Platform Economy Quotes

When permaculture design principles are applied to business, business becomes a powerful platform for making the world a better place.

But what we call social media is not media, nor is it even a platform. It is a massive cultural shift that has profoundly affected the way society uses the greatest platform ever invented, the Internet.

This book is about how to hold open that place in the sun. It is a field guide to doing nothing as an act of political resistance to the attention economy, with all the stubbornness of a Chinese “nail house” blocking a major highway. I want this not only for artists and writers, but for any person who perceives life to be more than an instrument and therefore something that cannot be optimized. A simple refusal motivates my argument: refusal to believe that the present time and place, and the people who are here with us, are somehow not enough. Platforms such as Facebook and Instagram act like dams that capitalize on our natural interest in others and an ageless need for community, hijacking and frustrating our most innate desires, and profiting from them. Solitude, observation, and simple conviviality should be recognized not only as ends in and of themselves, but inalienable rights belonging to anyone lucky enough to be alive. —

In today’s hypercompetitive environment enabled by technology, ownership of infrastructure no longer provides a defensible advantage. Instead, flexibility provides the crucial competitive edge, competition is perpetual motion, and advantage is evanescent.

I am not anti-technology. After all, there are forms of technology—from tools that let us observe the natural world to decentralized, noncommercial social networks—that might situate us more fully in the present. Rather, I am opposed to the way that corporate platforms buy and sell our attention, as well as to designs and uses of technology that enshrine a narrow definition of productivity and ignore the local, the carnal, and the poetic. I am concerned about the effects of current social media on expression—including the right not to express oneself—and its deliberately addictive features. But the villain here is not necessarily the Internet, or even the idea of social media; it is the invasive logic of commercial social media and its financial incentive to keep us in a profitable state of anxiety, envy, and distraction. It is furthermore the cult of individuality and personal branding that grow out of such platforms and affect the way we think about our offline selves and the places where we actually live.

In my opinion, this kind of hyper-accelerated expression on social media is not exactly helpful (not to mention the huge amount of value it produces for Facebook). It’s not a form of communication driven by reflection and reason, but rather a reaction driven by fear and anger. Obviously these feelings are warranted, but their expression on social media so often feels like firecrackers setting off other firecrackers in a very small room that soon gets filled with smoke. Our aimless and desperate expressions on these platforms don’t do much for us, but they are hugely lucrative for advertisers and social media companies, since what drives the machine is not the content of information but the rate of engagement.

Televangelist Pat Robertson also declared, on a platform that on defence and many other topics was well to the right of Attilla the Hun.

The derisive term bloatware has been coined to describe software systems that have become complicated, slow, and inefficient through thoughtless accretion of features.

What technology will do for us depends on how we design it and where economic power resides. That’s why the real challenge for humanity is to design an economic future that works for more people

Attention, as well as being a commodity that can be monetised through digital platforms, is a psychological wage. We know this from when we are children: think of the heaven of basking in the glow of an attentive parent or teacher. To be recognised is to be told that you matter, that your life has worth and that you have a place in the world. There’s nothing unhealthy about that. But our media and politics leverage the psychological wages of attention in a way that is utterly corrosive and warping.

However, simplicity is a virtue when developing metrics for your platform business. Overcomplex metrics make management less effective by introducing noise, discouraging frequent analysis, and distracting from the handful of data points that are most significant.

Tomorrow's banks will be decentralized applications of software built on cryptography, blockchain technology and smart contracts. Theyll be platforms for saving, lending, investing, moving and spending that are much more equitable and sensible than they were in the 20th century and ironically it'll be more aligned to what banks were like in much earlier civilizations. So when I talk about banks being to the economy what the heart is to the human body - this is really what I'm talking about. I'm not necessarily talking about the ICBC. The ICBC or Bank of America may play an important role, but so could thousands of small local banks or small apps on a Blockchain.

I want this not only for artists and writers, but for any person who perceives life to be more than an instrument and therefore something that cannot be optimized. A simple refusal motivates my argument: refusal to believe that the present time and place, and the people who are here with us, are somehow not enough. Platforms such as Facebook and Instagram act like dams that capitalize on our natural interest in others and an ageless need for community, hijacking and frustrating our most innate desires, and profiting from them. Solitude, observation, and simple conviviality should be recognized not only as ends in and of themselves, but inalienable rights belonging to anyone lucky enough to be alive.

But the villain here is not necessarily the Internet, or even the idea of social media; it is the invasive logic of commercial social media and its financial incentive to keep us in a profitable state of anxiety, envy, and distraction. It is furthermore the cult of individuality and personal branding that grow out of such platforms and affect the way we think about our offline selves and the places where we actually live.

