“Platform Revolution” Review

and Summary

Chapter 1: Today: Welcome to the

Platform Revolution
Airbnb has disrupted the hospitality industry. Uber has
disrupted the taxi business. Facebook is a huge media company
that doesn’t produce any content. New upstarts have conquered
whole industries and revolutionized the way business is done.
This is possible because of a new business model, to wit — the
platform. Platform businesses are changing the world.

Platforms are businesses that match users to each other in order

to make financial or social transactions that create value. Value
arises from the community the platform serves.

Platforms are transformative and capable of producing

impressive results.

All information centric businesses can participate in the

platform revolution. The platform revolution is huge and
growing. Traditional business practices are being overturned.
Pipelines are the old style of business, wherein a company
designs and makes a product or service and ultimately selling it
to the customer. The producers are on one end of the pipeline
and the customers are on the other end.
Platforms are the new way. With this model, the platform
provides resources for a variety of producers and consumers can
interact and transact with each other. Instead of moving in a
straight line from produce to consumer, value can move
throughout the platform in a variety of ways.

Because platforms don’t own the resources that create value,

they can grow much faster than pipeline businesses. Platforms
also scale better. Growth isn’t tied to resources, so it can occur
faster. Platforms bring new supplies to market because users are
always coming up with new things.

There are still plenty of pipeline companies still around today,

but whenever they have to compete against a platform business,
they lose.

Platforms invert the firm, which is to say that many of the

processes that take place inside pipeline companies are external
in platform companies.

Platform businesses are ascendant. They’re taking over many

markets and transforming the economy. Platforms continue to
evolve. Many platforms serve more than one purpose. New
platform companies are founded every day. There is a wide
variety of different kinds of platform companies, from gaming
platforms like Xbox and Nintendo, to retail platforms like
Amazon and Alibaba.

Traditional business strategies and practices have been thrown

into a state of turmoil. The world of business is in a state of
major change because of the rise of the platform. This process is
continuing without any signs of slowing down, making it certain
that even more changes will be coming down the road.

Platform expertise is critical for today’s business manager, but

most managers know little about this developing business
model. They need guidance, the sort that a book like this can
provide.

Chapter 2: Network Effects: The

Power of the Platform
Supply used to determine scale. The more widgets ACME had to
sell, the greater the profit. Nowadays, in many cases scale is a
result of demand. Networks have changed the dynamic. The size
of the network has become the determining factor of scale.

With network effects, the value of networks grow exponentially.

As individuals join, the potential number of connections
between individuals’ skyrockets, making the network more
valuable.

Platforms typically enjoy two-sided network effects. The two

sides required for interaction attract each other; for example, on
a site with buyers and sellers, the presence of buyers attracts
sellers, and the presence of sellers attracts buyers. Network
effects can come from and affect both sides of a network.

People confuse network effects from other growth building

tools, but they are actually different things. It isn’t price effect
(from crazy low prices), and it isn’t brand effect (from high cred
companies). Neither is it virality, which is when people external
to the platform are pulled in.

Network effects are the result of increasing value for those who
are already on the platform, and they increase with the scale of
the platform. For this reason, it’s vital to increase size as quickly
as possible. There are some handy tools that can help a platform
scale up quickly. Unfortunately, networks can also have negative
effects besides the positive effects that we treasure so much.
Here’s a quick roundup of a few of these concepts:

 Frictionless entry makes it possible for users to quickly and

easily join a platform and immediately participate in the
creation of value.
 Side-switching platforms allow users to switch roles. For
example, consumers can become producers.
 Beware of negative network effects. If there are lots of users,
it can overwhelm the system, so it’s hard to find the best
matches. To fix this, frictionless entry has to be balanced
with curation.
 There are positive same-side effects, which are good effects
that increase on one side. For example, the more people on
Facebook, the more people with whom the user has to share.
 Negative same-side effects. For example, an increase in
users can increase competition.
 Positive cross-side effects. When there are more vendors,
consumers have greater choice. When there are more
consumers, the venders make more money.
 Negative cross-side effects. For example, too much choice,
too many ads, too much competition, etc.

Platform businesses are the most efficient value creators,

compared to other types of businesses, because they harness the
power of network effects.

