= book and concept
* Book: Platform Capitalism. Nick Srnicek. (Polity, 2016)
By sebastian olma:
"Sascha Lobo, a German technology blogger for Der Spiegel, has recently suggested to drop the obscure notion of “sharing” altogether. “What is called sharing economy,” he argues, “is merely one aspect of a more general development, i.e., a new quality of the the digital economy: platform capitalism.” As Lobo emphasizes, platforms like Uber and AirBnB are more than just internet marketplaces. While marketplaces connect supply and demand between customers and companies, digital platforms connect customers to whatever. The platform is a generic ‘ecosystem’ able to link potential customers to anything and anyone, from private individuals to multinational corporations. Everyone can become a supplier for all sorts of products and services at the click of a button. This is the real innovation that companies of the platform capitalism variety have introduced. Again, this is miles away from sharing but instead represents an interesting mutation of the economic system due to the application of digital technology.
It should be clear that understanding the “sharing economy” in terms of platform capitalism is by no means a matter of linguistic nitpicking. Calling this crucial development by its proper name is an important step towards a more sober assessment of the claims made by the proponents of “sharing.” Take, for instance, the notion that everyone benefits from the disruptive force of the “sharing economy” because it cuts out the middleman. Sharing models, the argument goes, facilitate a more direct exchange between economic agents, thus eliminating the inefficient middle layers and making market exchange simpler and fairer. While it is absolutely true that internet marketplaces and digital platforms can reduce transaction costs, the claim that they cut out the middleman is pure fantasy. As one blogger puts it: “Sure, many of the old middlemen and retailers disappear but only to be replaced by much more powerful gatekeepers.”
In fact, the argument is quite an obscene one, particularly if it is made by the stakeholders of platform capitalism themselves. As globally operating digital platforms, these companies have the unique ability to cut across many regional markets and reconfigure traditionally specific markets for goods and services as generic customer-to-whatever ‘ecosystems’. It seems fairly obvious that the entire purpose of the platform business model is to reach a monopoly position, as this enables the respective platform to set and control the (considerably lower) standards upon which someone (preferably anyone) could become a supplier in the respective market. Instead of cutting out the middleman, digital platforms have the inherent tendency to become veritable Über-middlemen, i.e., monopolies with an unprecedented control over the markets they themselves create. In fact, calling these customer-to-whatever ecosystems “markets” often turns out to be a bit of a joke. For the clients of Uber & Co., price is not the result of the free play of supply and demand but of specific algorithms supposedly simulating the market mechanism. The effect of such algorithmic tampering with the market is demonstrated for instance by Uber’s surge pricing during periods of peak demand. It is not very difficult to see where this might be leading. Taking a cab to the hospital in, say, New York City during a snow storm might become unaffordable for some under conditions of mature platform capitalism. For those who believe this to be overly pessimistic and a bit of an exaggeration, just ask your local taxi driver what percentage of her work is already coming from one of the digital platforms.
As Sacha Lobo puts it succinctly:
“By controlling their ecosystems, platforms create a stage on which every economic transaction can be turned into an auction. Nothing minimizes cost better than an auction – including the cost of labour. That’s why labour is the crucial societal aspect of platform capitalism. It is exactly here that we will have to decide whether to harness the enormous advantages of platform capitalism and the sharing economy or to create a ‘dumping market’ where the exploited amateurs only have the function to push professional prices down."
I agree. The basis for such a decision needs to be a proper understanding of the reality of platform capitalism. The anger we have seen over the last few months directed against the “sharing economy” has a lot to do with the utterly unsubstantial claims and stories that are constantly churned out by the marketing machine of platform capitalism. Take John Zimmer, co-founder of Lyft, who told Wired earlier this year that the sharing economy bestows on us the gift of a revived community spirit. Referring to his visit to the Oglala Sioux reservation, he writes: “Their sense of community, of connection to each other and to their land, made me feel more happy and alive than I’ve ever felt. We now have the opportunity to use technology to help us get there.” No question, the pompous impertinence of this comparison is truly breathtaking. And yet, neither is this kind of rhetorical gymnastics the exception in the sharing-scene nor does it come unmotivated.
Noam Scheiber of the New Republic explains the rationale behind the obscenities of Zimmer (and his kind) with great lucidity :
“For-profit “sharing” represents by far the fastest-growing source of un- and under-regulated commercial activity in the country. Calling it the modern equivalent of an ancient tribal custom is a rather ingenious rationale for keeping it that way. After all, if you’re a regulator, it’s easy to crack down on the commercial use of improperly zoned and insured property. But what kind of knuckle-dragger would crack down on making friends?” (http://networkcultures.org/mycreativity/2014/10/16/never-mind-the-sharing-economy-heres-platform-capitalism/)
Platforms as the new bureaucracy
"“Only” fifteen years after Himanen’s book, a prophet of business thinking such as Geoffrey Moore looks at Coase’s seminal “The Nature of the Firm” and explores the deep changes that the digitally transformed economy is having on the structure of the firm itself. According to Moore, the transition to post-industrial, information, age is finally getting to maturation and having effects not only on the business models (with the rise of the “age of access” and “on demand” economy) but also onto the very nature of the firm itself.