Beyond the public relations efforts of platforms like Uber and Airbnb, there may be deeper reasons why the term “sharing economy” is so popular: It captures some of the thinking and the idealism of the early proponents of economy-wide sharing approaches. It hints at the shift away from faceless, impersonal 20th-century capitalism and toward exchange that is somehow more connected, more embedded in community, more reflective of a shared purpose.

Fortunately, new platforms and technology have made homeschooling manageable on many fronts. Parents can do everything from accessing first-rate courses online to finding support from other parents in the same situation. The best part is that they can completely tailor the experience to the learning style and interest of their children and give them the attention that they would never get in the classroom. The results are striking. Twenty-five percent of homeschooled children are at least one grade ahead of their traditionally schooled peers. The homeschooled population, as a whole, scores exceptionally higher on academic achievement tests.5 This shift is perhaps the best glimpse of the future of education—mass customization alongside personalized attention. Like banking, it will return to a human-scale model based on relationships and personal needs, and it will be where much of the disruption in the economy and labor market occurs in the next few decades.

That law of nature whereby everything climbs to higher platforms, and bodily vigor becomes mental and moral vigor. The bread he eats is first strength and animal spirits; it becomes, in higher laboratories, imagery and thought; and in still higher results, courage and endurance. This is the right compound interest; this is capital doubled, quadrupled, centupled; man raised to his highest power. The true thrift is always to spend on the higher plane; to invest and invest, with keener avarice, that he may spend in spiritual creation and not in augmenting animal existence.

At the July Republican Convention, “never-Trump” delegates fought his nomination, only to be outraged at rules changes that gave Trump far more delegates than he had earned. Still, some could be comforted by the 2016 Republican platform, which offered Movement Conservative Republicans everything they had ever dreamed of. The platform chastised President Barack Obama for “regulating to death a free market economy that he does not like and does not understand” (which was manifestly untrue), called for originalist judges who would stop abortion and gay marriage, and insisted on returning federal power to the states.

In real life, the value capture process is sometimes deliberately managed by elites to manipulate and control others with game design-like tactics. Gig economy platforms like Uber and Lyft use "badges" and rating systems to manage the decision-making environment of their driver employees. Even outside of work, social media features such as likes, shares, and retweets play the role of points in games. Over time, these simple metrics threaten to distort or take the place of values (say, the wish to meaningfully contribute to discussion or to take pride in the quality of one's work) that might otherwise have inflected our behavior on these platforms.

No one is perfect, and I see ways in which each of the companies I’ve profiled could adjust and improve their social media initiatives. Then again, I’m well aware that there are things I could do to improve my own efforts. Sustaining relationships and leveraging social networks is challenging work. Yet the thing that strikes me about the individuals who are leading the companies and brands profiled in this book is their excitement. They work like animals, and the economy is still wobbly, but when they talk about their work, you get the definite sense that all they see are doors of opportunity flying open every day. It’s as though social media has given all its users an equal platform on which they can build not just their careers, but their dreams.

Beyond streamlining operations and introducing cost innovations, a second lever companies can pull to meet their target cost is partnering. In bringing a new product or service to market, many companies mistakenly try to carry out all the production and distribution activities themselves. Sometimes that’s because they see the product or service as a platform for developing new capabilities. Other times it is simply a matter of not considering other outside options. Partnering, however, provides a way for companies to secure needed capabilities fast and effectively while dropping their cost structure. It allows a company to leverage other companies’ expertise and economies of scale. Partnering includes closing gaps in capabilities through making small acquisitions when doing so is faster and cheaper, providing access to needed expertise that has already been mastered. A

Pull approaches differ significantly from push approaches in terms of how they organize and manage resources. Push approaches are typified by "programs" - tightly scripted specifications of activities designed to be invoked by known parties in pre-determined contexts. Of course, we don't mean that all push approaches are software programs - we are using this as a broader metaphor to describe one way of organizing activities and resources. Think of thick process manuals in most enterprises or standardized curricula in most primary and secondary educational institutions, not to mention the programming of network television, and you will see that institutions heavily rely on programs of many types to deliver resources in pre-determined contexts. Pull approaches, in contrast, tend to be implemented on "platforms" designed to flexibly accommodate diverse providers and consumers of resources. These platforms are much more open-ended and designed to evolve based on the learning and changing needs of the participants. Once again, we do not mean to use platforms in the literal sense of a tangible foundation, but in a broader, metaphorical sense to describe frameworks for orchestrating a set of resources that can be configured quickly and easily to serve a broad range of needs. Think of Expedia's travel service or the emergency ward of a hospital and you will see the contrast with the hard-wired push programs.