Industries with network effects function differently than

traditional businesses. The focus turns outside of the company.
HR moves from employees to public. R&D no longer happens
in-house; instead, users drive innovation.
Chapter 3: Architecture: Principles
for Designing a Successful Platform
Deciding where to begin in platform design is difficult. Copying
other companies doesn’t always work because platform
businesses tend to be different from each other. Instead of
trying to imitate another platform, the focus should be on the
interaction. Platform design should always start with the core
interaction. The core interaction has three
components: participants, value unit and filter. After figuring
out what the core interaction is to be, design the components in
the above order.

Value units are usually generated by producers.

In every exchange, producers exchange three things:

information, goods or services and currency. Information can
include things like descriptions and process of products.
Sometimes, the exchange of information is the central purpose
of the platform; for example, like how Yelp provides information
about restaurants. Once information is exchanged, participants
might choose to go on to exchange goods and services. While on
Amazon this could include products for purchase, on Facebook
it includes photos and posts that are exchanged between
participants. Finally, transactions are consummated with
currency. While currency can include plain old fashioned
Bitcoins or doubloons, many other forms of value can be
counted as currency. For example, giving your friends the old
thumbs up on Facebook is a form of social currency. Getting lots
of views can be an important reward for people posting videos
on YouTube. How well a platform can monetize the value it
provides depends on the kinds of currency exchange it can
capture.
Three of the most important functions of a platform
are pull, facilitate and match. Pull attracts users to the platform.
To facilitate transactions the platform provides tools and rules;
this is the scaffolding of interactions. And platforms must match
users to each other. The right consumers should find the right
producers.

Additional interactions beyond the core interaction might be

planned from the beginning, or they could be invented as the
platform evolves. Be careful, though, as adding features
increases complexity. This can be bad if users have trouble
figuring out a site or if it gives programmers too much work.

The end-to-end principle: the more peripheral a feature is to the

core mission, the more peripheral it should be on a platform. If
only some users need it, then it shouldn’t be junking things up
in a central location. This will make the system run more
efficiently.

Modularity is a good quality for platforms. While it can be

worthwhile to get a system up and running as quick as possible,
the best way to build a platform is to do it piecemeal. Modules
are designed separately, but they ultimately work together as a
coordinated whole. Modules need to have the same design rules
and standard interfaces. Systems can be re-architectured to be
modular.

Always leave room for organic and spontaneous change. Look at

how users are behaving; see if they’re putting the system to
unexpected uses. This can suggest new directions for the
platform to take.
Chapter 4: Disruption: How
Platforms Conquer and Transform
Traditional Industries
Platforms are places where buyers and sellers can come together
and transact business. It isn’t a business model. Platforms have
been around for ages. Platforms include traditional
marketplaces where goods, like produce, are sold.

The difference between the olden day’s platforms and nowadays’

platforms is that nowadays we have digital technology. We can
communicate all over the planet. We can complete transactions
almost instantly. The internet turbocharges existing platforms
like the New York Stock Exchange. It has revolutionized one
commercial arena after another.

Platforms are totally disruptive when they get involved with an

industry. For example, Uber has driven down the value of New
York taxi medallions.

Platforms eat pipelines. Platforms are so much more efficient

than pipelines that they eat the competition. For example, the
internet has largely replaced newspapers as the main source of
news for many people. News organizations don’t have to pay for
paper, printing, distribution and countless other expenses when
they publish online. An efficient method of dispersing the news
“ate” a less efficient pipeline.

The internet provides infrastructure and coordinates

communication. Platforms make use of these features for
transactions all over the planet. There are several reasons for
this. The internet can reduce costs, as it did in the news
industry. Platforms are more efficient than pipelines. They can
scale rapidly. They benefit from network effect. These things
give them the economic edge over pipelines. They can grow
faster than traditional businesses.

Platforms find new sources of supply. They make it easier for

producers to participate, it’s easier to get their products into the
value chain. For example, Airbnb makes it possible for hosts to
rent out their spare rooms to travelers. Many of these hosts
never would have even considered renting part of their home to
strangers, nor would they have the tools to do so, had Airbnb
not made it convenient for them to do so.

