WORLD
Swarm Economics:
How 3D Manufacturing Will Change
the Shape of the Global Economy
BY OLAF GROTH, MARK ESPOSITO AND TERENCE TSE
The collaborative economy and
commons are challenging the way com-
panies are engaging with consumers
and we experience a shift towards zero
marginal cost society thanks to a new
hybrid form of converging configura-
tion, powered by the crowd. Supported
by technological breakthroughs and dis-
ruptive creation, the intelligence of the
“swarm” constitutes an opportunity to
alleviate old structural imbalances, in-
justices and diseconomies, if managed
with foresight.
From the Few to the Many: Swarm
Economics
In recent years, we have been seeing a
shift in how goods and services are con-
sumed. Driven by global trends in re-
source shortages, sustainability, financial
strain, wireless technology, social media,
etc., fewer businesses and consumers
feel the need or are able to individual-
ly purchase, own and maintain certain
types of material assets. From Netjets to
BnB to Zipcar and Buzzcar, consumers
in the US and Europe have increasing-
ly been taking to what is commonly re-
ferred to as the “Sharing Economy.” This
is sweeping through many sectors. To
34 The European Business Review September - October 2014
be sure, there are many open questions
of a regulatory nature. But this demand-
side trend toward crowds sharing seems
unstoppable.
On the supply side too, we are now on
the verge of a paradigm shift. This shift
pertains to how goods are designed, made
and distributed across the globe. Over
the next 20 years we will see a democra-
tization of manufacturing that will allow
consumers to build their own products in
a decentralized and distributed fashion,
and to an extent never seen before. To
do this, they don’t need to be experts in
any one of these activities. Rather, they
will rely on the help of developers, some
of them professional product develop-
ers, many of them hobbyists and hackers,
to create designs for new products, and
of other consumers to contribute com-
plementary product components. Jointly,
these manufacturing communities will
hold most of the critical assets for ex-
perimentation and production.
Disparate and diverse sets of producer-
consumers will come together in forums
online, responding to each others’ needs,
offering ideas, designs, materials and re-
ciprocal services to each other. They will
form in small or large groups on a mostly
ad hoc and irregular basis, depending on
the needs in question, to help each other
think through and make “stuff.” They will
pay, barter and trade in currency, know-
how, assets and channels. This type of ad
hoc and agile cooperative but only very
loosely structured manufacturing model
will lead to new ventures with new pat-
terns and behaviours of production and
new ways of minimizing transaction
cost. We have dubbed this phenomenon
“Swarm Economics.”
The Driving Force Behind Swarm
Economics: 3D Manufacturing
At the heart of Swarm Economics is the
unfolding field of 3D Manufacturing,
also called Advanced or Additive
Manufacturing. Sophisticated printers
add layer-by-layer of different types of
print material to construct anything from
simple rubber ducks to whole automo-
biles. Costs of printers have come down
significantly in recent years, ranging
from hundreds of thousands to just 150
dollars, depending on the complexity of
the task they’re designed for.
This new field has been grabbing
media attention for a while, maybe not
surprisingly. It appeals to consumers,
entrepreneurs and politicians alike.
Consumers obtain more control and
instant gratification, entrepreneurs get to
develop new applications and business
models, and politicians get to harness
the technology as a means of on-shoring
long-lost manufacturing jobs.
The stakes in manufacturing are sig-
nificant. The value added as percent-
age of GDP in 2012 was $13% for the
US, 19% for Japan, and 10% for the
United Kingdom.1 In many economies,
manufacturing, whether undertak-
en in large or small companies, consti-
tutes a large chunk of economic activ-
ity. In some developing economies, this
sector has been increasing, whereas in
many industrialized economies, it has
Over the next 20 years we will
see a democratization of
manufacturing that will allow
consumers to build their own
products in a decentralized and
distributed fashion, and to an
extent never seen before.
been stagnating vis-a-vis the servic-
es sector. In most countries, however,
policy makers view manufacturing as
a way to foster deep technical skillsets
that are sustainably valuable in that they
serve domestic and global sets of multi-
national corporations and hence attract
investment. The numbers aforemen-
tioned only account for just the value of
manufacturing activity itself. But manu-
facturing spawns services and solutions
that sell, maintain or enhance prod-
ucts. Furthermore, it draws to it intel-
lectual property (IP) and innovation. In
California’s economy, much of which is
characterized by break-through IP, this
IP adds significant value in manufactur-
ing. California manufacturing generates
$229.9 billion, and it is also its great-
est export activity that generates $159
billion in exports in 2011.2 In clean
energy technology, for instance, many
of the state’s inventions and innovations
get integrated in Detroit, Spartanburg,
Tokyo, Seoul, Wolfsburg, Stuttgart or
Munich.
