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Disrupt Together - David Li

Interview by David Li

Founder of the first Chinese makerspace and pioneer of open-source, David Li offers here a striking analysis of the framework in which innovations emerge.  For this figure of the maker movement, the development of the city of Shenzhen testifies to the importance of collective action and the sharing of knowledge. No innovation, he explains, without collective action. And no collective action, he explains, taking inspiration from the alternative theories of "mass prosperity" of Nobel Prize winner Edmund Phelps, without sharing, mutual aid and benevolence.  

The cult of novelty and the omnipresence of the terms "innovation" and "disruption" mask the true nature of breakdowns. Is the Schumpeterian theory of creative destruction still valid/relevant? The need to decipher the storytelling around the ponciff of innovation, especially that promised by artificial intelligence, is becoming increasingly urgent.

Is this a new version of a neo-modernist ideology? What does this widespread uncertainty mean in the technical, social and environmental fields? With law and politics always arriving too late, how can we maintain or establish spaces for collective deliberation?

How, in the face of such accelerations, can we maintain the resilience of human groups? How can we avoid a "generalised ano-mia" by restoring virtue to the idea of progress?

“Many small people, in small places, doing small things, can change the world.”The year of 2018 was a turning pointing for the digital economies. CEOs of large digital ads companies such as Facebook and Google were summoned to testify in front of the US Congress over their business practices in amassing large amounts of personal data and exploiting the data for business gain in what is termed “Surveillance Capitalism” coined by Shoshana Zuboff. InEurope, GDPR went into effect as the EU regulators attempt to rein in the influences and controls of the digital giants. The public began to be aware of the negative consequences of the digital business.

At the same time, the stories of Artificial Intelligence, many of which came from the press releases of the AI industries lead by the digital giants, were popular in the media and promoted a techno determinism future that the AIs would obsolete human shortly. The stories of all-powerful AI under the seemingly unstoppable digital giants paint a glooming future for the humanities. Governments, civil societies, and academies around the world convened conferences and meetings to discuss how to rein in the power and influence of these giants corporations. The discussions often center around a techno-deterministic dystopian that neither governments nor societies could do much to change its course. The future seems to belong to these large digital giants and humanity is doomed without much challenge.

The digital giants are not infallible. At the end of 2018, Apple CEO Tim Cook announced thatApple missed the iPhone sales target in 2018 and cut the forecast of iPhone sales for 2019 citing the slowdown of the growth of smartphone. However, that was not the whole story. Huawei recorded a 20% growth and overtook Apple as the second largest smartphone brand in the world.Vivo, Oppo, and Xiaomi all had record business growth in the same year, mainly due to the rapid growth of markets like India and Africa. Along with several hundred smartphones brands, the mobile industry of Shenzhen took more than 70% of global smartphones market. The smartphones markets no longer dominated by a few large brands but distributed over a few hundreds of brands that collaborate in an open and sharing environment.

The rise of Shenzhen technology ecosystem defies the narrative of “creative destruction” in which breakthrough technologies originated from outside to bring drastic change to the order of the industry. “Mass Flourishing” model proposed by Edmund Phelps in which the technologies transfer and diffusion meet highly dynamic societies and the combination empowers mass participation and indigenous innovations in the creation and productions of new goods.The reform and opening of China four decade ago, the cluster of fifteen fishing villages in thePearl River Delta has bloomed into the modern and innovative metropolitan of Shenzhen. The city embraced the technologies advancements with a high level of dynamism that leads to mass participations turning the technologies into useful products in an open and collaborative ecosystem full of indigenous innovations. The open system eventually overcomes the dominance of a few and become the dominant force in the development of new digital technologies.This article drew on the researches of Shenzhen open innovation ecosystem and examined its development through the theory of Mass Flourishing to present an alternative future of a distributed and collaborative innovation system that could rein in the technologies to serve the societies and communities, rather than the interests of a few giants. The open technology ecosystem coupled with the new economic model such as platform cooperativism would enable the power, opportunities, and benefits of new technologies to be more evenly distributed.

Legacy of Schumpeter’s Gale

Schumpeter’s gale also known as the “Creative Destruction” is the root of the narrative for modern innovation. In theory, scientists and inventors outside of the industry would discover and invent new technologies. Working with visionary entrepreneurs and insightful financiers, they eventually lead to the destruction of the existing order and wealth of the current industry and give birth to the new one. While Schumpeter’s analysis is far more complex, the term has been take non face value as Tweet size rhetoric to suggest that all things of new technologies could disrupt and destroy existing business order.

