The Rise of the Platform Economy Martin Kenney Professor Community and Regional Development Unit UC Davis & Visiting Professor National Graduate Institute for Policy Studies Tokyo, Japan & John Zysman Director Berkeley Roundtable on the International Economy This presentation draws upon a joint paper published in Issues in Science and Technology. Also, we thank Ruth Collier, Stuart Feldman, Marion Fourcade, Lilly Irani, Kai Jia, Kenji Kushida, Bryan Pon, and others for their valuable comments. The speaker thanks the Kauffman Foundation and the TEKES-BRIE-ETLA project
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The Rise of the Platform Economy
Martin KenneyProfessor
Community and Regional Development UnitUC Davis
&Visiting Professor
National Graduate Institute for Policy StudiesTokyo, Japan
&John Zysman
DirectorBerkeley Roundtable on the International Economy
This presentation draws upon a joint paper published in Issues in Science and Technology.Also, we thank Ruth Collier, Stuart Feldman, Marion Fourcade, Lilly Irani, Kai Jia, Kenji Kushida, Bryan Pon, and others for their valuable comments. The speaker thanks the Kauffman Foundation and the TEKES-BRIE-ETLA project for their support.
Outline of the Talk• Introductory observations• Types of work and value creation• China is Different• Concluding discussion
Past as Prologue• The assembly line gave us the
corporate capitalist (and industrial union). – Different nations organized assembly-line
capitalism differently
• Will the Cloud give us the platform capitalist (and precarious labor)?–Will different nations react to platform
• PCssmartphonesInternet of Things– Sense, transmit, store, process data
• Software enveloping people and objects
IoT
IBM – New York
DEC – Boston
Apple – SV SV SV?????
Economics of Digital Platforms
• Network effects (Cusumano, Gawer, etc.)• Winner take all– One competitor in vertical survives – Google,
Facebook, Amazon, Github, LinkedIn• Small numbers of employees, high revenues– Google = ~62,000 employees, $74.54B– Facebook = ~12,700 employees, $17.93B
• But successful platforms create huge but dependent ecosystems around them
Technology Does Not Determine Outcomes, but
Creates Possibilities
Platform Economy, Sharing Economy?
Platform• Uber• What happens to labor?
– More precarious• Income distribution
– Platform owner “taxes” all?• More efficient use of resources
– Airbnb, Uber etc.• Winner take all industries• Who monetizes• Monetization of UGC
Sharing• Wikipedia• More wealth by sharing?
– Cooperative• Income distribution
– Redistribution• More efficient use of
resources– Locally organized
• Open source software• User-generated content
shared
Access for Producers Greater than Ever Before in History
• Apps can be uploaded from anywhere in the world– Openly available SDKs etc.
• Making a video for YouTube cheaper than ever
• Global access and devices more widespread and less expensive than ever
• Digital markets are global
Power Law Returns!!!
Location of Top YouTube Creators, 2015 n = 90
SOURCE: Anable and Kenney 2016
80% from outside US
Top 100 Paid IOS and Android Apps in 10 Largest Markets by Country of Origin, 2015So
urce
: Bry
an P
on 2
015
Data Is a New Raw Material
• Surfing the internet creates value (Terranova, Lanier et al.)?– Digital exhaust
• Putting content on Facebook, Pinterest, Youtube, LinkedIn?
• Creating open source software?– If on GitHub?
What Is a Digital Platform• The key readings on platforms:– Gawer and Cusumano 2002. Platform Leadership– Eisenmann, Parker & Van Alstyne 2011. Platform
Envelopment SMJ
• A digital platform is:a set of technical building blocks that act as a foundation upon which an array of firms, sometimes called a business ecosystem, can develop complementary products, technologies or services (Gawer 2009).
Digital Platforms• Application of big data, new algorithms,
and cloud computing• Algorithm-enabled “cyberplaces” where
constituents can act or transact• Create network effects between various
sides, applications and users, virtuous circles of growth
• Goal to lock-in and monetize users
What Will Be the Economic Organization?
