How depending on a platform is a ticket to financial ruin, and what to do about it

UC Berkeley economist J Bradford DeLong's wide-ranging Reinvent interview covers a lot of ground, but is especially fascinating on the long-term trajectory of small businesspeople who bet their commercial futures on platforms -- he uses Uber drivers as an example, but this has implications in lots of sectors.

But beyond this smart stuff about the precarity of platforms is a stirring call to arms for return to the "revolutionary social goals" of early tech, and away from the present focus on transferring wealth and control to the rich and powerful, "Large companies tend to be much more interested in figuring out how to use information technology to shed annoying and expensive workers, rather than how to give those annoying and expensive workers more control over their lives."

Brad DeLong: The possibilities for positive human flourishing from the platform economy are immense—if the platforms actually work. Right now we find ourselves in a world in which riders are paying essentially 60% of Uber's costs. Uber's investors are paying 40% of Uber's costs. What happens when the investors begin wanting their money back? Do we find that Uber has enough economies of scale, and scope, and enough of a brand and a first mover advantage, that it’s a profitable business? Or do we find that the business gets taken over by somebody else? What if Google puts a little taxi ride button on every Google Map screen, saying: “We'll only charge you a \$1.50 as a handling fee”? Uber will have charge you considerably more if it wants to repay its investors. Uber may turn out to have done the trail-breaking thing. Uber may suffer the fate of most pioneers—arrows in their back, and face down. Or perhaps the platform economy will not be a good thing. Perhaps it moves bargaining power away from the real producers, who are doing the work, and also away from the customers, and into the hands of that one large company in the middle that controls the information. That’s still up for grabs.

Brad DeLong: Most people who fear that we are, as the extremely sharp Zeyneb Tufekci of Duke University says, “building a dystopia one brick at a time in order to trigger people to click on ads", greatly fear that individual humans, given our cognitive disabilities, will be no match for the informational middleman organization using deep learning and information to figure out how to trigger and control us. Others are much more optimistic—although not necessarily much more optimistic about the prospects of individual platform pioneers like Uber. They are, however, more optimistic about the prospects of the large companies that have entrenched dominant positions: companies like Apple, Google, and Facebook—not that they are optimistic about any one of them, but rather they are optimistic about the prospects for profits for all of them put together, because what opportunities one of them fumbles another one is likely to recover.

Determining Bargaining Power in the Platform Economy: Reinvent Full Transcript [J Bradford DeLong]

(via Naked Capitalism)

(Image: Seydelmann, CC-BY-SA)