Distributed Market Substitution
Distributed Market Substition (DMS) is an essential requirement of the Open Source Economy
A condition whereby full open-sourcing of a product and its enterprise infrastructure results in substitution of centralized, proprietary production with distributed, open source, flexible, small enterprise for any given sector or product in the maintstream economy, paving the way for the Network State as the new model of human organization. The products that this applies to are diverse - in that this may apply to product development in the standard sense - but in OSE's sense - it also includes product ecosystems such as governance systems, institutions, natural life support systems, R&D efforts, and any other enterprises. For example - this could apply to replacing authoritarianism with democratic governance as a large BHAG product ecosystem.
But to what level? We can probably say becoming the single largest enterprise in that space. Not centralized - but via distributed production in franchise-like open business models. If the space is not a monopoly, then the fraction of overall production can be small. However, given the proof that DMS succeeded, it is likely that further substitution will occur simply based on the increased value proposition of the more equitable route. Ie - we claim that product optimization leads to the largest market share. Certain large corporations today have large market shares, but not with optimal products. We believe that optimal products can come to life only via collaborative, open development. See Optimal Economy.
The goal is to regenerate society from a military to a peace-time economy. Currently, there is a disconnection between humans and their environment, and this disconnect is both a symptom and a cause of ongoing ecocide. Both the military economy and environmental destruction are driven by fears of survival - which go back to material security of civilization - and to the reptilian brain which is overdue for a software update.
Solving material security is a central theme of Open Source Ecology's work, up to the point of solving this issue within 1-2 decades as of 2019.
How does one justify the grand connection between ecocide and human rights issues - and the distributed economy? It is that by creating a distributed economy, we create an agile and adaptable system that strives for a balance between human activity and natural life support systems. See more about this topic at How Economic Localization Can Be the Greatest Measure for Safeguarding the Environment
The key enabling point for modern economic transformation is the emergence of open source hardware. Open source affords unprecedented efficiencies that are not possible in traditional business models - due to the inefficiencies of Competitive Waste. The difficulty is actually societal, not technical - as a transition beyond a scarcity mindset to a growth mindset is necessary.
However, the issue is that open source hardware has failed to get meaningful traction within the global economy to date.
OSE's proposed solution is the obvious concept of distributing production via open source hardware and enterprise.
The idea is to distribute wealth more equitably by enabling thousands of producers to bring small enterprise back to communities. This can happen for most of light manufacturing, as well as a significant fraction of the primary sector + heavy industry. OSE is working on demonstrating this feasibility. Light manufacturing can happen in open source microfactories in communities. Local materials can be extracted using the processes of chemistry, a well developed art in civilization which unfortunately remains a mystery to the population due to its Scientific Illiteracy.
The idea is that as barriers to entry are lowered, and product design is designed-for-flexible-fabrication in open source microfactories. To lower entry barriers, productization and marketing capacity is developed to assist in distributed production. If these capacities are developed, then a 1000x or more wider production of the specific good can occur. The logic behind this is that the most robust production is local production, as it creates unjobs in a decentralized + distributed scenario. The incentive behind this is enterprise startup in communities. This can happen as open design becomes available - as open source microfactory technology becomes available - and barriers to entry are lowered - such that the value chain shifts to efficiency (no competitive waste, no transportation, local and recycled materials). It is theorized here that global supply chains cannot compete with truly efficient local production because local production enables improved lifecycle stewardhip.
The end state is defined as maximum benefit for the largest number of people. Ie, distribution of production should occur to the point which leads to the highest level of self-determination for people. The scale at which this occurs should be studied to determine the optimal balance between the circular economy, imports, and Import Substitution via Technological Recursion.
The philosophy here is Self-Determination as an ingredient of unleashed collaboration in a collaborative economy beyond competitive waste. The clarity here is that competition produces overwhelming competitive waste - energy which would otherwise be used for collaboration. Many people think that competition drives people to better results, but this is controversial. OSE assumes that the economic effectiveness of competition is inferior to collaboration, when greater societal benefit is concerned.
OSE plans to launch a test case of the above with a $250k incentive challenge to bring a 3D printed, professional grade, open source cordless drill to the world - build from waste plastic using plastic recycling infrastructure and 3D printing. The explicit goal is to convert a $10B cordless drill market from centralized to distributed production within 3 years.
That was the intoal idea from around 2019. Since then, we think that the minimum collaborative infrastructure to achieve this would be more like $4M for 10 full time staff working for 2 years: 5 machine designers, 2 system architects, 3 builders, supported by performance marketing and communications, organizational staff, programmers, and more support staff, collaborating with orgs such as HeroX, KS, and Crowd Supply.
However, in 2022 OSE is ending up with the Seed Eco-Home 2 as it's test bed for Distributed Market Substitution with the performance of open collaboration subsuming scarcity-based business models which simply cannot compete with collaborative, open development.
- This is just one of thousands of examples that can lend themselves to distribution via existing, open source digital technologies: shoes. Global supply chain of shoes ($300B market) can be substituted at scale by 300,000 local brands worldwide producing 3D printed or otherwise open source shoes using best practices gathered via open collaboration, each running a $1M/year operation.
- Cordless drills - If the numbers grow to thousands of producers worldwide - then we have probably achieved Distributed Market Substitution of the $10B cordless drill industry, which appears to produce around 100M cordless drills per year if an average drill costs $100. But we would need to produce 10x fewer drills, as the open source version would last 10x longer. That gets us down to 10M drills per year. 10,000 producers would need to produce 1000 drills each per year to meet this quota. That sounds about right: 100 drills per month in a garage-scale workshop. And there are about 5000 cities with populations over 150,000.  - so about 1 cordless drill enterprise per city worldwide.
- Integrate older writing from 2018 - Distributed Market Substitution 2018
- Distributive Enterprise
- The Second Industrial Divide
- Small is Beautiful
- See also Fragmentation - the rise of small players among the monopolies - a concept known in the progressive, mainstream, economic world. OSE's distributed market substitution states that the monopolies themselves will fragment, simply because unleashed open source collaboration will provide a more compelling revenue model.