The history of irregular media operations is complex and fractured; generalizations are difficult. Yet it is possible to isolate three large and overlapping historical phases: First, throughout the nineteenth century, irregular forces saw the state's telecommunications facilities as a target that could be physically attacked to weaken the armies and the authority of states and empires. Second, for most of the twentieth century after the world wars, irregulars slowly but successfully began using the mass media as a weapon. Telecommunications, and more specifically the press, were used to attack the moral support and cohesion of opposing political entities. Then, in the early part of the twenty-first century, a third phases began: irregular movements started using commoditized information technologies as an extended operating platform. The form and trajectory of the overarching information revolution, from the Industrial Revolution until today, historically benefited the nation-state and increased the power of regular armies. But this trend was reversed in the year 2000 when the New Economy's Dot-com bubble burst, an event that changed the face of the Web. What came thereafter, a second generation Internet, or "Web 2.0," does not favor the state, large firms, and big armies any more; instead the new Web, in an abstract but highly relevant way, resembles - and inadvertently mimics - the principles of subversion and irregular war. The unintended consequence for armed conflicts is that non-state insurgents benefit far more from the new media than do governments and counterinsurgents, a trend that is set to continue in the future.

Writing about the circulation of information, Berardi makes a distinction that’s especially helpful here, between what he calls connectivity and sensitivity. Connectivity is the rapid circulation of information among compatible units—an example would be an article racking up a bunch of shares very quickly and unthinkingly by like-minded people on Facebook. With connectivity, you either are or are not compatible. Red or blue: check the box. In this transmission of information, the units don’t change, nor does the information. Sensitivity, in contrast, involves a difficult, awkward, ambiguous encounter between two differently shaped bodies that are themselves ambiguous—and this meeting, this sensing, requires and takes place in time. Not only that, due to the effort of sensing, the two entities might come away from the encounter a bit different than they went in. Thinking about sensitivity reminds me of a monthlong artist residency I once attended with two other artists in an extremely remote location in the Sierra Nevada. There wasn’t much to do at night, so one of the artists and I would sometimes sit on the roof and watch the sunset. She was Catholic and from the Midwest; I’m sort of the quintessential California atheist. I have really fond memories of the languid, meandering conversations we had up there about science and religion. And what strikes me is that neither of us ever convinced the other—that wasn’t the point—but we listened to each other, and we did each come away different, with a more nuanced understanding of the other person’s position. So connectivity is a share or, conversely, a trigger; sensitivity is an in-person conversation, whether pleasant or difficult, or both. Obviously, online platforms favor connectivity, not simply by virtue of being online, but also arguably for profit, since the difference between connectivity and sensitivity is time, and time is money. Again, too expensive. As the body disappears, so does our ability to empathize.

As the body disappears, so does our ability to empathize. Berardi suggests a link between our senses and our ability to make sense, asking us to “hypothesize the connection between the expansion of the infosphere…and the crumbling of the sensory membrane that allows human beings to understand that which cannot be verbalized, that which cannot be reduced to codified signs.”24 In the environment of our online platforms, “that which cannot be verbalized” is figured as excess or incompatible, although every in-person encounter teaches us the importance of nonverbal expressions of the body, not to mention the very matter-of-fact presence of the body in front of me.

platforms sit at the top of the economy. they have the most market power, the highest profits, and the most sustainable competitive advantage.

Mind-mapping involves drawing a visual outline of your book on a large sheet of paper. You start in the middle with the core topic and then spider out to all of the sub-sections. For instance, with this book, I’d put Buy Buttons in the middle with lines connecting to Sharing Economy Platforms, Marketplaces to Sell Your Skills, and Marketplaces to Sell Physical Products. From there, I’d add the next layer. For instance, I’d add Ridesharing Platforms and Home Sharing Platforms and connect those to Sharing Economy Platforms. Off Ridesharing Platforms, I’d connect Uber and Lyft. In this way, you can create a visual map of your entire book before you even write your first words.

Platforms such as Facebook and Instagram act like dams that capitalize on our natural interest in others and an ageless need for community, hijacking and frustrating our most innate desires, and profiting from them.

a platform has to provide the tools and services that support the core transaction.

Obviously, online platforms favor connectivity, not simply by virtue of being online, but also arguably for profit, since the difference between connectivity and sensitivity is time, and time is money. Again, too expensive

competition in a world dominated by platform monopolies looks very different from competition in the past. In the twentieth century, competition happened primarily between rival companies within one industry. Today, it happens across industries. The fiercest competition will be between incompatible, rival platform ecosystems and the networks of businesses they support.

Remember to look for these three factors when you’re trying to spot platform opportunities: technology that reduces transaction costs and removes gatekeepers; implicit or underserved networks; and large, fragmented sources of supply. One of these factors can be enough to enable the growth of a successful platform business, but the more boxes you can tick off, the better.

Rather than ending the dominance of platforms, we would suggest that the growth of blockchain technologies will be accompanied by the emergence of many new platform companies. Like HTTP and the Web before it, the blockchain will create a decentralized infrastructure that provides the opportunity for new markets and communities to emerge. But most of these new opportunities won’t take shape without a platform company orchestrating them and capitalizing on their potential.

