Platform Capitalism

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= book and concept


Book 1

* Book: Platform Capitalism. Nick Srnicek. (Polity, 2016)

URL = https://www.academia.edu/10590672/Platform_Capitalism_Polity_2016_

Review

By Leif Wheaterby:

"Among its virtues is a particularly clear breakdown of the types of platform. The advertising platform is dominant but risky. Google and Facebook, according to Srnicek, are dangerously extended in this historically unstable area. They are “appropriating data as raw material.” They are not, Srnicek makes clear, expropriating a surplus value produced by “online” or “cognitive” labor in the production of that data. Opposing the Italian Marxists mentioned above, and especially Maurizio Lazzarato’s notion of “immaterial labor,” Srnicek argues that the platforms are just rearranging deck chairs as capitalism stalls — at least for now. Meanwhile, the “cloud platform” is virtualizing computing services and splitting them across distant servers, working with the increasing speed of networks to outsource IT labor from individual firms. The massive incumbent in this field is Amazon Web Services (which generated most of the non-tax-deduction profits of its unprofitable parent company in Q4 of 2017). As with its competitors Microsoft Azure and others, Amazon is renting “an increasingly basic means of production for contemporary business.” Unlike in traditional renting, though, they get valuable data in return. The platform economy is not isolated to the digital, as witnessed by the “industrial platform.” General Electric and Siemens are two of the firms at the forefront of bringing the platform into the guts of the industrial process, establishing feedback loops in which massive data-harvesting in the production process comes to guide that process itself. This is in line with Sterling’s feudal image of the Internet of Things, with every object digitally identified using RFID (Radio Frequency Identification), allowing purchase and consumption data to make the production chain more flexible. What former Baidu chief scientist Andrew Ng calls “O2O” or “online-to-offline” services are dubbed “product platforms” by Srnicek. They are on-demand and treat their products as rentables. They’ll wash your car at the push of a button, but are also invading spaces, like commercial jet engine retail, usually thought to be firmly offline. A contract indicates you’re buying the product as a service, even if the product is as tangible as it gets (like a jet engine). Product and industrial platforms will likely enter a profitable symbiosis in the coming years. The so-called lean platform treats workers and wages in the same way, making the labor market on-demand and essentially renting labor power at platform-market prices. Srnicek calls this a “hyper-outsourced model” that allows only “a bare extractive minimum,” a “control over the platform that enables a monopoly rent to be gained.” For Srnicek, this is the outcome of a generation of outsourcing since the 1980s, and the corresponding fall in growth. National growth or no, the platforms are increasingly in control of the distribution of wealth.

Srnicek argues that, because of the incumbency effect, the platforms are specializing and may focus on optimizing their rent-extraction processes, rather than competing outside their core competencies. (It’s not clear how this works in the case of Google, for example, where the core competency is so broad that they renamed the parent company Alphabet in 2015.) This strategy is that of “enclosure,” something similar to the “analog moats” Galloway recommends. Srnicek suggests, for this reason, that “capitalist competition is driving the internet to fragment.” For Srnicek, “whereas the tech boom of the 1990s at least left us with the basis for the internet, the tech boom of the 2010s looks as though it will simply leave us with premium services for the rich.” Perhaps today we should “collectivize the platforms,” he concludes.

Again, we find ourselves firmly in the territory of wish-fulfillment, this time with brilliant analysis. There is a tendency throughout Srnicek’s book to downplay the platforms’ economic stability, since they do not dynamically produce the surplus value needed to keep profits heading north. But what if the surplus in fact stops growing? What if Brenner’s “long downturn” becomes permanent? Srnicek’s Marxist account perversely clings to the model of European industrial capitalism, suggesting that outright political control is an unlikely outcome for the Four.

But what if the age of the platform turns out to be stable, or to lead to some worse post-platform capitalism? Srnicek argues that the platform castle is made of sand. The logic of capital itself — profit — will win out. But while this might be true for specific companies, why should capitalism return to the rough shape it had from around 1800 until the 1970s? Feudalism itself wasn’t so unstable, and we might be witnessing not some epicycle in the general capitalist economy but the large-scale emergence of some new balance of the social and the profit-driven. What prevents the stabilization of a post-industrial model of capitalism that retains all the platform-features yet remains just as painful and unjust as ever — or even more so? Calls for collectivization that presuppose the inevitable collapse of the current order are not much more convincing than calls for regulation. Both types of call are often built on little more than desire without any institutional base — activist, militant, or otherwise — to sustain them. Don’t get me wrong: I’m all for collective platforms, and I think Srnicek’s is the best political account of the current situation. But the path to collectivization will require a more persuasive account of the nature of platform capitalism and of the social forces that will be required to oppose it. Pieces of that theory might come from unexpected sources." (https://lareviewofbooks.org/article/delete-your-account-on-the-theory-of-platform-capitalism/#!)

