Open Source Hardware Enterprise Model: Distributive Enterprise

Distribution of wealth, or poverty, is one of the most pressing global grand challenges remaining today. The 85 Richest People In The World Have As Much Wealth As The 3.5 Billion Poorest. This issue appears worth solving.

What is required to make distributed production happen, as opposed to the wealth disparity growing? The World Economic Forum has identified the worsening wealth gap as the biggest risk facing the world in 2014 – among issues including extreme weather events, unemployment and fiscal crises. The Genuine Progress Indicator, a measurement which includes wealth distribution, is not improving:

OSE’s mission is to create the open source economy. One important question that we ask is how to create business models that tend to distribute wealth equitably? Our method is open source – but in itself, Open Source is not a business model. It is a development methodology. OSE likes open source because it promotes collaboration, cross-fertilization, and innovation. This also means that a workable business model still has to be developed on top of the open source development method for this process to be viable. Standard business models of monopoly capitalism – which have been designed for secrecy – may not apply. A casual observer may conclude that ‘open source business models do not work because standard models of monopoly capitalism cannot be applied readily’. This view is short sighted – because innovative business models can be created to make open source development work. As a business model solution – OSE is proposing the Distributive Enterprise.

In a nutshell, the Distributive Enterprise is a model where we develop enterprises, and give them away for free. We mean shipping real product – where robust business models are created. Ethically and practically, we believe in this and we are developing this model.

Think about it this way: it takes years of development to create a solid and sustainable enterprise. Many companies toil for years to develop their product, and do a lot of reinventing the wheel while they are at it. By the nature of this process, the result can not be optimal – due to the cost of competitive waste. Once a product ships, companies set up castles of protectionism around themselves, from patents to legal and tax ‘structuring’, up to some really foul play. Think of all the companies that make the same, common product. Startup, development, and innovation costs could be reduced significantly if open collaboration existed between all the companies: from product design to enterprise aspects, from sourcing to business model generation and marketing. The intended result of lowered start-up barriers is that an enterprise could break through start-up mode readily – and begin innovating. By innovating, we mean getting a head start on transitioning from business as usual to a regenerative enterprise – a transformative endeavor on a whole new playing field than plain survival. With such collaboration, everybody wins – people and the planet – and products become better from continuous improvement.

What would it look like if OSE could produce turnkey blueprints that can be downloaded for free and someone could start an enterprise from scratch? If both the product design and enterprise design were worked out in the bluerints, a veritable Construction Set could be created for enterprise creation. To explore this, let’s experiment with the Compressed Earth Block (CEB) Press – which is our farthest developed machine to date:

Distributive Enterprise Models for the CEB Press

There are several possible enterprise models for the brick press, from producing machines to houses, and from training producers of machines to training producers of houses. There may be various others, for which we would like to hear feedback in the comments below or on the Distributive Enterprise wiki page. We are interested in how we can distribute production far and wide – while generating revenue – while creating much greater revenue within the community as a whole. Our goal is to create an ecosystem of collaborating producers, where there is more incentive for collaborators to contribute back to the community, rather than to defect and go proprietary. In principle, our Share Alike license requires others to share derivative work, though this may not be enforceable in various cases.

We are concerned mostly with how far we can spread the enterprise by reducing barriers to entry as much as possible, with the constraint that we sustain OSE financially. The reason that we can meet financial sustainability is that we can always produce the thing for which we give away the plans for free. What happens when the market is saturated? As a flexible fabrication operation, we can begin producing other things. So we are in the game of constant innovation. This is feasible in an accelerated, open development scenario. The limit is that we develop a local production capacity that produces many different products. Because open source brings about efficiency – the end result is intended to be a post-artificial-scarcity economy, where human pursuit shifts from survival to happiness. This is under the assumption that solar energy resources – the fundamental fuel of civilization – is abundant like it is today, so materials can be converted efficiently into the lifestuff of modern civilization.

We theorize that publishing plans openly will result in rapid market diffusion of the brick press. My personal guess is that as long as the learning curve for fabricators is no longer than one week, and the plans are available readily for download – that the OSE machine will capture majority market share within a year of the first fabricator training event. There are several assumptions:

1. Our product meets or exceeds industry standards. Check. Our CEB press produces 6 full sized bricks per minute at half of its max power using 20 tons of pressure – or 8640 full bricks per 24 hour period. We still need to develop its functionality at full rated power.
2. Our machine is lower cost. Check. The nearest competitor with the same throughput as our machine costs $52k. Our machine costs $4.5k in materials and about 50 hours in labor.
3. Social marketing channels and other media presence provide us with publicity so the whole world finds out about the OSE Brick Press Distributive Enterprise Edition.
4. We train people to go into business independently of OSE by publishing fabrication plans, and instructions for how to get a fabricator to build the brick press. We publish the full economic analysis of production and market research – and other supporting assets.
5. The market is significant and larger than OSE can handle by itself (about 1000 brick presses per year)
6. Ease of servicing and part sourcing means that the machine effectively has a lifetime design.
7. Localized supply chains are identified by creating a global database of acceptable sourcing options.
8. Complete plans are available readily for download.
9. A training program for producers is implemented, such that anyone wishing to learn to build the machine can do so.
10. A certification program is created such that quality assurance is provided to any operation wishing to use the OSE brand. We encourage people to sell the machine independently, or using our brand only if OSE has certified the qaulity of the product

Here are the proposed business models that OSE is developing with intent to distribute brick press economic activity as wide as possible. Data will be collected to show market diffusion, which can be compared to baselines from other products. We would like to see that this rate of diffusion is higher than any other product in an established market. It should be noted that while most people don’t even know about brick presses and its market is limited, this can still be a valid case study on the market diffusion of a technology. The main reason why so few people build with CEB is because so few people know about it. That is why market creation potential is large – which is one of the reasons why we are particularly interested in “Training the Trainers” of Enterprise Model 3 below.

1. Simple Production Model: This refers to OSE or someone else selling the brick press. With open, downloadable plans, anyone is free to build and sell the product. Taking the blueprints to a local fabricator is probably the easiest way to produce the machine. This way, someone can have a brick press built for them or for sale. If the machine is certified for quality control, then it will have a higher chance of being sold. OSE intends to provide a certification service, or other international standards can be applied. The OSE brand can be used if OSE certifies the product according to transparent standards. Economics: The brick press materials cost is $4-5k, and fabrication time is 50 hours at $25-75/hr labor in the USA. A sale price of $10k could allow the production manager to capture 10-20% profit. A good production manager could probably get their management time down to about 4 hours per sale with experience. Customer communication, sale contract, shipping, production, and quality control are among the production manager’s tasks. Challenges: Quality control and system integration of a large machine. Potential supply chain issues. Liability issues. Opportunities: Good earning potential based on a simple business model.

2. Producer Training: Any competent fabricator should be able to fabricate the mechanical system of the brick press. Some will know how to build the hydraulic system. Not many fabricators know both metal fabrication and electronics, so the controller for the brick press may need to be secured elsewhere. OSE’s training, geared at fabricators or production managers – or any novice interested in building the machine – is intended to provide a complete training on the fabrication process, including marketing and enterprise aspects. Producers will have a chance to be featured on the OSE site for marketing purposes. Economics: To be determined. Challenges: Determining incoming skill sets and adjusting program accordingly. Opportunities: Great opportunity for building a producer and development network, and for finding future collaborators.

3. Training the Trainers: For diffusion of training throughout the world, we encourage the next level: training of those people who will train other producers in other parts of the world. This is intended to saturate the brick press market with open source innovation, providing valuable development contributions back to the OSE ecosystem. Teacher certification and continued education may be part of this program. This is intended for people to work either under the OSE brand – or for starting independent production training enterprises. Economics: To be determined. Challenges: Future trainer skill assessment upon graduation. Opportunities: Great opportunity to diffuse the technology and build global support.

4. Webinars: Basically, a lightweight version of 2 and 3 done via the internet. Economics:Gift economy model: free for the event, and after 8 weeks of time. For a notification with a link, a person subscribes to a voluntary donation. This involves a gift donation and the material is otherwise available for free. Challenge: Setting up a good webinar platform and website. Opportunities: Great way to reach large numbers with minimal effort.

5. Extreme Manufacturing (XM) Model: This is a dual revenue model based on the one day build optimization of OSE machines. Because we follow modular design, we are able to develop a production workflow based on a swarming group build. In this build, groups work in parallel on the different modules, and then the modules are assembled rapidly at the end. OSE’s goal is to compress build time to a day for every single one of its machines, including the house – by using a large swarm of people to do so. Because we are able to organize such effective ‘barnraising’ style builds, a build becomes a fun, immersive, social production event. People can learn welding, electronics, hydraulics, machining, and other skills in an immersive environment. Further, a complete machine is built as a result, and it can be sold. Economics: We have done this for the Brick Press as one example, and collected $5k in workshop tuitions at $300 per seat for a weekend workshop. We sold the machine at $5k net earnings, for a total of $10k net revenue from the weekend workshop. The economics here are quite favorable. This could work for things like a 3D printer – if 24 people participate, the potential revenue is $7200 if each workshop seat is $300 on top of the pure materials cost. With material costs at $500, this could be a really attractive proposition for participants – especially if they build the best design that includes automatic bed leveling. The challenge here is biuilding a high quality, turnkey printer in a single day – which nobody has done yet. From a preliminary study, we assess that this is quite feasible and we will develop production engineering for a 1 day build in the near future. Challenges: The process of running an extreme build is complex and fraught with risk of supply chains, tool breakage, team morale, and coordination of a large group. The skill set required of an Extreme Event Producer is diverse – from fabrication, supply chain management, documentation, quality control, production engineering, technological savvy, organization, to communication. It is difficult to find individuals skilled to run such an event, therefore, an in-depth training program for Event Producers is required. Reliable assistants are required to help the Event Producer. Opportunities: The XM event is rewarding upon succesful build. People learn a lot and make meaningful connections. Combination of production and empowerment training has a transformative effect on many as they recognize their true productive power. The economic model is robust, and demand for such workshops is significant based on peoples’ hunger for tangible skills.