Platforms enable new forms of consumer behavior. People will

gladly jump into a stranger’s car when they use Uber. It wasn’t
too long ago that such behavior would have been considered
crazy dangerous. Platforms enable this because they have built-
in mechanisms to engender trust between users.

Platforms change quality control into user driven curation.

Users gravitate towards higher quality goods, edging out the less
desirable products.

There are three different kinds of platform disruption:

 Separating assets from value. Ownership of assets like

equipment should be separated from value. For example,
pooling the use of a MRI machine means everyone can use it
without having to buy their own.
 Re-intermediation. There are new kinds of middlemen. For
example, executives in the music industry used to rely
primarily on agents in order to find new talent. Now they’re
just as likely to trawl YouTube in search of good acts.
 Market aggregation. Markets combine and become
centralized. For example, Alibaba has created a single
platform for wholesalers all over the world.
All is not lost for existing pipeline companies. They can
restructure themselves to take advantage of platform
economies. This isn’t a simple thing to do, as it involves
overhauling the entire operation, but it can put an existing
business on equal footing with their platform competitors, so it’s
well worth the effort.

Chapter 5: Launch: Chicken or Egg?

Eight Ways to Launch a Successful
Platform
The chicken-and-egg problem affects every platform at startup.
How do you attract both sides to a platform when no one is on
it? Buyers want sellers, and sellers want buyers, before either
side is willing to sign on to a new platform. What to do? There
are several different approaches to this conundrum:

 Bribe people with money or something else of value.

 User commitment. Get users to try the site. Just getting new
people to sign up doesn’t do a lot by itself, they have to
actually use the features.
 Push. There needs to be incentives for participating.
Although common in the world of pipelines, traditional push
strategies like advertising can still be helpful.
 In the world of platforms, pull strategies are more useful.
Customers are pulled toward the platform with desirable
features and incentives.

Existing large companies have an advantage of scale. Probably

the reason they haven’t taken over the world yet is that they
tend to be old companies with a culture of complacency. Once
they enter the platform world there are already others with
much more agility already playing the game.

Here are eight proven strategies that platforms have

successfully leveraged for overcoming chicken-and-egg
problems:

1. Follow the rabbit. Set up a non-platform demonstration so

people will know how cool your platform is.
2. Piggyback. Recruit users from other platforms.
3. Seeding. Create value that will appeal to at least some users.
When these folks get on the platform, they’ll draw others in
other roles. For example, producers draw consumers.
4. The marquee strategy. Identify key users. Bribe them; treat
them well.
5. The single-side strategy. Create a business around products
or services that benefit a single set of users. Later, convert
the business into a platform business by attracting a second
set of users who want to engage in interactions with the first
group.
6. Producer evangelism. Design your platform to attract
producers; their customers will become users.
7. Big bang adoption. Use traditional push marketing to create
a big splash that draws attention to the platform — for
example, the way that Twitter was introduced at SXSW.
8. The micro-market strategy. Target a tiny, existing market.
Effective matches can be made even at the very beginning.

Viral growth is a pull process. Create an environment where

users tell new people about the platform. Viral growth depends
on the user to be the sender. The sender shares a value unit.
Allow the value unit to spread to existing networks. Then there
has to be an actual recipient to receive the value unit. Viral
growth can accelerate the platform’s expansion at an extremely
rapid rate. Facebook is an example of a platform where users
draw in more users through viral growth.

Chapter 6: Monetization: Capturing

the Value Created by
Network Effects
Charging discourages users, but a business has to make money.
When it’s time to monetize, it’s important not to alienate the
users. There are some useful techniques that can help. For
example, don’t charge people for listing ads; charge them when
the deal is done.

A partially free model can help grow the network. For example,
a site may have a basic free service but users have to pay for the
full service.

Some platforms are free to some users but charge others. Which
side to charge depends which side you’re trying to cultivate.

The interactions are more important than the number of

participants in the value of a platform. But it’s not just about
raw numbers. The quality of the interactions is important, too.