The growing demand for the firm to be able to act as a pivotal point – interact and collaborate with partners and peers – is being deeply disruptive to the hierarchical and bureaucratic management structures that provided the motivation for the existence of an entire class of middle-management, middle-class jobs for most of the twentieth century.
The transition from corporate bureaucracies to digital empires is, according to Greg Satell, so relevant that he defines Platforms as “bureaucracies for the networked age“.
Ultimately you go then, gradually and with huge differences between different industries, from an industrial perspective, of a linear relationship between firms and the market to one which is networked and post-industrial. While in the first, the company (capital) owns the means of production and workers access them to produce products and services to be marketed, In the latter the market is reticular and indistinguishable from the society, the means of production are dispersed and accessible and companies have the main aim of connecting supply and demand and facilitating the “citizen producer”." (http://meedabyte.com/2015/06/19/the-hacker-ethic-of-work/)
" A recent study from OpenMatters and Deloitte, based on the observation of 40 years of S&P500 companies, reported that four major business models have been used so far in the history of capitalism: more in details, these business models are those of Asset Builders (firms that “build, develop, and lease physical assets to make, market, distribute, and sell physical things”), Service Providers (“hire employees who provide services to customers or produce billable hours”), Technology Creators (“developing and selling intellectual property”) and finally, Network Orchestrators.
This new breed of companies wins on the market by creating networks of peers in which participants – being prosumers, small business or partners in general – interact and play a role in a shared and internetworked value creation process. With no surprises, this research confirmed that Network Orchestrators historically achieved better financial results: bigger market value, faster growth, higher profit margins.
By surfing on the strong reductions of transaction costs mostly made possible by the ubiquity of the Internet and by leveraging existing and eventually “connected” infrastructures, inventories and network of resources, these companies can create markets that didn’t exist before. They can grow these markets into millions of participants, if not billions – by making connections and generating interactions between value producers and consumers, often shortcutting traditional middlemen and gatekeepers. These “platforms” focus on creating customer driven value – by using advanced techniques to deploy, test and measure the new – and on generating user experiences that are not only just better, but often 10x if not 100x times better (faster, easier, more enjoyable, more accessible, etc.) than the – not always existing – alternatives.
These “platforms” effectively enable what could be called a “Platform Based Peer Production” (PBPP in the rest of the document) paradigm – in contrast to the well known concept of “Commons Based Peer Production” as defined by Yochai Benkler." (http://meedabyte.com/2015/07/17/on-the-role-of-platform-based-peer-production-and-the-commons-in-the-dynamics-of-innovation/)
Asymmetric Competition Models
"Here are some key lessons for companies wanting to emulate the success of Internet marketplaces like Amazon, Google, Uber, and Airbnb:
- Lower transaction costs are what drive the evolution of the market from traditional firms to large networks. Therefore, focus relentlessly on lowering barriers to entry for both suppliers (workers) and customers.
- Networks aggregate customers very effectively, reducing the number of other companies that sell directly to those customers, thus leading to industry consolidation. As Jeff Bezos famously said, “[Their] margin is my opportunity.” Look therefore for fragmented markets where technology allows you to create new economies of scale, going directly to consumers rather than through intermediaries.
- Networks aggregate suppliers very effectively, increasing both the total number of available products and the total number of suppliers. In addition, as they evolve, networks become a breeding ground for new kinds of intermediaries. Suppliers range from single individuals offering a single product to huge firms, with many levels of smaller firms, and also intermediaries who aggregate those smaller firms, as well as those who provide services to individuals, smaller firms, and the platform itself. Therefore, build in mechanisms that will support suppliers of all sizes. (Note to policy makers considering the employment status of on demand workers: suppliers to on demand platforms will eventually include companies of many sizes, not just individuals.)
- The lower costs of doing business at scale make it possible to offer products to the market at lower prices, increasing demand. Be sure to pass savings on to the customer. Given sufficient investment, you can scale more quickly by passing on the savings even before you get to scale. Jeff Bezos was able to convince the market of this proposition, enduring years of losses or very low margins even as a public company in order to reach massive scale. Uber appears to be following the same playbook.
That being said, use market mechanisms and data to innovate on pricing. Google famously revolutionized advertising by creating an auction system that favors the most effective advertisements rather than the highest bidder. I expect similar business model innovations in the on-demand space, as the power of big data makes it possible to make a real time market in various kinds of services.
Networked platforms serve customers who were previously hard to reach, thus increasing the total number of customers. Therefore, don’t just skim the cream. Build mechanisms to extend your network to underserved populations, creating new markets. Many of the second-tier on-demand companies are doomed to fail because they only target small populations of affluent consumers, rather than finding a path in which the virtuous circle of scale and lower cost eventually allows them to serve a much broader market.
When you open the market to an unlimited number of suppliers, you must invest in reputation systems, search algorithms, and other mechanisms that help bring the best to the top. Simple, easily gamed reputation systems are table stakes; over time, more sophisticated curation will be necessary. Internet era networks don’t just seek to eliminate workers, they seek to augment them. Invest in software that empowers your workers, allowing them to multiply their effectiveness and to create magical new user experiences for customers." (https://medium.com/the-wtf-economy/networks-and-the-nature-of-the-firm-28790b6afdcc)