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[...] How do you convert a product to a platform in the business-to-business (B2B) arena? Many corporations own massive fixed assets like power generation plants, magnetic resonance imaging (MRI) machines, or tracts of farmland. How do you build platforms around those?
The answer: you de-link ownership of the physical asset from the value it creates. This allows the use of the asset to be independently traded and applied to its best use—that is, the use that creates the greatest economic value—rather than being restricted to uses specific to the owner. As a result, efficiency and value rise dramatically.
this is literally just like the worst thing about financialisation. kinda equivalent in stupidity to making derivatives (skimming off the top without bearing any of the risk ... startup founder's wet dream)
In the complexity of the governance issues they face, today’s biggest platform businesses resemble nation-states. With more than 1.5 billion users, Facebook oversees a “population” larger than China’s. Google handles 64 percent of the online searches in the U.S. and 90 percent of those in Europe, while Alibaba handles more than 1 trillion yuan ($162 billion) worth of transactions a year and accounts for 70 percent of all commercial shipments in China. Platform businesses at this scale control economic systems that are bigger than all but the biggest national economies. No wonder Brad Burnham, one of the lead investors at Union Square Ventures, responded to the introduction of Facebook Credits—a short-lived system of virtual currency for use in playing online games—by wondering what the move said about Facebook’s monetary policy. In a similar vein, we might ask: In choosing to apply unilateral software standards as opposed to multilateral standards (as we saw in chapter 7), what kind of foreign policy is Apple pursuing? Is Twitter following an industrial policy based on investment in “state-owned” services or one relying on decentralized development by others? What does Google’s approach to censorship in China tell us about the company’s human rights policy?
for diss: even mainstream proponents of SV recognise the degree to which they've become very powerful and even more powerful than nation-states in some key areas (but dont ask the obvious question: where is the democratic control)
Thus, when a firm can erect barriers to entry, it can keep competitors out, and entrants with substitute products cannot storm the castle. When a firm can subjugate suppliers, competition among them weakens their bargaining power so the firm can keep its costs low. When a firm can subjugate buyers by keeping them relatively small, disunited, and powerless, the firm can keep its prices high.
In this model, the firm maximizes profits by avoiding ruinous competition for itself but encouraging it for everyone else in the value chain. Advantage is found in industry structures that create a protective moat—one that enables the firm to segment markets, differentiate products, control resources, avoid price wars, and defend its profit margins.
think about how this applies to global value chains of commodity production re: digital advertising companies
Over the last two generations, as Andrei Shleifer has noted, most economists and political theorists have shifted from viewing government intervention in a positive light to preferring privatization. Today, there’s a trend toward regulation that was once provided by governments now being provided by private entities acting in their own self-interest—for example, the gradual shift from nationally mandated accounting standards like the Generally Accepted Accounting Principles used in the United States toward the International Financial Reporting Standards promulgated by the International Accounting Standards Board, a private organization based in London. We believe this trend will continue and that governments must rethink what they choose to regulate and what kinds of regulation private entities can provide more efficiently. [...]
yeah no shit
[...] We are skeptical about the specific charge against Amazon—namely, that book prices will rise significantly once the company’s dominance is complete—but we are somewhat more sympathetic to the idea that Amazon might act as too powerful a gatekeeper for an important cultural industry, perhaps establishing its own proprietary format for digital content, as it has tried to do with Amazon Word (AZW), the format used on the Kindle reader. Free pricing of book chapters given away in the AZW format, for example, could be used as a Trojan horse, attracting readers as part of a long-term strategy leading to increased platform control and a shift from an open to a closed proprietary standard.
an example of how a company with a monopoly as a gateway in one sector can use its power to dominate adjacent sectors (combined with cross-subsidisation)
In the decades to come, it seems likely that the platform model will be applied—or at least tested—in virtually every market for labor and professional services. How will this trend impact the service industries—not to mention the working lives of hundreds of millions of people?
One likely result will be an even greater stratification of wealth, power, and prestige among service providers. Routine and standardized tasks will move to online platforms, where an army of relatively low-paid, self-employed professionals will be available to handle them. Meanwhile, the world’s great law firms, medical centers, consulting partnerships, and accounting practices will not vanish, but their relative size and importance will shrink as much of the work they used to do migrates to platforms that can provide comparable services at a fraction of the cost and with far greater convenience. A surviving handful of world-class experts will increasingly focus on a tiny subset of the most highly specialized and challenging assignments, which they can tackle from anywhere in the world using online tools. Thus, at the very highest level of professional expertise, winner-take-all markets are likely to emerge, with (say) two dozen internationally renowned attorneys competing for the splashiest and most lucrative cases anywhere on the globe.
christ dudes, this is not a good thing
[...] But beyond being pro-technology the government has also uncritically accepted much of Silicon Valley's rhetoric of disruptive innovation. It is remarkable that the Bay Area technology industry can continue to see itself as a collection of scrappy non-conformist outsiders while accumulating the greatest collection of private fortunes in the world. [...]
the way the industry sees itself - useful to draw out for Tribune piece
An investigation by Vanessa Houlder of the Financial Times showed that up to a third of the price gap between hotels and Airbnb rentals is due to tax differences, with hotels being subject to business taxes and value-added taxes that almost all Airbnb hosts avoid, while many Airbnb hosts benefit from the Sharing Economy allowance mentioned above. Airbnb also avoids costs such as commercial-level fire and safety protection and accessibility features, which its competitors must pay to install. [...]
also think about the labour implications ... more flexible, less "downtime" ie squeezing out more work per dollar
The Sharing Economy is a movement: it is a movement for deregulation. Major financial institutions and influential venture capital funds are seizing an opportunity to challenge rules made by democratic city governments around the world, and to reshape cities in their own interests. It’s not about building an alternative to a corporate-driven market economy, it’s about extending the deregulated free market into new areas of our lives. An enthusiasm for “the end of ownership,” the title of one Andreessen Horowitz blog post on the Sharing Economy, is difficult to take seriously when it comes from those who actually own the companies involved. [...]
For many economists the story was simple and the villain was clear: “regulatory capture” by those taxi medallion owners who suck all the money out of the taxi system without delivering value. Take them out of the picture, improve efficiency by better matching drivers with customers to cut down on the dead time between rides, and we have a new age for urban transit.