On an individual human level, manu-
facturing plays on the natural human in-
stinct to make, to build, and to express
oneself through physical representations
of or additions to our world. The Makers’
and Do-it-Yourself (DIY) movements,
for instance, have gained significant
steam, especially in the United States.
One of the movement’s most success-
ful ventures, TechShop, posted 798%
revenue growth in the last three years and
was just named to Inc.’s list of fastest-
growing private companies. “We’re just
riding the wave,” says CEO Mark Hatch.
“We’re responding to the demand.”3
Meanwhile for Etsy, the trading and e-
commerce platform for makers based in
Seattle, the volume of traded goods has
increased its valuation to nearly double,
$700 billion.4
It is no surprise then that stakehold-
ers of manufacturing are excited about
the prospects to empower individu-
als to design, make, and sell products to
bring back jobs, spur innovation and in-
crease productivity and fulfillment. Of
course, many questions remain around
3D Manufacturing and the Makers’ / DIY
movement, from environmental to safety
to labour regulations. But with such
heavy-hitting economic and political in-
terests aligned, these concerns will get
worked out and it is hard to imagine that
the trend could be reversed altogether.
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From Ant-Hills to Beaver Dams: How 3D Manufacturing
Changes the Geo-Economics of Production
So far so good. But why should we care beyond this rather en-
couraging picture of bringing manufacturing back from the
dead? 3D Manufacturing and Swarm Economics are not merely
the wet dream of base-democratic San Francisco hippies and
Silicon Valley libertarians. They are nothing less than a fun-
damental reshuffling of how manufacturing will work in the
future. How manufacturing works will in turn determine where
it happens, who makes it happen and at what costs.
Modern manufacturing has come to us in two basic waves:
the early wave of craftsmanship that was common to the devel-
opment of many countries around the world, started by individ-
ual master craftsmen, harnessed by guilds and cooperatives; and
the later wave of industrialization rooted in Britain and conti-
nental Europe, perfected at scale in the United States during and
after World War II. What followed was an efficiency and cost
drive in the West that led to the much debated and bemourned
outsourcing (offshoring and hence migration of manufacturing
activity and jobs largely to Asia). As Asian economies became
more affluent, more Western companies moved closer to the
new consumers, partially to understand them better, partial-
ly because local regulations demanded it, which reinforced the
trend. As a result, China now accounts for a fifth of global man-
ufacturing, as opposed to Western industrialized economies.5
All of that will soon change; not for all manufacturing and
36 The European Business Review September - October 2014
not at once, but slowly and steadily over the course of the next
20 years. More and more manufacturing will be transformed
from large centralized production facilities (ant hills) that are
hierarchically managed to smaller, individual or cooperative-
type operations (beaver dams), thanks to the empowerment of
3D Manufacturing and cloud computing.
How will this happen?
As printer technology and big data applications evolve, and
as the maker-movement starts to acquire the requisite com-
puting skills at scale, small businesses and individual produc-
er-consumers will acquire 3D printers to help them produce
smaller products or components of bigger products. They will
utilize analytic applications to understand the hot spots of con-
sumer trends, public and investor attention. Companies like
Quid (www.quid.com) are already humming in that direction
and will help them do so at much greater granularity. Then they
will use design applications to test out and experiment with the
right configurations of products against the needs that call for
them. So enabled, they will also have the means to then search
for and connect to others in the cloud and on special makers’
networks and communities to understand who has comple-
mentary capabilities. One maker’s cloud-based profile and ca-
pability specifications will match up with that of others to de-
termine synergistic capabilities and the logistics required to
bring both together.
Responsiveness to late-breaking consumer trends will be
high, because connections will be immediate and direct, trans-
action cost and hence overhead will be low. Batches will be
small, but in aggregate, will be able meet consumer demand at
volume. There will of course be lots of trial-and-error, heart-
break and backlash as consumers complain about inadequate
quality, safety and reliability. New regulations will need to be
put in place to safeguard without stifling this new economic
growth horizon. Because of this, it is unclear at what pace and
in what direction this swarming mess will evolve. But one thing
is more or less certain: the days of the mega factories that crank
out homogeneous products for indiscriminate users using un-
differentiated labour are numbered.
The New Heat-Map of Production in 2030: Goodbye,
China Offshoring!