• Sharing economy (Benkler) – too narrow and Uber etc are not sharing
• Peer economy (Chase) – Uber etc. not peers, too narrow
• Gig economy (Friedman) – Describes the compensation and work, but misses the digital nature of the reorganization
• Precariat (Standing) – Describes relationship of many to employment, but misses digital aspect
These Digital Platforms May Affect
Changes in labor force Value creation and capture
New businesses such as YouTubers Spatial organization Role of the state
Do it and ask permission later – hopefully after you have changed the conditions on the ground
East Coast Law = Government, West Coast Law = Code
Platform Economy
• Consumer –Discussed here
• Industrial (likely to be extremely important in the future)–Internet of Things–Industrial Internet
Types of Work and Value Creation
Number of Participants
Venture Labor
D. Apps stores, Youtube etc.. shared advertising revenue,
Amazon self-published books, games, such as Zynga, etc.., affiliate marketing revenue
Open Source commercialRedhat, Github
A. Cyberformal globally biddable labor monetization. Amazon, Mech Turk, oDesk, etc.
Free labor such as posting to Facebook, Twitter, LinkedIn, Youtube, Pinterest, Yelp, etc..
All activity on the net- Google, Bing, Browsers, ad networks
Compensated by employer for building website, etc..
Can become Venture Labor
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Labor, Value Creation and Capture in the Consumer Platforms
Can become monetized if sufficiently visited
Acknowledgements: Thanks to John Zysman, Ruth Collier, Bryan Pon and Lilly Irani for suggestions and comments on this figure.
Wag
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Liquidity event, stock options valuable, no longer Venture Labor now operating companies subject to stock market etc.
B. Industry cyber-transformed. eBay, Amazon Market, Uber AirBnB
These are theplatform buildersand VC financed
Traditional economic activities attacked, can include monetizing assets such as automobile, spare room
Platform firms funded by VCs, e.g. Google, Facebook, Uber – their direct employees
E. Virtual Project
Funding, Kickstarter, Indiegogo,
etc..
Copyright: Martin Kenney
C. Cyberformalize informal markets, TaskRabbit, etc.
1
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Venture Labor
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Compensation
Venture Labor – The Elite of the System
Acknowledgements: Thanks to John Zysman, Ruth Collier, Bryan Pon and Lilly Irani for suggestions and comments on this figure.
Wag
e,
stoc
k op
tions
Liquidity event, stock options valuable, no longer Venture Labor now operating companies subject to stock market etc..
These areplatform buildersand VC financed
Successful platform firms funded by VCs, e.g. Google, Facebook, Uber – their direct employees
Copyright: Martin Kenney
Often winner take all with enormous capital gains
1
2
Number of Participants
All activity on the net- Google, Bing, Browsers, ad networks
Compensated by employer for building website, monitoring social media, etc.
Non
e
Inter
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or
Acknowledgements: Thanks to John Zysman, Ruth Collier, Bryan Pon and Lilly Irani for suggestions and comments on this figure.
Copyright: Martin Kenney
Compensation
Monetized Activity in Exchange for Platform Use – Distributed Value
Creation
Consignment labor such as posting to Facebook, Twitter, LinkedIn, YouTube, Pinterest, Yelp, etc..
Can become monetized if sufficiently visited, see D
Observation: Enormous Amount of Value Created while Compensation Is Use of Platform
6
5 Open Source commercialRedhat, Github
3 & 4. Compensated Platform-Mediated Work
A. Global bidding/cyber-contracting – eLance/Odesk
–Microwork – fill up working day -- AMT
B. Industry cyber-transformed, e.g., taxi cab – Uber; hotel -- Airbnb
C. Informal work – cyber formalized, e.g., TaskRabbit, Instacart
D. Virtual consignment – Apps storesE. Virtual project funding –
Indiegogo,Udemy
Contracting in the Platform Economy
A. Globally Biddable Contract Labor AMT, UpWork, etc.