There are several suggested monetization methods:

 Charge a transaction fee. This way, people aren’t discouraged

from joining the site to begin with. One problem with this is
that naughty users can take the transaction offline to avoid
fees. Networks need to up the value of staying in-house.
Rating systems and feedback can be useful to producers,
keeping them on the platform.
 Charge for access. For example, on employment websites
recruiters usually pay to list jobs.
 Charge for enhanced access. LinkedIn is free to users, but
they can pay a fee to see complete listings of the people who
have looked them up. This strategy doesn’t usually hurt
network effects, as we’re talking about people who are
already in the network.
 Charge for enhanced curation. Offer high quality. People are
more than happy to pay a premium to purchase the things
they want if they can easily get exactly the thing they want.

Because platforms have users positioned at both sides of a

transaction, there are several different approaches when it
comes to deciding who to charge. One approach is to charge
everyone. This tends to discourage participation, but it can work
when you want to cultivate the sense of an elite user base. You
can also charge one side and subsidize the other. This is
especially useful when one side needs some incentive, and the
other side really values their presence. This strategy is used by
nightclubs that offer cheap or free drinks to women on “ladies’
night.” Women are drawn to the bar by the promise of cheap
drinks, and men are drawn because women are present.
Another approach is to charge full price to all but a few. Give
free access to super-users and they’ll attract others. A similar
approach is to charge full price to some and subsidize those who
are price-sensitive.

There are caveats. Don’t be in too big of a rush to monetize. The

transition must be handled delicately. Avoid charging for things
that used to be free. Don’t reduce access that users were used to
getting.

It’s good to create new, additional value and charge for that. The
best approach is to think about monetization when you initially
design the platform.
Chapter 7: Openness: Defying What
Platform Users and Partners Can and
Cannot Do
Wikipedia is an open source reference platform that allows the
public to contribute and edit content. Usually it’s a good source
of reliable information. With controversial topics, however,
people sometimes add incorrect, and sometimes even malicious,
misinformation to articles. This highlights the difficulties
platforms can have with openness.

To be open means to have no restrictions on development,

commercialization or use. In another definition, it can mean
that any restrictions — like rules and fees — are reasonable and
nondiscriminatory.

Getting the right amount of openness is difficult, but important.

Openness encourages innovation, but the more openness there
is the harder it is to monetize and control a platform. Bad
decisions in regards to the level of openness can doom a
platform. Before Facebook was the dominant social network,
Myspace ruled supreme. But Myspace was sort of buggy. They
didn’t allow outside developers to work on the site’s features
and the company didn’t have the resources to correct all the
problems. Contrast this to Facebook. When they decided to
open their site to apps created by outside developers,
enthusiastic partners were quick to create a slew of interesting
apps that made the users happy. There were so many developers
working on any problems that arose, for the most part things
got ironed out quickly. Facebook took off like a rocket while
Myspace tanked.

It’s important to remember that users create value. The

platform is host to the value that the users create. For this
reason, limiting the roles of the users can also limit the value
that is brought to the site.

There are three kinds of decisions about openness. Manager and

sponsor participation, developer participation and user
participation.

In manager and sponsor participation, the sponsors control the

platform architecture, the manager controls interactions. Often
these two roles are played by the same entity.

Developer participation has three different kinds of users. Core

developers are usually employees. Extension developers add
value to the platform, usually from outside the business.
Platforms can encourage these developers by building
application programming interfaces (API) and data aggregators,
services that collect users and interactions to sell to a third
party. If someone develops an app that could become a good
platform on its own, the hosting platform should try to get
control of it. With user participation, any user might have the
ability to freely add content. The problems with this kind of
participation includes the possibility of lower value content. It’s
useful to find some way to curate the content.

In time, platforms frequently become more open as they evolve.

Platforms should be regularly evaluated and the openness
should be tinkered with.

It’s important not to give away the store. Core generators of

value should be in the control of the platform. Extension apps
should be evaluated for their potential to threaten the core
business. Any app that has the potential to become a platform in
its own right should either be bought by the company, or else
they should seek to replace it by developing their own version
in-house.
Functions that are popular with users should be acquired by the
platform. Once they’re under the control of the platform, they
should be made available to developers through open APIs.

It’s also important to control the level of openness for users.