6. Training XM Workshop Event Producers: In addition to running XM workshops, OSE would like to train others to run XM workshops. For this, a curriculum is needed on top of the event organization protocol. Prospective Event Producers first participate in an XM workshop. Challenges: XM workshops are complex events, so effective knowledge transfer has to be refined, and suitable candidates may not be numerous.Opportunities: Spreading the XM workshop far and wide can have deep transformative potential. This can happen by creating the deepest kind of freedom that can come only from tapping one’s material production power.

7. Training Trainers of XM Workshop Event Producers: This is the next layer, along the lines of Training the Trainers. This is the step after we train XM Event Producers.

8. Other?

All of the above have to be developed in detail – especially market research on existing markets. Our questions on the above models revolve around pricing structure, incentive structure, messaging, and positioning such that the above enterprise options remain true to optimal levels of open source collaboration, while providing revenue streams to OSE to sustain its effort and to grow to a fully-featured, open source product development platform.

For OSE’s growth model, we believe that focusing on the hardcore open source production aspects is the route to a transform the economy: by seizing the raw power of efficient production. Such a model is scalable and unstoppable. It allows us to fund new developers as needed to address continuity of the project. The type of collaborator that we’d like to attract is someone who collaborates first on the production floor to understand the practical and organizational aspects of distributive production and enterprise, and who gains a grasp on our philosophy. Then this person joins OSE as a Partner in Production, not an employee, so that our organization remains an agile network organization with minimum overhead. Continuity is guaranteed because our Partners are producing new resources, not just using them. The goal for the network is to create a powerful, agile, collaborative development, innovation, and production platform. For example, if 1000 new brick presses are needed on a week turnaround time – the entire network can meet this demand easily – while this would be impossible with a centralized operation.

Notes on Distributive Enterprise and Solving Pressing World Issues

It may seem that business accelerators are similar to our distributive enterprise concept. Not so – because usually, accelerators create a company whose business does not rely on creating collaborating clones that can ‘compete’ with that company.

If we truly care about distribution of wealth – spreading the best, innovative enterprises around the world is a way to do it. This is what many companies claim they are doing. Typically, their definition of spreading really means colonializing and monopolizing. For OSE, the interesting part of enterprise innovation is reducing the scale of production from megafactories to microfactories – accompanied by a shift from mass production to flexible fabrication. We claim that distributed manufacturing can meet the volume of demand with a large number of producers – similar to mass production – but without certain inefficiencies of scale. Further, because supply does not explode like in centralized operations that need to keep producing regardless of need – there is less waste produced in the world. Allocation of resources can improve.

The limit of flexible fabrication and distributed manufacturing is the end of employment as we know it, as wage labor is replaced with distributed entrepreneurship fed by open source design. End of employment as we know it appears to be anathema to the current political and economic system of subjects funding their own oppression. Yet the new potential wave of entrepreneurial making is the beginning of true autonomy.

We believe that true freedom – the most essential type of freedom – starts with our individual ability to use natural resources to free ourselves from material constraints. It is from this point that the human race has a chance of transitioning beyond power conflicts associated with the provision of material needs. For that to happen, barriers to production have to be lowered to the point that moving electrons (designs) becomes almost as easy as moving atoms. Technology is enabling micro-scale advanced production. At the point where production or material security is no longer a source of power struggle, humanity can transition to autonomy, mastery, and purpose. That is the point where we can make a clear bypass through the dominant industrial, economic, and political paradigms – and create more locally adapted solutions. Anything short of this does not make people happy.

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That’s why to OSE, the future of the economy is the open source economy – and the Distributive Enterprise model is a way to get there.

The Significance of Distributive Enterprise and Relationship to the Global Village Construction Set

Why is DE so important? Therein we have a practical chance to transition enterprise to regenerative enterprise and systems solutions. Think solving wicked problems, similar to Singularity University and Exponential Organizations – but add open source and remove the technofix.

