RealExampleMarvelMaterial
From main: RiskSharingPassiveReturnBrainstorming g Part: [[1]]
Contents
- 1 Some Terms for a Commercial Project
- 2 What is the expected payout for each participant
- 3 ActiveReturnSharing instead of PassiveReturnSharing?
- 4 Shared Patents Revenue for Cooperative Members?
- 5 Group of Harvestors and FreeRiders
- 5.1 How to keep out the free riders without patents?
- 5.2 Cost factors and obstacles in the OldEconomy
- 5.3 Reducing cost in the NewEconomy
- 5.4 Big Corporations must act fast to harvest
- 5.5 Synergy between large Corporations and Cooperative Innovation Efforts
- 5.6 Benefits for the early stage Innovators
- 5.7 Pushing the Technology Envelop
- 5.8 Corporations Sharing Risks with Cooperative Groups
Some Terms for a Commercial Project
Martin: Members of the cooperative have a conceptual idea for a novel raw material or mini-machine that would fit in their garage.
Fridemar: Ok, lets call this marvelous conceptional community member idea for easier reference:
MarvelMaterial
each one, who initiated or refined the concept
ConceptContributor
and any peer who only made a small risk capital investment an
EarlyBird ("The early bird catches the worm")
Martin: In this case assume it takes PhD material scientists to actually do the R&D to invent this or that.
Fridemar: Ok, some PhD scientists do the R&D, using expensive lab equipment, to invent the prototype material (not yet mass produced, just can prove it works). Let's call them
ProtoTyper(s).
Martin: Next one needs money, to go from the stage of prototype raw material to scale up production, to make large amounts. This can require investment is special process machines, and can get very expensive.
Fridemar: Let's call such a person, who makes a big risk capital investment an
EarlyBull (because a bull is bigger than a bird).
In praxis it will be an investment pool of RiskCapital.
Martin: Once this material is available in larger quantities, then each member buys the raw material, then adds their labor to it, to create a local company offering novel customization services.
Fridemar: Let's call such a person
EarlyCommercialApplicator.
What is the expected payout for each participant
Fridemar: What is the expected payout for each:
- ConceptContributor
- ProtoTyper
- EarlyCommercialApplicator
- EarlyBird
- EarlyBull
ActiveReturnSharing instead of PassiveReturnSharing?
Fridemar: If you make the equation ConceptContributor=EarlyInvestor, then in this case it is not PassiveReturnSharing g, it is ActiveReturnSharing g
Martin: People outside the cooperative (that did not contribute to the early stage risk) might also buy this MarvelMaterial, but if that happens, patents can create a passive revenue stream for the cooperative members.
Group of Harvestors and FreeRiders
How to keep out the free riders without patents?
Martin: A person that is outside this group (did not invest their time or money) can now come along and buy the same thing. That is because a large company that invested in the scale up of the raw material will likely sell to this “outsider” person. This "free rider" dynamic is going to cause some (likely many) folks not to contribute their money to the project, at early stages, in the first place - thus the invention won't come into existence. How to keep out this free rider, without going through a patent process, so as to keep people motivated to pitch in their money?
Cost factors and obstacles in the OldEconomy
Fridemar: This is indeed a very tricky situation. In the OldEconomy g we have a lot of cost factors, inhibiting inventions:
- Prototyping
- ProjectHunting
- ProjectScreening
- PatentProcess
- OrganizingVentureCapital
- Marketing
- Manufacturing
- Distribution
Reducing cost in the NewEconomy
In the new OpenEconomy g costs and obstacles are dramatically reduced by the following strategies:
- OpenPrototyping instead of isolated double work
- OpenProjects as selforganizing, selfattracting projects, instead of Hunting for appropriate partners
- ProjectScreening (The OpenProject screens itself)
- PatentProcess ( Patents destroy the Creativity and Productivity of Mankind as a whole. Patents produce a global Alzheimer effect, i.e. isolated processing in the GlobalBrain)
- OrganizingVentureCapital (Diminished need for VC)
- Marketing (Reduced to a minimum, because the OpenProject advertises itself due to the HoofSmith g effect
- Manufacturing (I doubt, that the Manufacturing costs must be that high. Invite the whole planet to participate. China and India will show how much bluff is in the system.)