Websites can descend into cesspools of pornography and
become the haunts of trolls. Some controls have to be in place
for platforms that aspire to high quality content.

Chapter 8: Governance: Policies to

Increase Value and Enhance Growth
Governance is all about creating good rules. A platform is
composed of a community of users. Like all healthy
communities, there need to be rules protecting the members of
the community. The wrong kind of rules, however, can alienate
users. To avoid this, platforms should observe three
fundamental laws of good governance. First, rules should always
create value for the customer. Second, those writing the rules
shouldn’t use their power to change the rules in their favor. And
finally, platforms should never take more than a fair share of the
wealth.

The aim is to create wealth and to share it fairly with everyone

who adds value. Think of platforms as states with their own
laws. Countries with good governance are less corrupt and more
economically successful than states with unfair or overly
constrictive rules.

Completely free markets without any rules might sound like a

good idea in theory, but they don’t always result in fair
outcomes for everyone involved. In fact, they can produce
market failure. Some basic economic examples of when things
go wrong include information asymmetry, when one side
knows something important about the transaction that the other
does not; externality, with costs to those outside of the
transaction; monopoly power; and risk. Reduce the chances of
market failure through good governance.

Tools for governance include laws, or platform rules,

and norms, the desirable behavior within a
community. Architecture, or programming code, can be used to
reinforce desired behavior and make unwanted behavior
difficult to perform. And finally, markets, including not just
financial monies but also social currency. Orderly markets
reduce risk for the participants.

Internal transparency is important. Company departments

shouldn’t become too siloed. The ability to see across units
makes everyone more agile.

External and internal stakeholders need a voice in making

decisions. No one wants to be part of a system where they have
no control. Poor governance structure will lead users to seek out
a competing platform in order to do their business.

Fair governance can foster wealth. People will trust you more if
you are fair, and they’ll be more inclined to participate in
innovation. Participants make better use of their resources in a
just and fair system.

There will always be problems, of course. Resolving conflicts

should favor the future over the past. Preferring the direction
that the market is turning rather than hold on to procedures of
the past will position a platform well for the future. Backwards
looking rules can lead to stagnation for the company.

Self-governance is an important part of platform management.

Well run platforms govern themselves following the principles
of participation and transparency.
Platforms can be immensely complex. Some components, move
and change quickly, while others are much more slow. Good
governance systems are flexible enough to respond
appropriately to both.

Chapter 9: Metrics: How Platform

Managers Can Measure What
Really Matters
The way to understand what’s going on with a system is through
metrics. By measuring the right things, needs, performance and
other aspects of the system can be assessed.

Platforms are a new business model that require new ways to

keep track of what’s going on.

Platforms must track and manage a different set of metrics than

the old pipelines did.

Platforms create value through network effects. Good metrics

focus on positive network effects and the activities that can
affect them.

Rate of interaction success is important. A high rate of

successful interactions draws users.

The metrics one uses change over the lifecycle of the platform.
In the beginning, during the startup phase, there is a lot of
uncertainty. Look for information on core interactions and how
producers and consumers benefit from the platform. The most
important components to track
are liquidity, matching and trust.
Liquidity means that there are some producers and consumers,
and there is a high percentage of interactions. You can track
liquidity by measuring the percentage of listings that lead to
interactions. It’s also important to look at illiquidity, which
happens when transactions aren’t possible. For example, when
Uber users want a ride but there are no cars available. People
get frustrated by these kinds of things and can become so
discouraged that they leave the platform.

Liquidity is more nuanced than simple reports of how many

people have visited a site. Companies that tout page visits or
numbers of registered users might well be covering up deeper
problems and should be regarded with suspicion.

Matching quality measures how well the search algorithms

match users to make transactions. People want to find what
they’re looking for. Search results shouldn’t bring up a bunch of
noise that users must sift through. A good metric to measure
this is the sales conversion rate — the percentage of searches
leading to interactions.

Trust is essential. No one will risk money to buy something if

they can’t trust the site to provide them with high quality
information about the product and the transaction. Trust is built
through careful curation.

