The Beauty of Platform Capitalism

keep calm and love data

Hardly a day goes by without some tech company proclaiming that it wants to reinvent itself as a platform. …Some prominent critics even speak of “platform capitalism” – a broader transformation of how goods and services are produced, shared and delivered.   Such is the transformation we are witnessing across many sectors of the economy: taxi companies used to transport passengers, but Uber just connects drivers with passengers. Hotels used to offer hospitality services; Airbnb just connects hosts with guests. And this list goes on: even Amazon connects booksellers with buyers of used books.d innovation, the latter invariably wins….

But Uber’s offer to drivers in Seoul does raise some genuinely interesting questions. What is it that Uber’s platform offers that traditional cabs can’t get elsewhere? It’s mostly three things: payment infrastructure to make transactions smoother; identity infrastructure to screen out any unwanted passengers; and sensor infrastructure, present on our smartphones, which traces the location of the car and the customer in real time. This list has hardly anything to do with transport; they are the kind of peripheral activity that traditional taxi companies have always ignored.

However, with the transition to knowledge-based economy, these peripherals are no longer really peripherals – they are at the very centre of service provision.There’s a good reason why so many platforms are based in Silicon Valley: the main peripherals today are data, algorithms and server power. And this explains why so many renowned publishers would team up with Facebook to have their stories published there in a new feature called Instant Articles. Most of them simply do not have the know-how and the infrastructure to be as nimble, resourceful and impressive as Facebook when it comes to presenting the right articles to the right people at the right time – and doing it faster than any other platform.

Few industries could remain unaffected by the platform fever. The unspoken truth, though, is that most of the current big-name platforms are monopolies, riding on the network effects of operating a service that becomes more valuable as more people join it. This is why they can muster so much power; Amazon is in constant power struggles with publishers – but there is no second Amazon they can turn to.

Venture capitalists such as Peter Thiel want us to believe that this monopoly status is a feature, not a bug: if these companies weren’t monopolies, they would never have so much cash to spend on innovation.  This, however, still doesn’t address the question of just how much power we should surrender to these companies.

Making sure that we can move our reputation – as well as our browsing history and a map of our social connections – between platforms would be a good start. It’s also important to treat other, more technical parts of the emerging platform landscape – from services that can verify our identity to new payment systems to geolocational sensors – as actual infrastructure (and thus ensuring that everybody can access it on the same, nondiscriminatory terms) is also badly needed.

Most platforms are parasitic: feeding off existing social and economic relations. They don’t produce anything on their own – they only rearrange bits and pieces developed by someone else. Given the enormous – and mostly untaxed – profits made by such corporations, the world of “platform capitalism”, for all its heady rhetoric, is not so different from its predecessor. The only thing that’s changed is who pockets the money.

Excerpt from Evgeny Morozov, Where Uber and Amazon rule: welcome to the world of the platform, Guardian, Nov. 15, 2015

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