Because Bitcoin allows developers to build on top of the blockchain protocol, it enables countless new uses of the underlying technology. Just as Apple’s iOS platform created a world where “there’s an app for that,” we may soon be in a world where “there’s a Bitcoin app for that.

This book is about how to hold open that place in the sun. It is a field guide to doing nothing as an act of political resistance to the attention economy, with all the stubbornness of a Chinese “nail house” blocking a major highway. I want this not only for artists and writers, but for any person who perceives life to be more than an instrument and therefore something that cannot be optimized. A simple refusal motivates my argument: refusal to believe that the present time and place, and the people who are here with us, are somehow not enough. Platforms such as Facebook and Instagram act like dams that capitalize on our natural interest in others and an ageless need for community, hijacking and frustrating our most innate desires, and profiting from them. Solitude, observation, and simple conviviality should be recognized not only as ends in and of themselves, but inalienable rights belonging to anyone lucky enough to be alive.

During our research, we discovered what I still, to this day, consider some of the scariest scientific results I have ever encountered. We found that false news diffused significantly farther, faster, deeper, and more broadly than the truth in all categories of information—in some cases, by an order of magnitude. Whoever said “a lie travels halfway around the world while the truth is putting on its shoes” was right. We had uncovered a reality-distortion machine in the pipes of social media platforms, through which falsehood traveled like lightning, while the truth dripped along like molasses.

Authoritarianism does not contradict the disappearance of the state; it is its messenger—the mask of this so-called “collaborative” economy which, by bringing professionals and users into direct contact through technological platforms, pulverizes all fixity.

PayPal’s big challenge was to get new customers. They tried advertising. It was too expensive. They tried BD [business development] deals with big banks. Bureaucratic hilarity ensued. … the PayPal team reached an important conclusion: BD didn’t work. They needed organic, viral growth. They needed to give people money. So that’s what they did. New customers got $10 for signing up, and existing ones got $10 for referrals. Growth went exponential, and PayPal wound up paying $20 for each new customer. It felt like things were working and not working at the same time; 7 to 10 percent daily growth and 100 million users was good. No revenues and an exponentially growing cost structure were not. Things felt a little unstable. PayPal needed buzz so it could raise more capital and continue on. (Ultimately, this worked out. That does not mean it’s the best way to run a company. Indeed, it probably isn’t.)2

Most important, the PayPal team realized that getting users to sign up wasn’t enough; they needed them to try the payment service, recognize its value to them, and become regular users. In other words, user commitment was more important than user acquisition. So PayPal designed the incentives to tip new customers into the ranks of active users. Not only did the incentive payments make joining PayPal feel riskless and attractive, they also virtually guaranteed that new users would start participating in transactions—if only to spend the $10 they’d been gifted in their accounts.

Furthermore, for a platform business, user commitment and active usage, not sign-ups or acquisitions, are the true indicators of customer adoption. That’s why platforms must attract users by structuring incentives for participation—preferably incentives that are organically connected to the interactions made possible by the platform. Traditionally, the marketing function was divorced from the product. In network businesses, marketing needs to be baked into the platform.

Staging value creation. The platform managers arrange for the creation of value units that will attract one or more sets of users and demonstrate the potential benefits of participating in the platform.5 Those initial users create more value units, attract still other users, and set up a positive feedback loop that leads to continuing growth.6 The Huffington Post followed this strategy by hiring writers to create an initial array of high-quality blog posts for the site, thereby attracting readers. Some of these readers began contributing blog posts of their own, leading to the gradual development of a wider network of content creators and attracting even more readers.

3.  The seeding strategy. Create value units that will be relevant to at least one set of potential users. When these users are attracted to the platform, other sets of users who want to engage in interactions with them will follow. In many cases, the platform company takes the task of value creation upon itself by acting as the first producer. In addition to kickstarting the platform, this strategy allows the platform owner to define the kind and quality of value units they want to see on the platform, thereby encouraging a culture of high-quality contributions among subsequent producers.7

The platform is a simple-sounding yet transformative concept that is radically changing business, the economy, and society at large. As we’ll explain, practically any industry in which information is an important ingredient is a candidate for the platform revolution. That includes businesses whose “product” is information (like education and media) but also any business where access to information about customer needs, price fluctuations, supply and demand, and market trends has value—which includes almost every business.

Chatroulette pairs random people from around the world for webcam conversations. People can leave a conversation at any time by initiating a new connection or simply by quitting. The strangely addictive site grew from twenty people at launch in late 2009 to more than 1.5 million users six months later. Initially, Chatroulette had no registration requirement and no controls of any kind, leading to what became known as the Naked Hairy Men problem. As the network grew without policing, a growing number of naked hairy men showed up to chat, leading many of the non-naked, non-hairy others to abandon the network. As legitimate users fled, the noise level on the platform increased, setting a negative feedback loop in motion.