Once a platform is past the ticklish startup phase, it should be in

a state of growth. Here, the focus should be on metrics that
measure that growth. The producer-to-consumer ratio
determines if the market has balance among its users. Measure
value creation. There are several suggestions for metrics to
measure both sides of the market. One such metric is the
interaction conversion rate, which compares the number of
queries to the number of interactions.

During the maturity phase, metrics should drive innovation.

Improvements to the product should be closely measured and
tested against a baseline. Metrics also help identify threats from
competitors and facilitate resource allocation.

Don’t feel like you have to measure everything. Be selective.

You’ll need to be able to see the forest from the trees. Only track
the things that you need. If you don’t understand why you’re
tracking a particular statistic, you’re doing it wrong. Metrics
should be actionable, accessible and auditable.

Chapter 10: Strategy: How Platforms

Change Competition
The world of platforms has three levels of competition.
Platforms compete with each other, they compete with their
partners and partners on the platform compete with other
partners.

But competition isn’t the whole story. Unlike pipeline

companies, with platforms, competition is less important than
cooperation and collaboration. Partners may represent potential
competition, but they are more likely to add value to the
platform than anything else. In such an environment,
controlling relationships are more important than controlling
resources.

There are different strategies that can be employed depending

on the platform’s needs. Many platforms will find it is helpful to
employ several different strategies at any given time.

When users go to a number of different sites to do similar kinds

of transactions, it’s known as multi-homing. It’s better for the
platform if it can keep all those tasty transactions at home on
the platform. One way to accomplish this is to limit platform
access. Platforms should try to get exclusive access to essential
assets so users won’t want to go to other platforms.

It’s always a good strategy to foster innovation and capture its

value. Keep a close watch on the apps that are developed for the
platform. Absorb those apps that look like they might take off.
Use the immense value of data. Use data tactically. Test tools
and features in order to optimize them. Strategic data analysis
tracks who else is creating, controlling and siphoning off value
both on and off platform. Analytics can help to increase value on
the platform and reinforce network effects.

Mergers and acquisitions should have strategic goals. The target

company should create value for a user base that overlaps with
the one they’re already serving.

Watch for other platforms that have significant overlaps or

similarities. Either become a partner with your competition, or
else just offer a similar feature on your platform. Platform
envelopment, successfully absorbing the functions of an
adjacent platform, will help to absorb the adjacent platform’s
users as well.

Enhanced platform design and continuous improvement is itself

a strategy. Try to offer more, better. Users will prefer the
platform that offers the best features.

Sometimes the advantage over competitors can be sustained

over time. This generally happens when conditions favor
winner-takes-all markets. Like immortals from the ’80s
movie, The Highlander, eventually there will be only one. Or at
the least, eventually there will be just a single dominant one.
And like it was in the movie, competition is fierce among the
contenders. Factors that encourage this process include supply
economies of scale, strong network effects, high multi-homing
costs and lack of specialization.
Chapter 11: Policy: How Platforms
Should (and Should Not) Be
Regulated
Regulations should be reevaluated everywhere because the
whole game has been changed by platform businesses. Often
enough, new economy businesses have just ignored existing
regulations. This has brought a host of ethical problems.

Some say regulation is bad and it stifles innovation. Besides, it’s

not always perfect. The free market should regulate things.
When regulation gunks things up, it’s known as regulatory
capture. Regulation can be used to rein in competitors. Some
people really vilify regulation.

In fact, corruption increases the level of regulatory capture.

Realistically, regulation provides important services to society
and it probably would be bad to eliminate it. For example,
regulating airlines makes air travel safe.

Access to some platforms is now part of the functioning of

everyday life. As such, if people are excluded from these
platforms it could draw regulatory attention.

Dominant platforms might resist change and innovation- after

all it’s the status quo that gives them the edge. This does not
serve the public good. People won’t have access to the improved
technology.

There are numerous important regulatory issues. Sometimes

companies engage in predatory pricing. They price themselves
so low that their competition can’t possibly match their prices.
After driving the competition out of business, they raise their
prices super high. After all, they don’t have competition, they
can charge what they like. This behavior is not looked on
favorably by regulators, and it’s possible they’ll intervene.
However, with platform economics, producers might well be
able to offer their goods and services at or below cost without
predatory intent. Even in situations without competition, they
might set their prices below cost for some customers. This is a
tricky issue, as there certainly is the potential for abuse.
Regulators have started to change their requirements in order to
account for network effects.