Those that believe that this is yet another idea dreamed-up by
the want-to-be avant-garde ivory tower dwellers for a mostly
affluent western and northern elite audience starved for the next
sci-fi gadget may want to reflect on this a little further. There is
no reason this can’t happen across the globe and across rich and
poor economies alike. In Asia, Africa and Latin America, poor
farmers and merchants may lack basic infrastructure, but they
do own cell phones. They have leapfrogged western/northern
stages of industrial capabilities once and they can do so again.
In fact, it would be much more beneficial
to them to invest in 3D printers than to
pay manufacturers in China and their sat-
ellite big-city distributors for the goods
they wish to sell.
And there are precedents: in Africa and
Asia, mobile banking and payment ser-
vices like M-Pesa have empowered the
“un-banked” consumers, some of whom
have consequently become merchants
as they have harnessed the power of new
platforms that alleviate traditional barriers
to financial transactions. Why would poor
rural farming communities be able to pool
their resources to procure joint harvest
machines or cell phone-charging stations
for a few hundred dollars at a time, but not
afford a 3D printer for $300?
If that is so, then why would we need
to continue to put all of these facto-
ries in China to make simple household
items, toys and tools? Why would we
need to search for new manufacturing
hubs around the world to take over from
China as it evolves into a higher-end in-
novation economy? Wouldn’t a wire-
less connection, access to the cloud and
a printer-box that is barely the size of a
washing machine in the hands of a local
merchant, suffice? Why embark on the
next round of offshoring in what is be-
coming an endless odyssey of low-cost
labour searches? Could this be the end of
the centralized, hierarchical mass-man-
ufacturing and shipping paradigm? The
container killed labour in industrializing
economies. Now the 3D printer could
kill the container. Local craftsmanship
could be back with a vengeance!
Make no mistake about it, we do of
course still need large facilities and more
centralized production for certain types
of goods; for example, where one hub is
needed to aggregate and assemble complex
technical systems. It is hard to see how
Swarm Economics could replace the need
for assembly lines for aircrafts in Seattle
or Hamburg, for shipyards in Korea, or any
type of highly restrictive clean room type
operation like semiconductor fabrications
in Taiwan, any time soon. But the part
suppliers of these large operations might
very well be impacted.
So, in sum, we will see the emergence
of a much more distributed, decentralized
production paradigm, even if for simplic-
ity’s sake, only the smaller products are
impacted at first. Hence, large portions of
economic power will migrate away from
those with large capital and other bulk
production factors to those with special-
ized craft and know-how in what could
become a crafts-paradigm on steroids.
Instead of products being pushed out from
the monolithic centre to the distributed
periphery, we will see a pull of print mate-
rials and designs from those dispersed pe-
riphery locations and a push of products
back into the center through the cloud.
The days of the mega
factories that crank out
homogeneous products
for indiscriminate users
using undifferentiated
labour are numbered.
Here then are some implications:
As a result, cheap manufacturing hubs
like China will lose their edge in low-end
manufacturing more quickly and will
get pushed further up the manufactur-
ing value chain. Trade and investment
negotiations across borders will take on
a very different character as these value
chains get reconfigured and actors figure
out their new power relationships. As that
happens, confusion of what products are
made where and how that will change
customs duties and value-add taxes will
increase. At the same time, within the
swarms of individual consumer-produc-
ers, liability and service obligations will
need to be figured out. Determining the
who, why and how for handling these
issues will be messy, given the lack of
formal organization and overhead, until
cooperative agreements about those
aspects are reached and certain standards
become clear. Labour will become more
fragmented into individual contributors
that form cooperative swarms around
consumer preferences. Unions become
communities. That will mean less order
and hierarchy to rely on and more en-
trepreneurial initiative on the part of the
many. But at least the many will no longer
have to fear the offshoring odyssey.
In this environment, manufactur-
ing innovation can happen in a myriad
of spaces. The swarm determines where
the weight of attention and skills should
be placed, more so than centralized in-
dustrial policy. This is already happening
to some degree with open source soft-
ware, crowd-sourcing and open inno-
vation challenges. Corporations have re-
alized that they don’t hold all the smarts
and wisdom they need behind their
walls. They are increasingly making their
borders more permeable to tap exter-
nal pockets of expertise. The same will
happen with the design and production
of new products. With the help of the
crowd, empowered Master craftspeo-
ple will absorb this piece of the corporate
value chain too.
Slowly but steadily, the corporation
as we knew it – the corporate citadel –
will relax and resolve itself into external
swarms. Corporations themselves could
become networks of freely associated
producers. After all, the main purpose of
corporations was to pool capital and tools,
create trust, lower transaction costs and
share overhead. With those needs being
met by a combination of 3D printing,
crowd analytics and design, and hybrid
digital-physical communities, what will
be the role of the corporate citadel?