The third industrial revolution revolves around the development of ICT (Information andCommunication Technology), particularly in Silicon Valley. With the success of personal computer and the Internet, the young genius working out of garages inspired to challenge the status quo and “change the world” has become the role models, and their creations are the forces of“creative destruction.” This meta-narrative of young tech wizards bringing technologies change to reshape the world has resulted in the culture of techno solutionism with the motto of “move fast and break things” so they can play fast and loose with regulations and societal norms in the name of advancement by technologies development.

In the past few years, the world began to take notice of the dire consequences of the toxic culture on the economies and democracies. The societies put the business practices of the digital giants under the microscope, and the governments began to make inquiries and set up regulations.

Mass Flourishing

“Mass Flourishing” is the work of the Nobel Laureate Edmund Phelps and provide an alternative theory of innovations to the “Creative Destruction.” Phelps proposes the technology transfer could initiate the economic growth from outside, received by the highly dynamic community to take advantages of the technologies. Once accepted, the knowledge of the new technologies are quickly diffused into the community and start to generate incremental and innovations for new products and new methods of productions. Next, indigenous innovations emerge to support sustainable economic development.

The smartphone market of 2018 illustrates how “Mass Flourishing” has transformed Shenzhen in the past few decades. While Apple posted a warning on its earring in 2018 and lowered the forecast of iPhone in 2019, the mobile brands from Shenzhen enjoyed record growth and took over 70% of the global markets. The Shenzhen brands are especially popular in the rapidly growing emerging markets such as India and Africa. The 70% market share of the mobiles phones are not held by a few brands but composed of hundreds of brands in a variety of scales. The development of Shenzhen and its open mobile ecosystem does not follow the theory of creative destruction. The titanic shifts in the mobile phone markets brought about by Shenzhen mobile phone industry was not caused new breakthrough technologies but by rapid technologies transfer through the open sharing and collaborative ecosystem that enable the mass participation in the business with indigenous innovations to continue to improve products and methods of productions in a rapid speed. The city of Shenzhen has become the leading innovation hub termed “Silicon Valley with Hardware.”

A Short History of Shenzhen

The worlds

The Shenzhen is one of best examples of how the democratization of knowledge and technologies and commoditization of production can rapidly transform a region from the collections of 15 fishing villages of 300,000 people to a mega-metropolis of 15 million responsible for 90% of the electronics productions.

Shenzhen came into the global spotlight in 2010 with the workers committing suicides in theFoxconn factories making iPhone. The city was seen as the global sweatshop. Within short eight years, the city is now known as one of the leading global innovation hub termed “Silicon Valley of Hardware.”

The city of Shenzhen became the first “Special Economic Zone” in May 1980 as China began the“Reform and Opening” and seek to experiment with entrepreneurs driven capitalism. The opening of the city started to attract the original equipment manufacturers (OEM) of ICT devices in Taiwan,Korea, Singapore, and Japan to set up productions here. The Asian countries have been the destination of the outsourced manufacturing for decades, and the rapid expansion and re locations into Shenzhen has driven the initial growth of the cities. The transfer of knowledge and technologies came along with productions. By the 90s, Shenzhen had hundreds of thousands of factories and hundreds of technical solutions houses providing engineering and production support to the factories.

DVDs players that read every disc

The new middle classes with disposable income emerged in China in the late 90s, and they wanted entertainment. The most popular entertainment of the time was DVDs and VCDs. DVDs and VCDs of pirated contents were popular, but DVD players from large brands had difficulty reading those pirated DVDs. With the engineering and productions capacity of ICT devices in place, companies in Shenzhen created the DVD players that reads every disc, and it was an instant hit in the Chinese market and later on other emerging markets in South East Asia, SouthAmerica, India, and other emerging markets.

The massive demand of the DVD players brought substantial business opportunities to Shenzhen at the time of weak IP protections. The factories were busy producing to fulfill the market demands while the technical solutions house quickly evolved the engineering of the players in kind of forced open and sharing fashion by providing the turnkey solution for the productions. The technical solution houses shared the design of the players, somehow forced due to the weak IP protections The sharing practice evolved into Gongban (roughly translated public circuit boards)whose plans are widely available to the solution houses allowing rapid iterations of the system to improve performances, reduce costs and add new features.

The success of DVD players kicked the collaborative ecosystem with two significant features:First, open sharing of the design and engineering and second, leaving the open and wide availability of the open components, the producers could serve market needs in all regions.The growing business of DVD also set the foundations of the open ecosystem in Shenzhen where the traditional vertical integration of design, engineering, and production within one company broken down to the multiple independents and collaborative units of industrial design, technical solutions and factories.

