Factor e Live Distillations – Part 10 – Community Supported Production

This episode covers the basic economic model of Factor e Farm. It is Community Supported Production (CSP) with two parts: Manufacturing (CSM) and Agriculture (CSA). It is permaculture and permafacture in one. We’re a replicable, vertically integrated, open source, community-supported flexible fabrication model – for short. View on. Transcript is found below the video.

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Today is the last Factor e Live Distillation before the Summary. I will discuss the Factor e Farm economic model. We are fierce supporters of open source economics and development.

How do we create wealth? The short answer is that we integrate the immaterial production of the design, for which we do not get paid, with the material production of the objects – for which we may get paid. Precisely because we are integrating the two functions in one operation – Michel Bauwens from the P2P foundation called us the most important social experiment of our time.

People are frequently confused when we describe our work – and ask ‘how we will make money if we are developing open source products’. Locked in the industrial mindset – it seems that many people can’t comprehend how somebody could create wealth and give away their production secrets at the same time. After discussing this with Jeremy here – the best metaphor I can make is to take the example of apples: I will be able to sell apples even though others are already selling apples.

The simple answer is – we produce our wares and sell them on the open market. The only rule is – we are not going to monopolize production – because we are open source.

We thus capture the value of our labor – and the full value of it – unlike working for somebody else. The only 9 to 5 that I like – personally – is going to bed at 9 and waking up at 5.

Our economic model has further details. We are developing a replicable, vertically integrated, open source community-supported flexible fabrication model. We do vertical integration – in our case carrying out all these business functions ‘under one roof’ – from the growing of feedstocks – design – parts fabrication – assembly – marketing – to public relations functions. We are open source – an open collaborative effort where many stakeholders get together behind the design effort. We are flexible – because the fabrication facility that we are creating will support multipurpose production.

We are community-supported. This is a big point. This means that we engage open collaborative design and development, raise money from many interested stakeholders – and we build the production infrastructure with that money. The agreement there – by voluntary contract with the crowds – is that we provide production at cost.

That latter is an important point – because it is a hint that we can compete with major corporations by leveraging crowd support for development and financing. The key to this is the at-cost part – which is clearly more attractive to the consumer than paying for the typical 4-6 greater cost found in a standard industrial model. Such a model has cost increases over the true cost (materials and labor) by virtue of waste in the form of development costs, financing, overhead, stockholder profit, interest, bureaucracy, inventory, transportation, legal, marketing, PR, and other costs. We are proposing a post-industrial model of Community Supported Manufacturing – where you pay only for materials and labor, and every other cost is distributed to a large group.

In particular, we raised $5k that paid for our present workshop. We leveraged crowds to develop design. For the CEB press– our first product scheduled for May 1 release – we have gone through the Prototype 1 and Testing, and now we are optimizing the product and its fabrication, by developing a torch table for metal cutting. In short, the materials are around $2500, and if we charge $50 for labor, we expect a total price to be as low as $3500 if we optimize production to 20 hours with the torch table It is likely that the initial cost may be higher due to additional labor hours and fine tuning of production– until we master the fabrication procedure. Still, the cost will be way under the $25-50k from the competition.

While experience only will tell, we are convinced the model that we are demonstrating will receive widespread adoption.

That is a tall order. However, basic logic indicates – that if a community-supported manufacturing operation succeeds at fabricating items of at least equivalent quality as commercial production – then the lower cost to the consumer will simply annihilate the 4-6 time more expensive goods.

This applies to many assembly/fabrication intensive products, and even to products that come from automated factories. Engines, solar power generators, cars, tractors, power tools, and just about any machine or process equipment falls into this category. In this group, most tools of agriculture, transportation, energy, housing, and some others, are included. We’ll know more about this theory on May 1, after the CEB goes into production as a test case of this economic model.

Now, there is the concept of recursion, introduced to me by Nathan of effortlesseconomy.com. This concept means that we go one step back in our fabrication to making our own parts, such as by metal casting. For example, with the CEB press, that means that we cast the structural members, and eliminate the cost of raw steel, by substituting with labor of metal casting operations. We have actually come up with a theoretical cost structure formula, based on our workshop’s planned ability to cast 300 lb of steel per hour, and assuming a day’s labor costs $200 at $25/hour. The formula shows a predicted CEB machine cost of $1400 instead of about $3500 – and we are talking about our sale price – where most of the cost is labor.

Think of it this way – if we pay $1000 for structural steel – we can spend 8 hours in labor, or $200 – to produce the same value by casting – from $100 worth of scrap. Clearly – we come out ahead by substituting labor for materials. This works for a win-win situation – the consumer pays less for the product, and the producer makes more money by capturing a higher value of labor – even though the sale price is lower. This is almost magical, and may have been impossible before the advent of digital fabrication.

We want to prove this, by developing our metal casting ability by this year. The formula indicates that we could build LifeTrac for $3k, where $3k <<$50k of the competition, as discussed in the Distillation on the tractor.

We need to produce some data on this by this year – as this is very exciting.

So you see, we are following 2 tracks at factor e Farm. The first is development of products, for which we pay with donations from the 1000 True Fans campaign. We also engage in production as above – as an ultimate test of our product development – and as a test of a business model – which we then test for replicability by training others.

Our ultimate product? It’s the entire package. For sake of replication, the cheapest route to attaining the entire package – al the GVCS tools – such that you could build a sustainable, regenerative community, enterprise, or some other undertaking – is to invest your time for 2 years with us in an immersion training program. In this program, you have an option of ‘paying your way through school’ by production, using your newly learned skills. All in all, for a few thousand dollars, you can build yourself an entire infrastructure as a result of the immersion program. You graduate with the technical skills, theoretical background, and a package of tools that you will have built and can take with you. That is our goal, and it approaches abundance. We think this is certainly better than college, where you leave as a dependable cog, with debt, and no practical skills – opinion of author.

For those of you who feel that you are trapped in the system by debt, you can sell your home, take the money, and run – buying yourself a parcel of land where there’s less people. Then we can teach you how to live regeneratively, and as a part of a productive global P2P economy – fueled by open business models and open design. The only trick to this is getting past your ego and gaining a whole new skill set. This is not for everybody – not for those who are used to welfare, corporate or other. But if you are hungry for a way out – we would like to create an option for you once we’ve got the enire GVCS package and the education program to support it – which we are planning to develop within 2 years from GVCS completion. Then our work is done.

The final goal is abundance, but I must explain what this word means. Abundance is everywhere around us. It is in the solar rays that make this earth alive. To tap abundance, we must know how to produce, how to turn dirt into gold. And we must learn to be wise and not wasteful, and not greedy. Then we have abundance. Plants and animals shower you with food if you can maintain a diversity of them in an ecological balance. Personal fabrication will produce for you when you can feed it with high skill and open design. Solar power feeds your energy needs. The fundamental ingredient is skill – and wisdom. – towards ultimate responsibility, autonomy, and a peer economy. There’s no magic to abundance. It is hard work, and an evolved mindset beyond the world of scarcity. Or, you can remain in the present world – struggle to produce more and more, a new green revolution, some new technology – until we live in test tubes like in The Matrix. But where is enough? That’s where the wisdom comes. If one is beyond ego, the wisdom shines through.

So that’s about it for the economic model. Maybe there’s something in it for you. And if so, please support it.