From one perspective, solving wealth disparity is low-hanging fruit. There is enough for all of us: from first principles – the sun shines 10,000 times more power to the surface of the earth than the entire global economy uses today. The reality is that currently, the wealth of our distributed energy source is not distributed well.

OSE’s notion of a regenerative economy is the open source economy. We define the OS economy as an efficient economy, where distribution of wealth also happens – so everyone is happy. OSE’s current practical approach to the regenerative economy is the Global Village Construction Set (GVCS). As we are developing the GVCS, we are innovating on open collaborative development protocols so that any product can be developed quickly. Over the last few years, we have discovered indeed how much of a BHAG the GVCS really is, and what it really takes to get to 100%. We are perhaps 1/4 of the way there as of 2014.

At present, we believe that a 2 week design cycle for a complex machine/product is possible – compressing the effort of about 5 years of human time to 2 weeks via swarming. We imagine something like a Red Bull Creation – but larger, more focused, replicable, self-funding, and with a carefully designed collaboration architecture. For comparison, the industry standard time to design a house is 4 weeks. For a car, the time is 2 years.

Market Share of Open Source Hardware and the Road to the Open Source Economy

For perspective, the current market share of open source hardware is only approximately one millionth of the total economy . This means there is a long way to go for open hardware, because 85 << 3.5 billion.

Let’s rewind. Global wealth inequality is a pressing challenge. The World Economic Forum deemed wealth disparity the single most pressing risk to the world in 2014. Open source economic development – and in particular – Distributive Enterprise – can yield drastic improvements on this issue. Is anyone paying attention to this opportunity?

Concluding Comments on the Nuts and Bolts of OSE’s First Experiment in Distributive Enterprise

There are 2 components to the Distributive Enterprise. The first is its substance – which we call Extreme Enterprise (XE). An extreme enterprise is an enterprise that ships product – and specifically – an optimized, low cost, open source product that is as good as it gets. The optimization includes zero competitive waste – no patents or protectionism of any sort. All documentation assets are available. From design to BOM to production engineering plan, and even marketing materials. An Extreme Enterpise’s efficiency includes social aspects of the Genuine Progress Indicator: by design, it tends to distribute wealth to the populace rather than to concentrate it.

The second component of the Distributive Enterprise is training for startup. Training is desirable so that any entrepreneur who would like to start the enterprise could get the required crash course – an accelerator program focused on distributive good. The entrepreneur is free to pursue the enterprise option either on their own – because all product and enterprise documentation is available – or via an accelerator program that OSE is creating – to minimize barriers to entry.

Who has the incentive to develop all the necessary assets as above? An ethical player like OSE. Is there financial sustainability to such a model? Absolutely. We test the enterprise model to determine if it work. While dogfooding the enterprise as such – we run this enterprise, learn the ropes, and end up with a working business model. Then we add training. As we believe that information wants to be free, we put all of our training materials online. If you want to take immersion crash training with us, we charge you for that. To minimize the barriers for our social entrepreneurs-in-traing – or OSE Fellows – we are evaluating setting ourselves up as a community college such that tuition can be covered via external support – or we can look for other ways to underwrite our Fellows while making the program self-sustaining.

The Distributive Enterprise is a combination of the Extreme Enterprise and training as above. The DE is a business that develops the Extreme Enterprise – up to dogfooding its enterprise model – and then teaches the enterprise to others. As such, the DE is the polar opposite of the monopoly: its revenue model is based on creating competition for itself. The DE model can train 2 types of entrepreneurs: the entrepreneurs who wants to produce as an XE, or someone who wants to dive into the deep end and start another DE. The latter becomes a teacher of other entrepreneurs. The former is solely a producer.

The DE concept can be applied most effectively to common products that are in wide demand, and where current demand is met by some centralized, non-local operation. The DE can bump out the invading colonial, by virtue of community support and based on raw econommic performance afforded by lean, open source XE. There is a huge case for such regenerative economic activity, because relocalized production brings wealth back to communities. Many startups today focus on zero sum games, turking, and other activities that do not generate real tangible value or real transformative potential. As such, DE brings a meaningful option.

The DE can be applied readily to common products with a huge market as opposed to the long tail – products related to the basic infrastructures of survival that are multibillion or near trillion dollar markets: food (food products, agriculture equipment), construction (homes, work places), manufacturing (distributed producution tools, automation), energy (solar, biomass, hydrogen, etc.), transportation (cars). Complex products such as computers or semiconductor fabrication (digital age technology) are not considered here for simplicity, though there is no a priori reason why such enterprises cannot be considered.

There’s a radically viral intent in this concept. Viral such that perhaps we can change the 85 = 3.5 billion.