Harvard Business Publishing

Peer-to-peer, or P2P, networks have thrown the media industry into turmoil, changing the flow of information from a one-to-many model (with newspaper publishers, Hollywood studios, and

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big music companies as the sources) to a many-to-many model (with blogs, YouTube, and file-sharing forums as the venues). The ability of individuals to both consume and create content--news, movies, and music--greatly threatens traditional players. Witness the struggles of established U.S. newspaper publishers--the share prices of the four largest have fallen between 10% and 50% during the generally rising market of the past three years--because of challenges from new media and advertising models, including P2P schemes.

A shock like the one that jolted the media is poised to strike other industries, perhaps more disruptively. It is already being felt in financial services. Start with the phenomenon of microcredit: the lending of small sums to, and then within, social groups at the village level in poor economies, with members collectively guaranteeing the bank's loan. Combine that with the power of a global digital network, and a new model for banking begins to take shape.

Indeed, P2P financial systems are set to reprise in the banking industry what has happened in media. Already, websites like Kiva.org, Prosper.com, and LendingClub.com have extended microbanking to consumers in developed economies. In such systems, everyone is a tiny bank, making it easier to raise small amounts of capital among people who know--or at least, because of their social network, trust--one another.

It is only a matter of time before these digital systems close the arbitrage enjoyed by large banks, which lend at up to 15% interest but pay only about 5% on capital. Why do business with a bank when your network's lending and savings interest rates are both 7%? To grasp the power of such a system, imagine your local credit union with the membership and social networking capabilities of MySpace.

Furthermore, people will soon use personal currencies to make payments for "knowledge services" provided by other individuals, such as social introductions and shopping tips. These currencies will be traded on exchanges at floating rates determined by the market in real time. Like national currencies, personal currencies derive their value from the reputation and size of the network--status as an expert and number of friends, in this case, rather than market expectations and size of the economy.

An even greater shock could hit the energy industry, transforming it into a network that would make the current electricity grid seem rudimentary. Again, the consumer-producer would be the driving force. Some people are already installing home-based solar or other energy sources that allow them to sell electricity to the grid. Companies are using the roofs of their buildings for installations that turn the facilities into net power producers. Energy production and distribution could ultimately shift from a few key players to many participants.

The real breakthrough will come when cars generate more electricity than they consume--not as outlandish as it sounds. Hybrid vehicles currently take the kinetic electricity generated by braking and use it to help fuel motion and prolong battery life. Kinetic and battery technologies could improve to the point where cars generate excess kinetic power from their motion to be stored and sold back to the grid for micropayments.

These successive and ever more disruptive P2P shock waves foreshadow a distributed economy in which consumption is transformed into production that provides micro-income streams for individuals. The greater efficiency of such a system would help us all to live closer to sustainable economic equilibrium--which would be, on the whole, quite a pleasant shock.

Stan Stalnaker is the founder of Hub Culture, an international online and off-line social network. He is the author of Hub Culture: The Next Wave of Urban Consumers (John Wiley & Sons, 2002).

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