The Winklevoss twins recently applied to the SEC to create a $20 million Exchange-traded Fund (ETF) backed by Bitcoin. Like their more famous project, ConnectU, this ETF might seem democratic (little "d") in its mission. But peer-to-peer theorist Michel Bauwens, who runs the P2P Foundation, says its underlying economic design alludes to an entirely different political viewpoint. He talked to Co.Labs about value-sensitive design, how entrepreneurs are the new proletarians and the revolution will not be linear.
Can you give me some examples of the values underlying tech projects?
If you look at Facebook you have a front end which is peer-to-peer. It allows any individual to connect with any other individual. It plays a role in many communities, including radical communities who use Facebook to organize themselves, but if you look at the "backend" you see a totally different picture. Your data is sold to advertisers. You see Facebook connecting your data with data they buy or find somewhere else. You have no control over the monetization of your activities. You have no control over the design. The backend is hierarchical, centralized, and I would even say manipulative. This is because Facebook needs to generate profits and your attention is the commodity. This is what I mean by value-sensitive design. The way you design software or a social network or a social system reflects your underlying values and material interests.
Bitcoin is marketed as the P2P currency because it can be created by a cryptographic algorithm by any computer. It's independent of the State and independent of the corporation. That's the theory. This is only relatively true. There was a study by Shamir which showed that a small number of people owned the majority of Bitcoins. In the last two years a large percentage of the transactions were shown to be fake transactions. People were circulating money to give the impression of transactions but sending it to their own accounts. (97% of all Bitcoin owners participated in less than 10 transactions, while 75 owners are affiliated with at least 5,000 transactions).
Bitcoin is designed as a commodity currency. It's designed to rise in value, which appeals to self-interest. These are all choices. You could design a currency which is not a commodity currency. It has political philosophy and economic theory behind it.
When I speak about peer-to-peer, I mean human-to-human. There's an egalitarian ethos underneath. But if you say that computers are peers then someone who has 10,000 computers is 10,000 the peer of someone who has one computer. What about the Indian farmer who has no access to computers at all?
What’s the difference between use and exchange value and why does it matter?
Use value and exchange value are used to indicate the difference between something you make because it's useful and something you make because it's going to produce money for you, money that you can exchange for something else. Before the 18th century the economy was largely determined by use value. Farmers would make food for themselves and they had to give some of it to the feudal lords. People who had power had more use value but money was not the central governing logic.
Today we make something because it's going to realize a profit or exchange value. Whether the thing you make is really useful or not is a secondary issue.
In peer production—what happens in free software or open hardware or open design—people contribute for the use value. Around those common pools of open software, knowledge, and design you will have a vibrant economy, but the driving force of that economy is use value and not the exchange value even though it operates largely as a new kind of capitalist economy.
If you design as a community—you make an open source car, or an open source sailing boat, or an open source house—if you make it to put it in a common pool you are going to make the best possible design, the most sustainable design that you can. The open hardware economy and the open design economy is still a very marginal phenomenon in comparison to the open software economy, but if we succeed in pushing through this transformation so design is made in a community but the stuff would still be made by companies, then the companies would be making sustainable products.
So is the profit motivation the problem?
You have to make a difference between profit maximizing and profit making. In the current system the primary motivation is to maximize profit for the shareholders. It's also a legal requirement. As a company you cannot consciously subvert that because then the shareholders would go to court. Milton Friedman famously said that it was unethical for companies to do anything else but profit maximization. Profit making is different. If you look at social entrepreneurship or fair trade, they are allowed to make profits but they subsume their profit making to a higher social goal. We are not saying that you can't make profits. The idea is that the profit serves something else.
P2P is a philosophy of social design. The mainstream philosophy is that if we all think about our own self-interest then the common good will follow. It's the theory of the invisible hand. P2P is a visible hand but it’s not the hand of the State. It's the hand of communities themselves who design social systems which internalize these new value requirements.
You have said that "entrepreneurs are the new proletarians." Why?
Today being an entrepreneur is not very different from being a worker 30 years ago. An enormous amount of people have to become entrepreneurs, and are becoming entrepreneurs, and they need investment. The power is really in the hands of capital. Yes, the entrepreneur is a hero but faced with Venture Capital you are really in a subordinate position. You have to sign contracts which give Venture Capital the right to close you down, you're forbidden to work in same sector if that happens, and you have a gag order so you can't even talk about it. It's not enough to do something good if your governance and ownership structure allows you to distort it. Avis bought Zipcar, which is the poster child of car sharing, and then you see the announcement of Avis when they bought it which talks about hourly rentals. So what you see here a clash of mentality. They don't see the collaboration, but only the fact that you can rent a car by the hour. I don't know if they realize how essential the collaboration, the community is to the new models. It's better to look for solutions where the governance and the ownership are more in harmony with the community and the collaboration even if you grow slower in the long term.
You have this enormous clash of the desires and ideals of young people and economic realities. People want autonomy. If they don't want to work for a big company and be dependent, the only way they can see is to become an entrepreneur. It's like there's no other solution. Why not create your own ethical companies where the value system of open source is actually integrated in the legal structure of your company? Maybe you earn less money in the beginning but you create a lifestyle where you are in control and you can live your own values.
Can you give an example of an alternative?
Foradoeixo. Seven years ago a cultural center in the northeast of Brazil, which is very poor, decided to help musicians by mutualizing studios and festivals. Seven years later they have sold 8 million tickets. They support 30,000 musicians that have a credit card with four different alternative currencies. This keeps the reciprocity going. They have 200 fixed collectives and 150 nomadic collectives who organize festivals so a few thousand people can make a living from that. They have 14 communes where they teach four different things: how the bank works, how the open university works, how the open media works, since they do citizen journalism in the favelas, and then they have a degrowth party.They want to have a rich cultural lifestyle with a light touch on the earth. You learn these four things and then you can go and create your own collective. They don't have a hierarchy. They have a protocol like Anonymous or Occupy. As long as you follow the rules you can use the brand.
The revolution will not be linear. I don't see that tomorrow social entrepreneurs can outcompete the global system. You are creating an alternative economy in the margins. It has all the elements of a solution for the global system within it, but it will only break through if there is a sustained crisis of the mainstream system. If the old logic just doesn't work any more because oil is too expensive, then suddenly a model like Wikispeed (an ultra-efficient collaboratively designed car) will look a lot more attractive.
[Image: Flickr user Filter Forge]