that hundreds of
people have in their computers, which arrive in your computer from
different sources, after which an algorithm assembles the movie
instantly. This is the DNA of collaboration – that we should be willing
to use our computers as sharing nodes in a network.
The Paul Baran logic makes this system superior to former models.
Today it is the nodes that carry the information and are willing to
create a construct and emergent resource from it.
!
iTunes found its
business model from
the long tail theory:
it is much more
profitable to sell
single tracks than
CDs.

54. The economy of apps exploded, without which today we wouldn’t be
able to even call a taxi in some cities.
Last year, over 70 billion apps were downloaded just from Apple;
this meant US$ 10 billion in revenue. But perhaps the most surprising
issue is the number of jobs generated by Apple for young people
creating apps. There are around 700,000 people in the United States
today whose business is the creation of new software App systems. A
new generation that manages a new language, the language of
code, which we’ll probably consider the alphabet of the future.
!

55. As regards to platforms, the most interesting one, challenging
mainstream models is Etsy. It’s a platform where 30 million people
are exchanging products whose average value is US$ 15, mostly of
the DIY type – handicrafts, jewels, items of scant value.
US$ 1 billion is transacted through this platform every year. Now,
what happens when these craftsmen access a 3D printer at home?
(which today can be bought for US$ 1000.)
The democratization of production is already with us, and this
platform will prove it as 3D printers get better and cheaper.

56. The advent of Crypto currencies to this new matrix is currently
redefining our monetary system as a whole. Ripple is a breakthrough
worth mentioning: its purpose is to create a platform where all crypto
and traditional currencies may be transacted without cost.
!

57. Amazon is in the process of creating its Amazon Coins, so when we
want to buy a book from Amazon we will probably be asked to use
their currency, and there will be a platform for exchanging our
dollars for that currency. The same could happen with Etsy…
Suddenly currencies might lie behind the ideology of a group of
people or communities that transact their business or goods in a
certain associated currency, since the cost of going into or out of
another currency is zero, Etsy might decide to create “Etsy" currency
for its Etsy community.
++
Is it possible that we start seeing niche coins?

58. The opportunity here is to create a new social capital, a Knowledge
Commons, in constant evolution and perfectioning, driven by the
commitment of a community, a system, made up of interconnected
elements with a purpose: Their purpose is simple, to better a resource.
Give people the purpose of creating a Commons, the protocols and the
organizational tools to manage it, and they will create and sustain this
new capital which is a collective knowledge resource.
Ellinor Ostrom and the Knowledge Commons

59. Each time the human race faced an overload of information, it had
to create a new operational system, a new language.
Humankind has created a new operational system

60. Hominids trying to hunt down a mammoth needed the spoken word
as an order-providing system: at least four words –“right”, “left”,
“attack” or “run”– in order to cut down that huge beast.

61. In Sumer, when there were agricultural surpluses, someone came up
with the idea that, if three sacks of wheat were brought, three marks
should be made on a clay tablet, which was dried in the sun, and
there came writing and maths as two new languages. Not so as
communication languages but as organization languages. A glorious
period of innovation flourished: ceramics, architecture, plowing.
All this happened over short period of time when diversity and
information overload came together and created the need of new
organizational languages.

62. Writing and mathematics brought a new overload which only science
could solve. Today, every one of us who has attended a university
has his or her own science degree.

63. Computers and informatics solved the science overload. In the face
of what we have just analyzed, this new language, Internet,
appeared and evolved very rapidly towards our current network
language.

64. If we understand that there is a new network language, a new
Matrix on which we now operate, we have 50% of the answer.
Capitalism will probably soon understand this, and as a system, it
will very rapidly change the conscience of its elements and its
purpose.

65. www.ernestovanpeborgh.com
Thanks
www.elviajedeodiseo.com