Industrial Revolution. Part 5. Why do we need companies?

The final part of the fascinating article of the magazine Wired "In the next Industrial Revolution, Atoms are the New Bits" . Earlier you could read about Rally Fightere , virtual mini-factories , a $ 1000 3D printer , and learn how to build your dream .



In the mid-1930s, Ronald Kuz , then a graduate of the London School of Economics, wondered which, at first glance, it might seem silly: “Why do companies need it?” Why should we declare loyalty to some institution and one roof to create something valuable? His answer: to minimize operating costs. When people have a single goal, roles, responsibilities and means of communication are established, it is very easy to create something valuable. You just come up to the person from the next room to ask him to do his job.



But a few years ago, Bill Joy , one of the founders of Sun Microsystems, discovered an error in the Cuza model. “It doesn't matter who you are, most smart people work for someone else,” said Joy. Of course, it was always true, but before that it was very important that you were in Detroit, and the one who is smarter than you was in Dakar. You were here, and he was there, period! However, according to Joey, now everything is changing. With the advent of the Internet, you no longer need to be located in the next room. You can hire the best man right from Dakar!

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Joey's law turned Cuza's law upside down. Now, working in a company often implies higher transaction costs than working on an online project. Why go to the person in the next room, if you can just as easily contact a member of the online community? Companies are full of bureaucratic procedures necessary to maintain its integrity. Communities are formed around common interests; they are created to implement the project, and not to support the company.



This is what the new model of organization of the industrial society is. The model is built around small loosely connected parts. Most of the participants are not employees. Participants are formatted and reformatted on the fly, guided by opportunities and needs rather than commitments. It doesn't matter who the best people work for; if the project is interesting enough, the best people will find it.



Let me tell you my own story. 3 years ago I was thinking about how much gyroscopic sensors have lately become cheaper. What could be done on their basis? At first, I realized that it would be possible to transform a model of a radio-controlled aircraft into an unmanned aircraft! It turned out that at that time there were already many unmanned aircraft using the same principle, but the more I looked at them, the worse they seemed. They were hard to use and they were quite expensive (from $ 800 to $ 5,000). The hardware for an unmanned aircraft should not have cost more than $ 300, even with a decent profit. Everything else was intellectual property.



In order to launch this project, I created the DIY Drones website and found several “soul mates” led by Jordi Munoz, a 21-year-old Mexico City graduate who lived in Riverside, California. Munoz was self-taught and had first-class skills in the field of embedded electronics and aeronautics. Jordi told me about Arduino and together we developed a board for an unmanned aircraft.







We developed the payment in the same way as all enthusiasts - buying separate parts in electronic stores and then collecting a mock-up on their basis. As soon as the layout was ready, we drew a circuit of the circuit board using CadSoft Eagle. After that we sent the scheme to the factory and in a few weeks we received ready samples. We soldered components, tested the boards, corrected errors and made improvements for the next versions.



Finally, we came to a design that we were pleased with. How to make money now? We could collect everything on our own, but we realized that it would be much better to enter into a partnership agreement with a retailer. It turned out that SparkFun was ideally suited for us, which creates and sells electronics for a growing community of open source devices.



SparkFun is located in a new 2-story building, in a business park outside of Boulder, Colorado. The ground floor, which is larger than 3 basketball courts, is filled with printed circuit boards on the one hand, ready to go to their customers, and on the other hand, working machines, which are followed by several technicians. The first two machines are designed for positioning small electronic components in a certain place on the printed circuit board. After the boards are ready, the engineers put them on a conveyor belt, which directs them to the furnace. In the furnace, the components are soldered to their places, thus doing what a person could do by ordinary soldering, but with incomparably higher accuracy and speed.



Printed circuit board supplies partner SparkFun in China. Due to large-scale production, each board costs only a few cents.



That's all! Using these components, you can do anything from a mobile phone to a robot. You can sell self-assembly kits or find students on craigslist who will assemble everything for you. (Our planes, for example, are collected by my children).



SparkFun creates, stores and sells our unmanned aircraft, as well as several other aircraft models that we have developed. Thus, we have the opportunity to engage directly in the development and not to care about how everything is stored and delivered. Some of the products we wanted to make at SparkFun required too much time, so we made them ourselves. Now we have our own mini SparkFun, in one of the garages of Los Angeles, which we rent. Instead of a machine for positioning components, we have a teenager with good eyes and a steady hand, and instead of a stove for soldering, we use a converted toaster. In this way, we can do dozens of boards in one day. Well, if you need to expand production, then we just buy the appropriate machines.



Every day our site takes many orders. Munoz, or one of his assistants, seals the product in protective packaging and puts it in envelopes for delivery. At 15.30 we go to the post office or UPS and send all the products to our customers. Only in the first year we had a turnover of $ 250.000, while we felt the need to expand production and had many new models in the queue. A little bit of luck - and we will reach a million by the end of the third year, which will put us on a par with other successful US companies. We are just a small gear in the economic engine that drives the US forward. At first glance, it does not seem that this is an economic model that will completely change the world.



But the main difference between this type of small business and dry-cleaning salons or kiosks, which make up the majority of micro-enterprises in the country, is that we act globally and work with high technologies. Two thirds of our orders come from outside the United States and our products compete in the lower price range with such monsters as Lockheed Martin and Boeing. Despite the fact that we do not hire a lot of people and do not make huge money, our basic economic model is to reduce the cost of technology by 10 times (mainly due to the fact that we do not charge for intellectual property). The effect is felt mainly by our customers: when you undertake to complete an order for much less money than is customary in the market, you can radically change it, attracting more customers.



Despite its decline, the American industry is still the largest in the world. However, according to IHS Global Insight - a company engaged in the construction of economic forecasts, it is expected that by 2015 the growing sector of industrial production in China will take the first place in the world. However, not all production in the US is minimized, but only large-scale. The Pease Group study conducted among small manufacturers (no more than $ 25 million turnover) showed that most companies expect growth this year. In fact, analysts predict that virtually all new vacancies in the US manufacturing sector will come from small companies like ours!







How many products can such small companies produce? Most sell thousands of units - 10,000 is considered a huge success! Aliph is one of the companies that has achieved significant success. Aliph manufactures Jawbone wireless headphones that suppress external noise. Aliph was founded in 1999 by two Stanford graduates, Alex Asseyli and Hussein Rahman, and now sells millions of headphones worldwide. But there are no factories in Aliph. The company outsources all production. Despite the fact that more than a thousand people participate in the creation of the Jawbone headphones, Aliph has only 80 employees. All the rest work in the contracting companies. This is an amazing example of a virtual company engaged in manufacturing. Aliph creates bits, his partners are atoms, and together they challenge Sony.



Welcome to the Industrial Revolution!