We spoke to Mark Pesce while pulling together our Social Innovators Guide to Open State. This is a longer version of the interview that appears there.

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Mark Pesce is an inventor, writer, entrepreneur, educator and broadcaster. Pesce co-invented VRML, was a panelist on ABC’s The New Inventors, writes a fortnightly column for The Register, and is the author of six books including The Playful World. Pesce now runs the Digital Growth Partnership, a Sydney consultancy helping clients to identify and benefit from the opportunities of connected business. He’s in Adelaide as part of Open State Festival to speak at several events, including Future Money: Exploring opportunity in the collaborative economy, one of the featured events in The Social Innovators Guide to Open State.

When we asked Mark Pesce what he was looking forward to talking about he explained that he was going to “drill down into what the DNA needs to be for sharing economy companies to be successful. If you do your business design right, not only will you build a platform for your own services, you’ll build a platform that is so good your competitors will want to be able to consume those services. This is how business happens in the sharing economy, because sharing is a broader term. It’s not just about sharing with the public or the public sharing resources, it’s about building business units that are share-able.”

Mark gave the example of Amazon, which in the process of creating the world’s biggest bookstore had to create the world’s biggest and most scalable hosting platform, and then realised that this could be an independent business unit. Today AWS, Amazon Web Services, powered much of the startup economy. Even the world’s most bandwidth-intensive business, Netflix, which accounts for 20% of the bandwidth used in the US between 8pm and midnight, no longer manages its own hosting, nor even its own billing system. These jobs are now outsourced to Amazon. This is a very new way of approaching business, a new era of specialisation where companies do the things they are best at and leverage the sharable capacity of other companies for everything else. As Mark said slightly hyperbolically “They have no computers at Netflix anymore.”

I asked Mark what this all has to do with money.

“The way we think about payments, the way we think about money, all of that is really going to change”

As companies become more integrated, payments become a fundamental linkage between all these different business units. Right now they usually pass through a provider, such as a big bank, but these intermediaries may become obsolete as a new infrastructure connections individuals and businesses together more directly. Mark describes payments as the “plumbing” between businesses. “The little pipes that are going from point A to point B, sometimes it’s data. Most of the time it’s payments.”

The end result of this atomisation and sharing of business units and infrastructure is that businesses will be able to offer a wider range of services by tapping into this expanding buffet of functionality they no longer need to build or maintain.

Mark takes this food metaphor further. “One way to think of this is that the businesses of the future” he said, is that they “are going to be more like ingredients, and then there are other businesses that are going to be more like cookbooks. A well-informed consumer is going to be able to open up the cookbook and say, ‘Gee, what do I want? Oh, I want this kind of thing. Here are the ingredients. I’ll pull these out. I’ll mix them up.’”

This emerging sharing economy is still poorly understood. Most people think of it as simply “collaborative consumption”, the ability to monetise their personal assets such as their car or spare room, rather than as a re-wiring of how business is done, and Mark thinks it’s crucial for entrepreneurs, social and otherwise, to understand what’s happening if they want to make an impact.

“If you’re not already thinking in these terms, and maybe even doing this version of business process transformation, then as new services are being created that could save you or your customers money, you don’t have the flexibility to integrate them. It’s really that simple. Companies that don’t do this, and that’s most Australian companies, and really most companies everywhere, they don’t have the flexibility to be able to adapt to either competition or to changing economic conditions. They are becoming less resilient.”

“How do you create business process architecture that allows you to be flexible without just dissolving? It’s that balance point, and it’s a very different balance point from top-down hierarchical 20th Century industry.”

See Mark at Future Money: Exploring opportunity in the collaborative economy, October 20, part of Open State.