Of course, cross-side effects are not necessarily symmetrical. On OkCupid, women attract men more than men attract women. On Uber, a single driver is more critical to growth than a single rider. On Android, a single developer’s app attracts users more than a single user attracts developer apps. On Twitter, the vast majority of people read, while a minority tweet. On question-and-answer networks like Quora, the vast majority asks questions, while a minority answers them.15

Standard accounting practices might not factor the value of communities into the value of a firm, but stock markets do. Little by little, the accountants are catching up. A team of experts collaborating with the consulting and accounting firm of Deloitte published research that sorts companies into four broad categories based on their chief economic activity: asset builders, service providers, technology creators, and network orchestrators. Asset builders develop physical assets that they use to deliver physical goods; companies like Ford and Walmart are examples. Service providers employ workers who provide services to customers; companies like UnitedHealthcare and Accenture are examples. Technology creators develop and sell forms of intellectual property, such as software and biotechnology; Microsoft and Amgen are examples. And network orchestrators develop networks in which people and companies create value together—in effect, platform businesses. The research suggests that, of the four, network orchestrators are by far the most efficient value creators. On average, they enjoy a market multiplier (based on the relationship between a firm’s market valuation and its price-to-earnings ratio) of 8.2, as compared with 4.8 for technology creators, 2.6 for service providers, and 2.0 for asset builders.16 It’s only a slight simplification to say that that quantitative difference represents the value produced by network effects.

The primary venue for activities in which value is created for participants shifts from an internal production department to a collection of external producers and consumers—which means that management of externalities becomes a key leadership skill. Growth comes not from horizontal integration and vertical integration but from functional integration and network orchestration. The focus on processes such as finance and accounting shifts from cash flows and assets you can own to communities and assets you can influence. And while platform businesses themselves are often extraordinarily profitable, the chief locus of wealth creation is now outside rather than inside the organization.

Fasal is an online system that connects farmers in rural India directly with market agents and other buyers. Via Fasal, farmers can quickly learn the price of goods at a number of nearby markets, choose the sales location most advantageous to them, and use the data to negotiate a better deal, a challenge that exists around the world.2 Sangeet Choudary, one of the authors of this book, led the commercialization and launch of the Fasal initiative. One of the challenges facing Choudary and his team was figuring out what kind of communications infrastructure they could use to enable producers and consumers to share value units. They realized that the big advantage working in their favor was cell phones. More than half of Indian farmers, even the poorest, own and use cell phones. In fact, as in much of the developing world, cell phone use in rural India has spread rapidly. Cellular telephony, with its instant communications capability, became the conduit for the market data the small farmers so desperately needed.

which we summarize as pull, facilitate, and match. The platform must pull the producers and consumers to the platform, which enables interactions among them. It must facilitate their interactions by providing them with tools and rules that make it easy for them to connect and that encourage valuable exchanges (while discouraging others). And it must match producers and consumers effectively by using information about each to connect them in ways they will find mutually rewarding. All three functions must be performed well if the platform is to succeed. A platform that fails to pull participants will be unable to create the network effects that make the platform valuable.

Jake McKeon founded the social network Moodswing as a place where people could share their emotional states, from elation to gloom. Over time, he found that some users were turning to Moodswing in times of severe depression, and a few even used the site to threaten suicide. Distressed, McKeon decided to try to provide these users with the emotional support they needed. He concocted a plan to recruit psychology students who would volunteer to offer counseling and advice via chat lines to depressed Moodswing members. The volunteers would be tested and vetted in an effort to curate their quality. This “amateur therapy” offering would represent a new form of value exchange facilitated by Moodswing.

Jake McKeon founded the social network Moodswing as a place where people could share their emotional states, from elation to gloom. Over time, he found that some users were turning to Moodswing in times of severe depression, and a few even used the site to threaten suicide. Distressed, McKeon decided to try to provide these users with the emotional support they needed. He concocted a plan to recruit psychology students who would volunteer to offer counseling and advice via chat lines to depressed Moodswing members. The volunteers would be tested and vetted in an effort to curate their quality. This “amateur therapy” offering would represent a new form of value exchange facilitated by Moodswing. It’s an intriguing concept, but one that raises some obvious questions—in particular the potential danger in having untrained and unlicensed counselors offering psychological guidance to people whose lives are at risk. As of mid-2014,

To address this issue, LinkedIn layered an additional interaction on top of its core interaction: It began allowing users to organize themselves into groups and start discussions. This second form of interaction didn’t achieve the popularity LinkedIn had hoped for either. Given the self-promotional behavior that a professional network encourages, the loudest users in the groups were often also the most obnoxious. So LinkedIn went on to add a further interaction, partly driven by the quest to monetize the platform: it allowed recruiters to use the site to target candidates, and advertisers to target ads to relevant professionals. Later still, LinkedIn created another interaction when it allowed thought leaders, and subsequently all users, to publish posts on LinkedIn for others to read, effectively turning the site into a publishing platform. This combination of many forms of interaction gives users more reasons to visit LinkedIn.