Followed in the DVDs, Shenzhen started to pump out more local creations of MP3 and MP4 until the next golden opportunities of mobile phones in early 2000.

Shanzhai Mobile: Folk Art of Shenzhen

While many are sticker shock with the latest iPhone cost around $1,000, it helps to remember that a Nokia GSM phone cost around $800 without contract back in 2000. With the GSM networks complete its deployment in developing regions like China, the demands for inexpensive feature phones started to rise. While the major brands still concentrated their effort on the developed areas such as North America and Western Europe, Shenzhen ecosystem began to make inexpensive mobile phones serving the markets not attended by the major brands. The design studios, technical solution houses, and factories complex in Shenzhen got into action. They mix and match different looks and solutions to produce phones for the developing regions such as third and fourth-tier cities and rural area of China.

Initially, the designs were hugely inspired by major brands such as Nokia and Samsung and were marketed under funny names such as Nakia or Somsong. Affordable to the developing regions, the Shanzhai phones took off, and Shenzhen ecosystem started its first gold rush making feature phones for emerging markets ignored by the major brands. Shenzhen would like soon to ship tens of millions of Shanzhai phones annually.

Shanzhai phone industries while proliferating were still looked down by the major provides of chipsets for mobile phones. The major vendors such as Broadcom and Qualcomm required large up front license fees to access their technologies, require vast and long engineering effort on the vendor to adopt their chips for production and deal only with major brands. MediaTek, a smallTaiwanese supplier of chipset for DVD and MP3, started its mobile product division in 2004 to provide the turnkey solution to serve the Shanzhai markets allowing inexperienced vendors to quickly develop new feature phones with a small upfront licensing cost and little engineering efforts. The Shanzhai flourished with mass participation in making feature phones for all sort of niche markets around the world.

While most people thought of Shanzhai as nothing more than Nokia knockoff, the reality of Shanzhai by late 2000 transpired filled with all sort of new feature phones. One of the examples was Thunderstorm phone with seven speakers that could play music as loud as a boombox. The phone was created exclusively for the workers in construction sites. They need some musical entertainments but could not wear headphones that might prevent them from hearing the warning of dangers on site.

The Shanzhai open ecosystem drastically lowered the barrier to create new phones, and in turn, the companies could afford to develop new features to address small niche markets. Shanzhai democratizes and commoditize the creations of new phones. “Shanzhai: the folk art of Shenzhen”coined by a collaborator while touring the Huaqiang Bei electronic markets, is probably the best description of Shenzhen’s relationship to mobile phones. While the rest of the world still think of making a mobile phone as a high tech venture, companies in Shenzhen are mixing and matching designs and solutions to generate new mobile phones to fulfill new niches. They act on instinct, validate the phones by directly test them with consumers and iterate fast for improvement. The practice is very much like small villages making folk art rather than high tech companies engineering new phones.

Surround the cities by the villages

One of the most famous strategies used by Chairman Mao to take over China was “surround the cities by the villages” by aligning with the needs of the bottom of the societies. The smartphone is the most obvious example of how this strategy and the influence of Shenzhen in the shaking up the global industries. In Q2 2018, the top 5 smartphone companies are Samsung, Huawei, Apple, Xiaomi and Oppo. Three of the companies are from China, and two are from Shenzhen. Xiaomi could not have existed without the supply chain of Shenzhen. In total, Chinese vendors are now almost 70% of the global market share. The Chinese vendors did not take on this lion shares by taking on the dominating brands of Apple and Samsung head on but by serving the markets ignored by the large one. Over time, the technologies lift all, and the demolishing of return on the technologies kicked in for the Chinese brands to catch up and grab a lion share of the market. In the two most important emerging markets of the smartphone: India and Africa, the competitions are among the Chinese brands leaving two major global brands behind. Tecno from Shenzhenwith 37% of the market dominates African market. The share of Chinese smartphone went from almost not existing to 70% within a decade of the introduction of the smartphone.

The open ecosystem did not overtake the market by cutting edge technologies but by the open, collaborative ecosystem that allows furious competitions by many to quickly iterate and adopt the technologies to serve niche markets. Over the long term, the open ecosystem wins over the proprietary models.

With the production of 90% ICT products for the world, Shenzhen’s open ecosystem is playing a now critical role in the future of creation, development, and production. Understand how the system has affected the existing mobile devices market will provide an insight into the how the future of IoTs will develop.

