The Digital Skeptic: Now 'Freenomics' Grinds Manufacturing Into Dust

NEW YORK ( TheStreet) -- Greg Pilling knows how he'll make millions in manufacturing: Take his company's best kept secrets and give them away. For free.

"I am going to attempt to use top-flight, on-demand crowdsourcing," Pilling wrote me about his new line of smartphone and tablet cases. "In exchange I will share the collective effort. And in turn, the whole world will get the knowledge of the thing."

The Tucson, Ariz.-based "inventor type" is the founder of Sascase, an on-demand smartphone and tablet peripheral maker. But that's just a few of the more than 100 products Pilling has developed. He was a top salesman for pricey tool maker Snap-on ( SNA). He is also owner of a self-funded, 10-person truck lift manufacturing firm that has built 100,000 such kits over the past eight years, with reach into 1,700 retail outlets in North America.

Talking to Pilling is like taking a crash course in cutting-edge, 21st century manufacturing theory.

He's as comfortable with SKU spreads as he is quoting Chris Anderson's The Long Tail or Makers: The New Industrial Revolution. He relies on sophisticated fab tools such as laser cutters and on-demand design systems to offer a vast line of products. But he builds when only he gets an order.

"Our Asian-made competitors can't match this, since most factories want a minimum order of 500 items," he said. "We would just build one if that was all that was needed."

So why is this bright, nimble industrialist giving away the intellectual farm?

"Since being copied is a near-certainty, going open source is a method to try to control the process of being copied," he explained.

Here we go again, investors. Just as big-time manufacturers such as Cummins ( CMI), Caterpillar ( CAT), E.I. du Pont de Nemours ( DD), Joy Global ( JOY) and Deere ( DE) report overall positive news, it looks like the same no-money, "give it away and hope to make it up on the volume" information age economics are leaking into manufacturing.

The iPilling?
What makes Pilling worthy of investor attention is that making tablet and smartphone cases is just the beginning. Pilling actually has his eye on entire tablets. That's correct: This truck parts maker is on track to design, build and ship sophisticated, integrated tablet devices.

"I hope we can compete with the Panasonic Toughpad," he told me a few weeks back. "Their 7-inch Android device is priced at $1,100. I hope we can make something comparable for $300 to 400."

Already there is a fast-growing component parts market in the circuit boards, screens and other digioguts Pilling needs to make his riff on the Apple ( AAPL) iPad a reality. The most compelling is the red-hot, $25, credit-card-sized open-source computer called The Raspberry Pi, which has sold 1 million units in less than a year.

The Pi already powers low-cost phones, wireless 3-D desktop printers and digital cameras. And based on books such as Programming for the Raspberry Pi by Simon Monk, even with my third-grade Python skills I can see that a mere tablet will be no biggie.

Sophisticated manufacturers are already trying to get on the right side of this "manufremium" trend. New York-based Bug Labs announced that its open-source hardware tools are being used by none other than stuffy old Ford ( F) as part of its OpenXC platform.

And international phone giant Nokia ( NOK) announced that it would offer the means to design and build a smartphone case for anybody with access to low-cost 3-D fab tools, including Brooklyn-based MakerBot or Paris-based Sculpteo>.

Wired gets tired
Probably the biggest clue that manufacturing is heading down the same downward Information Age path is that the same digital age hucksters are showing up in manufacturing. No less than the pied piper of the free information economy, Chris Anderson, just quit his high-profile job running the Wired print and digital brand to helm a drone manufacturing firm.

"You can think of the Maker Movement as less about the return of industrial cities in the developed world and more about a new kind of cottage industry," Anderson told ZDNet.

A cottage industry with margins that major manufacturers cannot match.

"I see a fundamental shift in trends that can tilt the balance of power to favor innovation over scale," says Andrew "Bunnie" Huang, who earned a Ph.D. in electrical engineering from MIT on the way to becoming an expert in computer-controlled hardware systems.

Now, will making things join fully the race to oblivion already being run by the adult entertainment and music industries? Probably not. Real things are still real things. So value will be there. But it's also clear that said real things are no longer a hedge against the uncertainties of a world where information is worth less and less every day.

"On the whiteboard in my office I have written in small letters in the corner: 'The future will be just-in-time, made local, contract manufacturing, mass customization.' Because I honestly believe we will all want the same things as our neighbor, just a little different than his," Pilling said.

Which led Pilling to write me the obvious question:

"So how do I go about shorting Apple?"

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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