When you’re launching a new platform—or seeking to enhance and grow an existing platform—thoughtful attention to the principles of platform design will maximize your chances of value creation.24 But as we’ve seen, platforms cannot be entirely planned; they also emerge. Remember that one of the key characteristics that distinguishes a platform from a traditional business is that most of the activity is controlled by users, not by the owners or managers of the platform. It’s inevitable that participants will use the platform in ways you never anticipated or planned.

Twitter was never meant to have a discovery mechanism. It originated as simply a reverse-chronological stream of feeds. There was no way to seek out tweets on particular topics other than by scrolling through pages of unrelated and irrelevant content. Chris Messina, an engineer at Google, originally suggested the use of hashtags to annotate and discover similar tweets. Today, the hashtag has become a mainstay of Twitter.

It’s an idea that humans have been practicing for millennia. After all, what is the traditional open-air marketplace found in villages and cities from Africa to Europe if not a platform in which farmers and craftspeople sell their wares to local consumers? The same is true of the original stock markets that grew up in cities like London and New York, where buyers and sellers of company shares would gather in person to establish fair market prices through the open outcry auction system. The main difference between these traditional platform businesses and the modern platforms featured in this book is, of course, the addition of digital technology, which enormously expands a platform’s reach, speed, convenience, and efficiency.

Platforms, then, have economic advantages that enable them to grow faster than similar pipeline businesses. This phenomenon alone would lead to significant disruption of traditional industries, as platform businesses displace pipeline businesses at the top of the Fortune 500 rankings. But the era of platforms-eat-pipelines is disrupting businesses in many other ways as well. In particular, the rise of the world of platforms is reconfiguring the familiar business processes of value creation, value consumption, and quality control.8

We are hopping into strangers’ cars (Lyft, Sidecar, Uber), welcoming them into our spare rooms (Airbnb), dropping our dogs off at their houses (DogVacay, Rover), and eating food in their dining rooms (Feastly). We are letting them rent our cars (RelayRides, Getaround), our boats (Boatbound), our houses (HomeAway), and our power tools (Zilok). We are entrusting complete strangers with our most valuable possessions, our personal experiences—and our very lives. In the process, we are entering a new era of Internet-enabled intimacy.9

Consider McCormick Foods, a 126-year-old company that sells herbs, spices, and condiments. By 2010, the company’s traditional growth strategies had run their course. McCormick had already expanded into a full range of food seasonings and established a foothold up and down its supply chain, including operations in farming and food preparation. The company was running out of growth options. CIO Jerry Wolfe heard about Nike’s move into platform-building. Could McCormick do the same? Wolfe reached out to Barry Wacksman, a partner at R/GA, a leading New York design firm that had helped Nike design its platform. Together, they hit on the idea of using recipes and taste profiles to build a food-based platform. Wolfe and Wacksman used McCormick’s taste laboratories to distill three dozen flavor archetypes—such as minty, citrus, floral, garlicky, meaty—that can be used to describe almost any recipe. Based on personal preferences, the system can predict new recipes an individual is likely to savor. Members of the McCormick platform community can modify recipes and upload the new versions, creating ever-expanding flavor options and helping to identify new food trends, generating information that’s useful not only to the platform’s users but also to managers of grocery stores, food manufacturers, and restaurateurs.18

Unfortunately for Sony, this victory proved short-lived. Today, a few years after the triumph of Blu-ray, the migration of consumers away from DVD to streaming video is well under way, making Bluray’s dominance increasingly irrelevant. The lesson? If, like Sony, you choose to fight a standards battle in quest of proprietary control of a market, you’d better win it—and win it fast, before the next big thing supersedes the very technology you seek to dominate.

In 2012, Google Maps had become the premier provider of mapping services and location data for mobile phone users. It was a popular feature on Apple’s iPhone. However, with more consumer activity moving to mobile devices and becoming increasingly integrated with location data, Apple realized that Google Maps was becoming a significant threat to the long-term profitability of its mobile platform. There was a real possibility that Google could make its mapping technology into a separate platform, offering valuable customer connections and geographic data to merchants, and siphoning this potential revenue source away from Apple. Apple’s decision to create its own mapping app to compete with Google Maps made sound strategic sense—despite the fact that the initial service was so poorly designed that it caused Apple significant public embarrassment. The new app misclassified nurseries as airports and cities as hospitals, suggested driving routes that passed over open water (your car had better float!), and even stranded unwary travelers in an Australian desert a full seventy kilometers from the town they expected to find there. iPhone users erupted in howls of protest, the media had a field day lampooning Apple’s misstep, and CEO Tim Cook had to issue a public apology.19 Apple accepted the bad publicity, likely reasoning that it could quickly improve its mapping service to an acceptable quality level—and this is essentially what has happened. The iPhone platform is no longer dependent on Google for mapping technology, and Apple has control over the mapping application as a source of significant value.