- Distribution (The more independent producers, the less the allocation problem.)
Big Corporations must act fast to harvest
The big corporations are aware of this process. So they must act fast, if they want to harvest inventions, "not invented here", i.e. not invented in their own stalls.
Synergy between large Corporations and Cooperative Innovation Efforts
Martin: Fridemar, people that are not familiar with how innovative products come into the market place (after an R&D effort) often assume that the hardest and most expensive work is completed after the new inventive breakthrough in a research lab. In contrast it often comes at the point of trying to get this new invention into the market place, such as to enable larger production quantities of the new raw material. This is where existing large corporations can add value to a cooperative innovation effort. But when these large corporations become involved, and invest money, you can bet they will never negotiate a contract with the early stage innovation group, if the corporation perceives this group as a "tiny market" - rather they will want the freedom to sell the resulting raw material to what they believe is the larger populace - which is the dynamic that causes the free rider problem for the early stage innovators.
Fridemar: In the same way as cooperatives get value, the big corporations get value by the cooperative: PR, sympathy, customer-base. So the synergy-effects are obvious.
Benefits for the early stage Innovators
Martin: This is where having a dynamic that adds passive income is beneficial to the early stage innovative group members. For example if they had a patent, then sales by the large corporation to people outside their group gains the group members passive licensing revenue. But then one opens the can of worms with the Securities and Exchange Commission to advertise this possibility as part of the project – that is illegal.
Fridemar: I could imagine, that the problem of funds raising is mitigated, if not eliminated, if the whole thing is organized as a special purpose club like the OpenCinema g project. Look at OpenSourceCinema how big money is raised as a community effort.
Pushing the Technology Envelop
Martin: I purposely changed to a materials problem because I am well versed in the nature of machine innovation, and 3D printing as you say, and it is a lot easier to get such 3D project done and into the hands of others. I can also make a good argument that your 3D printing example is actually not pushing the technology envelop very much – already in the market place are more sophisticated versions than the link you mentioned. In contrast this open source project, and others like it, often use “off the shelf” components. That is also an indicator that the innovation level is not so high. When the innovation level is very high, one is much less likely going to be able to find “off- the-shelf” items that can be easily purchased by an individual.
Fridemar: You say "indicator", that may be right in most cases. But if the same function can be realized with Off-the-shelf items, then the innovation level is even higher.
Corporations Sharing Risks with Cooperative Groups
Martin: Also to make this a more realistic scenario in terms of “real world” R&D, ones chances of executing R&D (typically expensive) is for the early stage group members having to pool only half the required money, and then have a partnering large corporation(s) contribute the rest. Corporations increasingly seek financial risk sharing partners for R&D, and individuals in small groups typically have trouble to pool enough money on their own to fund a project – thus the mode mentioned can help both individuals and large corporations do better innovation and share in the risk. On Thursday I have a meeting with a high level executive at Dow Chemical Corporation (one of the largest chemical companies in the world) charged with filtering new “out of the box” business and partnership opportunities, after Dow read related white papers I sent (proposing such novel risk sharing relationships between new Internet cooperative groups and large corporations). But then where is this large cooperative group of interested community members? If they were easily visible, that would surly help to get more serious attention from Dow – in experimenting with these new collaboration and risk sharing processes. [MartinPfahler]]
Fridemar: So all we need is (love of course and) more Business Integration into Wiki-Culture. Anyhow, this is my personal opinion. AboutUs is one of those rare Wikis, where such a conversation is not only possible but encouraged. Please join our Conversation.
fridemar 19:19, 6 August 2007 (PDT) , embedding the contribution in the SocialCommonWealth.com Blog as a CommunityConnector, where you can click the community connector icons at the top of this article.