Book 2: Platform Revolution

By Leif Weatherby:

"As a recent how-to for the new business era, Platform Revolution, puts it: “A platform is a business based on enabling value-creating interactions between external producers and consumers,” providing “an open, participative infrastructure for these interactions” and setting “governance conditions for them.” This model of privatized governance is spreading. Production and distribution, services and the social: all have been “disrupted” by the rules of the platform. Tom Goodwin observed in 2015 that “Uber, the world’s largest taxi company, owns no vehicles.” And the same could be said for Facebook (media), Alibaba (retail), and Airbnb (hotels). It’s true that none of these platforms owns the goods their services enable. But this now ubiquitous observation raises more questions than it answers.

Are these platforms skimming rent off capital and labor? Or do they represent a fundamental shift in economics, a new Industrial Revolution? The second view, espoused by the pop-management guru team Erik Brynjolfsson and Andrew McAfee, holds that that “cybernation” will automate mental labor in the same way the factory automated the work of the arm. Of course, the “unburdening” of the arm unleashed the horrors of 19th-century industrial labor, so we have reason in advance to suspect such boosterism. Cognitive capitalism, to use Yann Moulier Boutang’s term, might be less about allowing creativity to organize the economic cycle than about siphoning value from socio-cultural activity as such. Companies such as Alphabet, with a market cap in the neighborhood of three quarters of a trillion dollars, have claimed to be neutral arbiters and spaces of informational exchange. No one really believes that anymore, but we lack language to grasp the way these platforms collapse profit and the social, culture and capital. As the media scholar Tarleton Gillespie has argued, the term “platform” tendentiously fuses several meanings to the benefit of these businesses, combining the software platform with the figurative and political senses of the word associated with freedom. Yet criticizing the propaganda of such usage is a less urgent intellectual task than trying to understand what the platformed world we now inhabit looks like." (https://lareviewofbooks.org/article/delete-your-account-on-the-theory-of-platform-capitalism/#!)


Concept

Discussion

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

Simone Cicero:

"“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/)

See graphic: https://meedabyte.files.wordpress.com/2015/06/postindustrial.png?w=710


Network Orchestrators and Platform Based Peer Production

Simone Cicero:

" A recent study from OpenMatters and Deloitte[4], 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

Tim O'Reilly:

"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)


Platform Capitalism as Rent-Based Feudalism

By Leif Weatherby:

"In their emphasis on the digital world’s medievalism, Foer and Galloway surprisingly join a chorus of Italian Marxists and cultural theorists who think the digital economy has brought a form of pre-modern economy back into capitalism. Rent has returned to a central role, as Carlo Vercellone argues. When growth levels off, ownership takes precedence over entrepreneurship. Rather than producing new value, the platforms simply coordinate virtual properties and charge for their use. But the properties are not in meatspace or cyberspace alone, which means the owners can set the rent at will. Think of Uber, which is only now beginning to try to create a more stable set of drivers (something like employees). Trying to keep drivers driving means negotiating with them, but the results are not encouraging. By denying their status as a firm with employees, Uber devolves the risk of enterprise onto their “contractors,” and then argues those contractors should be loyal to the platform’s internal, algorithmic assessment of its own success, since their ability to drive at all is based on Uber continuing to exist.

That situation resembles feudalism more than a bit, with the added freedom (read: risk) that individual drivers don’t even have the status of serfs. They are “free” to choose their lords, to whom they don’t even belong. The platform is an adventure in extreme forms of expropriation set against the backdrop of a slowing economy, what Marxist economist Robert Brenner calls “the long downturn” since the 1970s. That expropriation is increasingly conjuring pre-modern vocabulary, as in media theorist Benjamin Bratton’s apt formula, “cloud feudalism.” Science fiction author Bruce Sterling has recently argued that the Internet of Things is little more than a battle of lords in the new, online feudalism. There’s still a centralized federal government, but its authority is attenuated by platform monopolists. The platform confuses capital-flow and social form, rearranging the relationship of profit to community (and therefore class), and of intelligence to organization. With the incumbency effect that massive data hoarding affords companies like the Four, we appear to be looking at something like a set of smart monopolies, setting in question the long-stable political-economic vocabulary we use to describe and orient ourselves. We need new theory to face that situation, not just pre-modern analogies and calls to regulation lacking any sign of fulfillment in the current political landscape." (https://lareviewofbooks.org/article/delete-your-account-on-the-theory-of-platform-capitalism/#!)