However, reality teaches us that democracy—like free markets—can be messy, especially when intense passions and partisanship are involved. Hence the episode we recounted at the start of this chapter, in which the Wikipedia article about the death of Meredith Kercher was hijacked by “haters” of Amanda Knox who were determined to make sure the page should assert her guilt and were prepared to eradicate any signs of dissension. The Kercher killing is not the only instance in which Wikipedia is embroiled in controversy—far from it. An article on the platform headed “Wikipedia: List of controversial issues” lists over 800 topics that “are constantly being re-edited in a circular manner, or are otherwise the focus of edit warring or article sanctions.” Organized under headings that include “Politics and economics,” “History,” “Science, biology, and health,” “Philosophy,” and “Media and culture,” they include everything from “Anarchism,” “Genocide denial,” “Occupy Wall Street,” and “Apollo moon landing hoax accusations” to “Hare Krishna,” “Chiropractic,” “SeaWorld,” and “Disco music.

To avoid this result, the managers of startup platforms need to be strategic about identifying the external networks they can use to build their growth and finding creative, value-adding ways to connect with their users.

Not every budding platform has an opportunity to achieve viral growth. But if it does, it can help turn slow but steady expansion into the kind of skyrocket growth that makes a platform into a national or global phenomenon with the potential to dominate its market for years to come.

For both consumers and producers: Access to curation mechanisms that enhance the quality of interactions. Consumers value access to high-quality goods and services that address their specific needs and interests, while producers value access to consumers who want their offerings and are willing to pay a fair price for them. Well-run platforms build and maintain curation systems that connect the right consumers with the right producers quickly and easily.

WAYS TO MONETIZE (3): CHARGING FOR ENHANCED ACCESS Sometimes a platform that facilitates a monetary transaction may be unable to own, and hence to monetize, the transaction. Such platforms may instead charge producers for enhanced access to consumers. This refers to the provision of tools that enable a producer to stand out above the crowd and be noticed on a two-sided platform, despite an abundance of rival producers and the resulting intense competition to attract consumer attention. Platforms that charge producers fees for better targeted messages, more attractive presentations, or interactions with particularly valuable users are using enhanced access as a monetization technique. The system of monetizing enhanced access generally doesn’t harm network effects, since all producers and consumers are permitted to participate in the platform on an open, non-enhanced basis. But those for whom the additional value of enhanced access is particularly great can pay for that extra value—allowing a portion of that value to be captured by the platform business.

Creating value for users while asking nothing in return is often a great way to attract members and encourage participation. “Users first, monetization later,” as the slogan goes. Or, in a variant that we heard from the executive in charge of platform strategy for Haier Group, a Chinese manufacturing company, “You never take first money.” In other words, only after a value unit has been created and exchanged with results that are satisfactory to both the producer and the consumer should the platform business itself seek to capture a share of that value.

What fraction of the value creation unleashed by the platform is occurring on the platform rather than outside it?

A platform may also choose to innovate when features provided by third parties become a large part of the overall value enjoyed by users. As we saw in chapter 7, this helps to explain Apple’s 2012 introduction of Apple Maps in response to the enormous popularity of Google Maps.

sales conversion rate, which can be expressed as the percentage of searches that lead to interactions.

matching quality, and trust

the rate at which producers join the platform and the growth of this rate over time. Dating

The three key factors of liquidity, matching quality, and trust remain crucial to measuring the health of virtually any kind of newly launched platform.

However, as growth continues, the platform must monitor the change in size of the user base over time. In particular, platform managers will want to work to ensure balance on the two sides of its market.

lifetime value (LTV) models

signal-to-noise ratio,

The issue is to embed into the platform multiple independent solutions to the same problem. Then this becomes common for everyone else. It’s a question of timing. If you do it right away, your ecosystem is scared that you’ll cannibalize their cash cows. If one provider builds a particular functionality, you don’t want to co-opt it. But if a whole slew of them have [developed the same capability], then competition reduces benefits anyway, and you can fold it in.

To enable this strategy, Cisco employs metrics that seek out instances in which the same capability is provided across multiple industry verticals—health care or the automotive business, for example. That is a sign that the platform is missing important features that should be part of the next round of continuous platform innovation.

Also, avoid reducing access to value that users have become accustomed to receiving.

Instead, when transitioning from free to fee, strive to create new, additional value that justifies the charge. Of

Yelp, for example, offers restaurants enhanced visibility and better branding on its platform by charging for a premium listing in search results.