Development of Digital Computer Revised

Many attribute the success of Shenzhen to be Chinese specific and try to tie the open and collaborative practices to the Chinese culture. However, examining the history of the digital computer through the lens of “Mass Flourishing” would show the development of digital computers was also driven by the same technologies diffusion meeting the high dynamism pattern. Furthermore, the diffusion pattern of computer technologies also exhibits exponential growth in term of numbers of people with access to them.

In the beginning in World Wall II, the digital computer was created along with the technologies in the secret world of code breaking. There were only a handful of people in the world had access, and the production of machines took years and cost millions. Post-WWII, the digital computers were exclusively in the domains of militaries, governments, and large corporations. "I think there is a world market for maybe five computers,“ a famous quote attributed to Thomas Watson, president of IBM, 1943. The commercialization of transistors and the subsequent micro processor by companies like Fairchild and Intel in Northern California in the 60s opened up the opportunities to young people like Steve Wozniak and Steve Jobs to create a cheaper version of the computers.The PC was not widely available until the incremental innovators like IBM, Compaq and later onDell and others working out the incremental improvements to start making personal computer more affordable. Subsequently, Taiwanese OEM in the 80s continued to make incremental improvements to PCs to bring them available to the mass. The mass markets of personal computers were not created by a stroke of genius, and the inevitability of technology took its inevitable courses to reach the mass. It was the participation of large numbers of people and companies to continuously improve the technologies incrementally to bring the personal computer to the public. In every stage, the knowledge spread, the technologies diffused and the production cost dropped. The number of people with access to the ICT technologies grew exponentially over the years to bring about the third industrial revolution. The technology enabled but high dynamic people made it work.

The Maker Movement

With the publication of “Makers” by Chris Anderson in the mid-2000s, the Makers and the MakerMovement has generated vast interests all around the world. The Makers was seen as a paradigm shift in innovations and the Next Big things were expected to come out of maker spaces around the world following the same narrative of “Creative Destruction.” Cities around the world support the make spaces expecting little Silicon Valleys to grow out of them. However, the maker spaces had not yet delivered after a decade.

An alternative of the Maker Movement is as the continuum of ICT technologies diffusion originated in Silicon Valley in the 70s, spread to Asia through outsourcing in the 80s and brought to Shenzhen in the 90s. The Internet makes the spread of knowledge and the sharing of projects readily and abundantly available to many around the world. Coupled with the rapid cost drop of open source hardware for ICT and digital production, the Maker Movement became the global network of continuous ICT technologies diffusions to the mass.

Innovations are driven by access to resources: knowledge, technologies, productions, and funding. Traditionally, the accesses to these resources are exclusive to the few. Over time, the knowledge was transferred, the technologies diffused and production commoditized. The access was broadened to more significant numbers of people over time at an exponential rate as the world got connected by more and more innovations in areas such as transportation and communications. With more people having access to these resources, the speed of changes increases drastically at almost an exponential rate.

The history of the digital computer often uses Moore’s Law with its exponential growth curve to promote the ideas of the inevitability of the technology. However, we should examine closely from the human side. The growing number of people who get to innovate with the technologies also grow exponentially. More people have the opportunities to innovate with the technologies, more applications are discovered which lead to more people involved in the innovations with the technologies. The exponential growth is less about the technology, but more about the number of people get to innovate with it. As the digital technologies continue to take the shape of mobile phones and smartphones, the people factors have reached a critical mass in Shenzhen that leads to the dominance of the Chinese phone vendors in the mobile phones and smartphones markets.

Platform Cooperativism

Platform Cooperativism developed in the past few years in response to the unilateral control of the sharing economy giants such as Uber have on the workers and AirBnB on the property owners on the platforms. Platform Coop is a digital version of the time honored practices of cooperatives that enable the members to have democratic governance of the organization.Platform coops organize through digital platforms to provide the same services as large corporations and empower the members to be the owners of the platforms. Ride sharing coops such as Denver Green Taxi and Ride Austin have proven the coop can be competitive to the large and centralized alternative.

A kinder Digital Future

While the mainstream view of the future promoted by the digital giants seem to be bleak without alternative. The digital giant make the devices, control the platforms and use them to collect our data, analyze our behaviors, sort us into categories and influence our choices according to the buckets we are sorted into. The techo-determinism seem to make this future inevitable. However, communities around the world are taking actions collaboratively against this narrative of the future and bring a future of digital “good life” where the communities can exercise controls over the devices and the platform and individuals in the communities can explore the resources to take adventure and create indeginous innovations to keep on improve the quality of lives. That future is not just possible but desirable. We just have to work together to archive it.

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