When you democratize the tools of innovation and production, what happens to the manufacturing industry?

Question: How is the Internet changing the face of manufacturing?

Chris Anderson: We have learned a lot on the Web. We've learned a lot about sort of what happens when you democratize the tools of production. In the case of the Web, democratizing the tools, the publishing, the broadcasting and communications. We saw what happens. First of all, more things are made and more people make them. You end up with a long tail of products and different ways to engage and we learn a lot about who we are and what we want.

We are now starting to democratize the tools of manufacturing as well. That was true for bits and we're now starting to do it for atoms. One of my side [jobs] -- my wife calls it a hobby because I don't make money, so let's call it a hobby -- I have a Robotics company and we make autopilots, we make unmanned aerial vehicles, open source ones. To look at us, we look like an Internet company. We're a couple guys with -- four guys with laptops, right? No manufacturing facilities to speak of. No warehousing, and yet we make really sophisticated electronics that look like the kind of stuff you'd get from Sony minus the packaging.

How are we able to do that? Because the global supply chains of electronics are now impedance match to the individual. I can push buttons -- so what happened to the music industry when you could push buttons and make music? We saw the sort of fragmentation, balkanization in the music industry. On your laptop, you can make music, mix music, distribute music, and market music. It was all sort of digital. You are starting to do the same thing with stuff. I can design products. I can push buttons. Factories in China will ramp up and make them. I can make them in units of 10, 100, 1,000. And we now have the ability to target markets that are small.

Sony will not make a product for 1,000 people. But 1,000 people is perfect for us. And there are a lot of 1,000 people markets out there. Because the global supply chains and manufacturing are now on the Web, are now easy to access, are now willing to scale down to our level, you see this explosion of amateurs and professionals and people who are moonlighting and sort of saying, "Well, you know, this isn't a big product, but it is a product and I can make it happen." The garage is now has global impact.

This plays out in a lot of ways. You talked about the ratio of intellectual property versus atoms. The old model stuff is that the raw materials cost a lot and then manufacturing cost a little bit on top of that and that was the price. The new one is that the raw materials cost like almost nothing. Silicon and various sorts. And all the value in Intel chip, for example, is an intellectual property in that chip. What happens if you choose to give away the intellectual property? We saw what happened in software.

If all the value in a Microsoft product is the intellectual property went in to coating it and not the reproduction of the bits, then -- and you choose not to charge for that -- you end with Linux, you end up with my MySQL, you end up with Apache, you end up with Open Source software. We're doing the same thing with hardware, Open Source hardware. If we don't charge for the intellectual property in a product, settling the private **** fallen price by ten-fold or more. You're seeing not only explosion of niche products but niche products incredibly low prices because they're driven by businesses that don't require those high margins to survive; they're being done for other reasons, for other incentive[s], these non-monetary incentives like reputation and attention and expression and fun, doing it for your own purposes and sharing it with the world.

All those things that made Open Source software such a disruptive force are now starting to play out with the real stuff.

Recorded on September 30, 2009