Tuesday, 26 November 2013

Peer-to-peer as a business model, Part VI (concluding)

Part I          What is the peer-to-peer business model?
Part II          How does it work?
Part III         Relating the p2p model to the internet business model
Part IV        Impact of p2p
Part V         How businesses can use p2p
Part VI        Issues and what’s next


The biggest issue now is that wrought by change.  There is fear in the affected industries and among lawmakers, in part fuelled by vested interest.   Many do not understand the innovation brought by p2p models and the permanency of the consumer economy.  While the sharing economy in the US is facing some legalities, this is not so in Asia probably because Asia is not a land of lawyers!  Or maybe it’s not sufficiently developed yet.  Nevertheless consumer protection laws could be enhanced to protect the user of the services (but not protect the affected sectors).  And maybe less stringent interpretation of local laws for those in the p2p businesses because after all, it is ridiculous to apply draconian laws meant for businesses to individuals. A p2p marketplace is a facilitator while the business practitioner is an individual, not a company.  A restaurant sits hundreds of patrons a night, a p2p chief maybe one family.

The question is what.  P2P firms involve transactions that if they were conducted in the more traditional business would face the kind of government regulation that are imposed on them.  Does a supplier, mostly individuals in a p2p marketplace require a local business license?  Do the latter have to register in all locations where services are provided?  Like eCommerce was, should there be less tax to encourage this sector?  Who is liable if something goes wrong?

And this leads to litigation when something does go wrong as the laws of probability dictates.  Should laws that apply to a restaurant be equally applied to a home chef?  In such matters take inspiration perhaps from the internet way of development - for something new, get it going quickly, fix (improve) it as we go along.  Approach it with simplicity, not complexity.

Internet connectivity is another.  In many parts of Asia, the cost and quality of broadband may deter would-be marketplaces entrepreneurs.  This is unfortunate because p2p is an emerging economic model that can create new jobs and increase income for citizens.

What next?

In general, any business that has elements of consumer-to-consumer dealings could be next (transformation).  Those where consumer resources is involved, the middleman commerce and where information plays a significant role are especially ripe.  The following are speculations but they are fascinating possibilities.

The financial industry which is famously opaque and profits massively from it and its middleman role between peers of consumers and businesses seem certain to be impacted.   This statement is an early whiff of what’s ahead.  “Some regulators have big hopes for peer-to-peer lending: Andy Haldane of the Bank of England, suggested earlier this year that the upstarts could make conventional banks obsolete” – page 24, Economist, 15 Dec 2012.  It is not just p2p lending, p2p factoring or p2p payment systems, p2p currencies like Bitcoin or a future variation will make an impact.  And it is really the consumer economy that is going to drive this trend forward.  But the banks, their regulators, politicians, vested interests and big money means it’ll take a long time but eventually it will pop.  The financial industry will be transformed.  You cannot stop a tsunami.

I came across this, applying its principles to socio-political systems.   “In 2005, Michel Bauwens, former strategic director for a telecommunications company, Belgacom, wrote an essay on "The Political Economy of Peer Production," which put forward such views with enthusiasm. P2P for Bauwens is a "third way" that is neither socialistic nor capitalistic, that involves the creation of value "through the free cooperation of producers" with the profit motive or central planning. Though that may sound like airy philosophizing, P2P in this sense is pertinent to business strategies. Since then, some theorists have come to use P2P as a term for their social and political views.”  I’m no social scientist and this sounds like material for the next George Orwell novel but he has a point.  Again it has to do with the emerging consumer economy and also the democratisation affect of the internet.  This leads to the act of governing.

P2P seems a natural for governments only because governing is about people.  In many parts of Asia where centralising has resulted in the abuse of power and corruption, peer-to-peer, the opposite of centralisation may have a part to play, not in replacement but in complementing centralised governing.  Some services by bypassing gatekeepers must improve transparency, reducing corruption.  Or simply involving the crowd will go a long way.  It can also make governments smaller by giving a bigger role to society.  Perhaps the philosophy of Big Society should make a comeback.  In short, social enterprises could be encouraged while the bureaucracy could use p2p to supplement government services.

And since I started this post with technology, I’ll end this section with technology.  With the interest in autonomous driving which requires that cars ‘talk’ to each other, interest in p2p as a technology will increase.  Self-driving cars is a peer model.  Similarly, the internet-of-things (eg. everything in the house is connected; the lights, doors, electrical appliances) is peer-to-peer so is collaborative robots for manufacturing.  The technology of peer-to-peer will surely be further developed.


The peer-to-peer model is based on the idea of connecting peers directly to each other for an exchange of things of value between them.  A powerful new business paradigm, it seeks to monetise or benefit from these exchanges by turning a previously latent resource, the consumers into a productive resource.  In the process, prices are reduced.

P2P has given rise to the consumer economy.  Rather than just consuming, the consumer now also produces.  While still in its infancy, it is already proving transformative, creating new types of businesses while disrupting others.  The big loser is the middleman industry which looks likely to shrink further.  For the economy, it increases productivity and makes the market more efficient.  It also stirs up the local economy. 

P2P together with crowdsourcing will make the consumer economy a serious pillar of the future economy.  In the process, regulations will change, towards what is really the industrialisation of consumers.  Perhaps the term itself ‘consumer’ will also change because they now don’t just consume.

And the original Napster model may return to haunt the music honchos.

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