Charging most users full price while subsidizing stars.

A better approach to analyzing the monetization challenge is to ask these questions: How can we generate revenues without reducing our positive network effects? Can we devise a pricing strategy that strengthens our positive network effects while reducing our negative network effects? Can we create a strategy that encourages desirable interactions and discourages undesirable ones?

collecting a lead generation fee from the restaurants.

YouTube gained traction among producers, the focus of the platform moved from improving video hosting infrastructure (as a value proposition to producers) to improving matchmaking of videos with consumers (focusing on video search, and a video feed).

Customer Network and Go-to-Market Infrastructure: Orchestrators use their platforms to create a network effect, connecting participants with customers and sometimes with one another. In other words, they help ecosystem participants thrive by bringing them together and providing services to help them enhance their offers as well as access to a broad network of customers. As more and more customers join, the ecosystem becomes more and more attractive to participants. And likewise, as more and more participants join, the ecosystem becomes increasingly attractive to customers.

But the platforms serve the central function of coordinating activities, structuring the relationship, and providing the backbone. For example, they provide billing and collection as well as ensuring the safety and security of all parties involved.

Ask yourself: What assets or capabilities do you need to be successful in this comfort-and-safety-as-a-service proposition? For example, you would need the capability to assemble and distribute the necessary HVAC equipment, security cameras, and other physical infrastructure. This, fortunately, may be a capability you already possess as an equipment manufacturer. But chances are that such a player would lack at least a few other critical capabilities. For instance, you would need the ability to install and maintain that equipment, which may go beyond the scope of your current operation. Perhaps most importantly, you would need an online platform to connect all the devices, sensors, and other equipment—allowing for the creation of digital twins for real-time remote digital monitoring. This online platform would also allow customers to make adjustments, access camera footage, and manage their subscription, all in one place.

if you are an HVAC equipment manufacturer, an online or software player would be an ideal choice as they would be well positioned to fill in the missing but critical capability of building the platform. They are an attractive potential collaborator. (Though, it is important to note that in such a scenario, partnering with an online player carries a risk of putting that player in a position to disintermediate you—so you would be wise to proceed with caution.) At the same time, you bring something important to the table, too: your equipment, which is essential to the value proposition. This makes the partnership feasible.

But in this next iteration of capitalism, the raw materials are no longer oil or minerals but rather commodified attention and behavior. In this new economy of surveillance capitalism, we are the raw materials. What this means is that there is a new economic incentive to create substantial informational asymmetries between platforms and users. In order to be able to convert user behavior into profit, platforms need to know everything about their users’ behavior, while their users know nothing of the platform’s behavior. As Cambridge Analytica discovered, this becomes the perfect environment to incubate propaganda.

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The Metaverse doesn’t exist yet, but some platforms contain elements that come very close to this concept. Video games currently offer the closest Metaverse experience to this idea. Developers have pushed their limits concerning what a game can be by organizing in-game events and creating virtual economies within them.

white rabbit; (4) take a piggy-back ride; (5) seed the ground; (6)

successful platforms begin with a single core interaction that consistently generates high value for users.

Platforms must perform three key functions in order to encourage a high volume of valuable core interactions, which we summarize as pull, facilitate, and match.

We are hopping into strangers’ cars (Lyft, Sidecar, Uber), welcoming them into our spare rooms (Airbnb), dropping our dogs off at their houses (DogVacay, Rover), and eating food in their dining rooms (Feastly). We are letting them rent our cars (RelayRides, Getaround), our boats (Boatbound), our houses (HomeAway), and our power tools (Zilok). We are entrusting complete strangers with our most valuable possessions, our personal experiences—and our very lives. In the process, we are entering a new era of Internet-enabled intimacy. ~ Jason Tanz Not so long ago, activities like these would have been viewed as weird, if not downright dangerous. Today, they are familiar to millions, thanks to the trust-building mechanisms established by platform businesses.

refusal to believe that the present time and place, and the people who are here with us, are somehow not enough. Platforms such as Facebook and Instagram act like dams that capitalize on our natural interest in others and an ageless need for community, hijacking and frustrating our most innate desires, and profiting from them. Solitude, observation, and simple conviviality should be recognized not only as ends in and of themselves, but inalienable rights belonging to anyone lucky enough to be alive.

And while platform businesses themselves are often extraordinarily profitable, the chief locus of wealth creation is now outside rather than inside the organization.

Thus, every platform business must be designed to facilitate the exchange of information.

Yet, in most cases, platforms don’t create value units; instead, they are created by the producers who participate in the platform. Thus, platforms are “information factories” that have no control over inventory.

Facebook’s news feed is a classic multiuser feedback loop. Status updates from producers are served to consumers, whose likes and comments serve as feedback to the producers. The constant flow of value units stimulates still more activity, making the platform increasingly valuable to all participants.