There is a tremendous amount of data that’s collected on

people. There are lots of ways this can go wrong. People don’t
seem to mind too much, however, as they freely provide it.
Companies that trade in data own information about people,
information that in other cases would belong to the individual
people.

In the brave new world of IT, regulators must determine how to

enforce laws in respect to international boundaries. Countries
might think the best way to maintain control is to have platform
data stored and processed locally. One form of regional control
is seen with the European Union’s strict privacy laws. This has
reduced some behaviors (especially in advertising), which has
already affected EU economies.

Sales and value added taxes are different in every location. This
makes compliance a challenge for retail platforms. Amazon has
lobbied against these taxes, they’ve also been quick to take
advantage of loopholes and have even engaged in what some
may consider dodgy behavior. Local tax laws have become
obsolete.

Labor platforms say workers are contractors, so labor laws don’t

apply. This probably isn’t true, and besides, it makes the
platforms look slimy to the public. Better regulation is likely to
emerge in time.
Big time platforms like Amazon can rig the game. They can
prefer some products more than others. They can manipulate
the emotions of users. The potential for platforms to manipulate
high stake activities, such as voting and political behavior is
alarming.

There is huge temptation for platform managers to do unethical

things. Rational regulation must be put in place to mitigate this.
Use the data stream to identify offenders. This is a new day and
we need a new way. We need regulation 2.0. Regulations should
aim to minimize market inefficiencies- especially the abuse of
dominant positions- and the failure to adapt to innovation.

Some people are anti-or low-regulation on principal. Regulation

dampens innovation, they say. Give the new companies time to
grow into their role; they shouldn’t have to worry about
compliance in the first few years. But this will just encourage
bad behavior.

The old rules don’t apply any more. New ones need to be
written. We must make sure there are the kind of health and
safety regulations that we need to make society function. At the
same time, over regulation is to be avoided.

Chapter 12: Tomorrow: The Future

of the Platform Revolution
There are many industries that will probably convert to
platform industries in the coming years, these include
information intensive industries, industries with non-scalable
gatekeepers, highly fragmented industries and industries
characterized by extreme information asymmetries.
Industries that are resistant to platform transformation include
industries with high regulatory control, industries with high
failure costs and resource intensive industries.

It’s possible to predict with some accuracy how some industries

will change in the coming years. For your edification, here’s a
list of some likely scenarios for how platforms are likely to affect
different sectors of the economy:

 Education is quite vulnerable to platformization. People can

learn online instead of attending a physical classroom.
 Healthcare is ripe for platformization. There is currently lots
of fragmentation and friction. Inefficiencies can be reduced.
But there are huge barriers to reforming this industry,
however.
 Energy is another inefficient industry. People are working on
smart grids in order to gather and make use of data on
energy usage patterns. The industry is likely to change
enormously over the next few years.
 Finance and money is sort of the ultimate platform business.
Platforms have helped financial companies find new sources
of value. Financial platforms tend to be conservative as
regards to change. Will they learn to adapt? They are facing
competition from new sources. Mobile phone companies
have helped people without bank accounts in Africa with
their money movement needs.
 Logistics and transportation industries. Platforms are the
obvious tool for coordinating the movement of resources.
 Labor markets have seen boatloads of change due to
platforms. They will continue to do so. As Adam Smith stated
way back when, the unit of work will be broken down into
smaller and smaller pieces.
 Government. There are many ways that governments can
integrate the platform model into some of their tasks.
Platforms are not always an automatic good. The growth of
contract work is an example of how platforms may be creating
undesired change in society. Companies provide lots of benefits
for their employees. If contract work becomes the norm, what
are people supposed to do about it when they no longer have the
security of being attached to a company?

Eventually everything will be connected and alive with

information. The internet of things will create more networks.
The future will bring challenges. Society has to have time to
absorb change. New policies and regulations need to be ironed
out. We should think about all this stuff now, while the
technology is still emergent.

There’s always hyperbole, and there are always people who

announce that everything has changed. In the case of platforms,
anyway, it would seem they are right.