Some might go as far as to see the
end of employment, the end of the sal-
aried man and woman. And while they
might find that to be a scary proposition,
it doesn’t have to be. It could in fact mean
the end of structural unemployment,
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 WORLD
Could this be the end of
the centralized, hierarchical
mass-manufacturing and
shipping paradigm? The
container killed labour in
industrializing economies.
Now the 3D printer could
kill the container.
because skill contributions are indepen-
dent of time and space, i.e. age, location
and corporate walls.
So, in sum, we could be seeing a shift
along two geo-economic axes, both
moving from centralized to decentral-
ized mode: from low-cost manufactur-
ing countries and regions to a distribut-
ed global base of individual craft-master
businesses; and from the centre of the
value chain, the corporation, to its edge
– the producer-consumer. The latter
might in fact lead to a further disaggre-
gation of the value chain into a loose
value web connected through new trust-
maximizing and transaction cost-mini-
mizing communities.
How to Prepare: Recommendations
for Executives, Labour, and Policy
Makers
We recommend a series of dialogues
between the leadership of these con-
stituents to more thoroughly under-
stand this intentionally provocative
vision. What are the risks and opportu-
nities? Should this vision be promoted or
mitigated?
• Exercise more detailed foresight and
assess the global and regional shifts
of economic activity and what they
mean for social cohesion and local so-
cio-economic development
• Study the requirements for a build-
out of high speed data infrastruc-
ture through wireless networks to
38 The European Business Review September - October 2014
empower both major cities and rural
villages
• Create programs to train Master
crafts-producers in the foundations of
the technologies, business models and
operational-financial tools
• Craft blueprints for health, safety, lia-
bility and labour regulation for a new
distributed manufacturing paradigm
• Incentivize the formation of online
cooperative co-production commu-
nities with a framework of rules of
conduct that creates status through
trustworthiness, responsiveness and
performance
• Develop corporate strategies that
take account of the collapse of the
value chain
• Draft communications plans that align
economic stakeholders in the web to
mitigate friction
• Institute secondary school programs to
teach crowd-production and Swarm
Economics
• Lay out negotiation approaches
between economies to coordinate the
labour, tax and customs regulations
Swarm economics and the distributed
production economy are not a revolution
on the fundamentals of markets, or micro-
or macro-economics. But they are a
radical shift in how these fundamentals
play out among the actors and countries
involved. In our opinion, they constitute
an opportunity to alleviate old structural
imbalances, injustices and diseconomies,
if we manage with foresight.
About the Authors
Dr. Olaf Groth is Global Professor of
Strategy & Economics, Management
& Innovation and Discipline Lead for
Organization & Global Economy at
HULT International Business School. As
corporate executive and adviser, he has
been involved in new initiatives and ven-
tures in 30+ countries. He has been a
Fellow for Competitiveness at Grenoble
École de Management, Senior Fellow for
Innovation at the Center for Emerging
Markets Enterprise at Tufts, and a judge
for GE’s Ecomagination Challenge. He has
published through the World Economic
Forum, Harvard Business Review,
Huffington Post. He holds a PhD from the
Fletcher School at Tufts University.
Dr. Mark Esposito is an Associate
Professor of Business & Economics at
Grenoble Graduate School of Business
in France and Instructor at the Harvard
Extension School in the USA. He serves
as Senior Associate for the University
of Cambridge Institute for Sustainability
Leadership in the UK. He is the founder
of the Lab-Center for Competitiveness
and has worked with governments, the
UN, and the NATO over the past 10 years
on economic development and sustain-
ability issues. He holds a PhD from the
International School of Management in
Paris/New York.
Dr. Terence Tse is an Associate
Professor in Finance at the London
campus of ESCP Europe Business School.
He is also the Head of Competitive
Studies at i7 Institute for Innovation and
Competitiveness academic think-tank
at ESCP Europe. He began his career in
investment banking at Schroders and
Lazard Brothers, and later as an inde-
pendent consultant to a University of
Cambridge-based biotech start-up and
various major corporations. He worked as
a consultant at Ernst & Young in London.
He holds a PhD from the Judge Business
School, University of Cambridge, UK.
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4. Thomas, Owen. "Here's Why Etsy Is Worth
Almost $700 Million." Business Insider. Business
Insider, Inc, 09 May 2012.
5. "The End of Cheap China." The Economist. The
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