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new platform economy China

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new platform economy China

  1. 1. 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 for their support.
  2. 2. Outline of the Talk • Introductory observations • Types of work and value creation • China is Different • Concluding discussion
  3. 3. 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 capitalism differently?
  4. 4. Digital Technologies • Cloud computing (see Zysman 2012) • Ubiquitous connectivity –3 billion smartphones • PCssmartphonesInternet of Things – Sense, transmit, store, process data • Software enveloping people and objects
  5. 5. Io T IBM – New York DEC – Boston Apple – SV SV SV ?????
  6. 6. 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
  7. 7. Technology Does Not Determine Outcomes, but Creates Possibilities
  8. 8. 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
  9. 9. 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
  10. 10. Power Law Returns!!!
  11. 11. Location of Top YouTube Creators, 2015 n = 90 SOURCE: Anable and Kenney 2016 80% from outside US
  12. 12. Top 100 Paid IOS and Android Apps in 10 Largest Markets by Country of Origin, 2015 Source:BryanPon2015
  13. 13. 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?
  14. 14. 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).
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. Platform Economy • Consumer –Discussed here • Industrial (likely to be extremely important in the future) –Internet of Things –Industrial Internet
  19. 19. Types of Work and Value Creation
  20. 20. 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 commercial Redhat, 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 None Feefor Service or Product contract Liquidityevent, capitalgains, secure employment, Contingent Compensation FinancialReward 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. Wage, stock options 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 the platform builders and 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 2 3 4 5 6
  21. 21. Venture Labor Liquidity event,capital gains,secure employment, 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. Wage, stock options Liquidity event, stock options valuable, no longer Venture Labor now operating companies subject to stock market etc.. These are platform builders and 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
  22. 22. Number of Participants All activity on the net- Google, Bing, Browsers, ad networks Compensated by employer for building website, monitoring social media, etc. None 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 commercial Redhat, Github
  23. 23. 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 stores E. Virtual project funding – Indiegogo,Udemy
  24. 24. Contracting in the Platform Economy A. Globally Biddable Contract Labor AMT, UpWork, etc. Feefor Serviceor Product contract B. Industry Cyber- transformed. Ebay, Amazon Market, Uber Craigslist, AirBnB C. Cyber- formalize informal markets, TaskRabbit, etc. 4
  25. 25. A. Globally Biddable Contract Labor • Lowest price • Contractors largely powerless – Exception if they have rare skills (Kunda and Barley’s gurus) • Little upside for contractor besides possibly learning – Could lead to a permanent job? • Social Outcome: – Replace permanent employees – More efficiently allocate people to work
  26. 26. B. Industry Cyber-Transformed • Convenience, efficiency, mobilization of slack assets • Often roll up fragmented industries • Breakdown barriers to competition (taxi rules, zoning, anti-discrimination) – But some initial advantages eroding as Airbnb pays hotel tax, Uber/Lyft get commercial insurance, etc. • Providers largely powerless vs. platform owner – Little upside for contractor
  27. 27. C. Informal Work -- Cyber- Formalized • Cyber formalization history is long – eBay, Craigslist • Large number of huge platforms • Movement of control and monitoring to the Cloud • Social Outcomes – Greater efficiency and price discovery – Greater transparency in terms of taxation, trust etc. – Shift of power to platform owner
  28. 28. D & E. Virtual Consignment and Virtual Project Funding Models D. Apps stores, Youtube etc.. shared advertising revenue, Amazon self-published books, games, such as Zynga, King Digital, Supercell, etc.., affiliate marketing revenue Contingent Compensation E. Virtual Project Funding, Kickstarter, Indiegogo, etc.. Can lead to entrepreneurship and upside 3
  29. 29. Virtual Consignment • The Apps stores have now paid out $20 billion • YouTube – YouTube Partner Program –Created in 2007 –1M+ creators –1,000s of channel earning $100K+ –Vidcon Convention 2014 – 19K+ • Udemy – Online courses
  30. 30. Returns to Producers for Cyber Consignment Super long tail Very small return Discoverability an issue Winner take all returns $ Items, videos etc. Of course, platform owner always wins But if there is referral, research shows that long-tail refers to winners ipso facto they subsidize winners! © Martin Kenney
  31. 31. D. Virtual Consignment Model • Platform owner gets content at no cost • Content provider bears all costs • Content provider may have multiple forms of upside – Payment from platform owner – Ancillary income sources from audience • Appearances, testimonials, product placements, items • Content providers’ return characterized by power law • Social Outcome: – Enormous opportunities for new work but WTA
  32. 32. E. Virtual Project Funding/FinTech • Crowd “charity” funding – Kickstarter ($612M) and Indiegogo ($98M) • Cyber platform for angels – Angel’s List • Bitcoin and block chains
  33. 33. Concluding Reflections
  34. 34. Algorithmic Law? • Power is in the algorithms – Volkswagen “solved” pollution with algorithms that state tests could not see – High frequency trading • Uber changes payment algorithm • Google changes PageRank algorithm – Decides on who qualifies on right to forget • Facebook decides on pornography – Women breast feeding Opaque to users, producers, regulators, consumers
  35. 35. Value Creation Atomized Throughout Society • Online human activity, both work and not work, creates (or is transformed into) value • “Long tail” work may not produce substantial income, but some becomes extremely valuable – Flappy Birds etc. • Where is the work place – potentially everywhere that there is digital access
  36. 36. Successful Platforms Often Are WTA • They have new value propositions – Massive opportunities for value creation or saving • Platform owner/workers benefit massively, but not necessarily contractors and consigners – A few may be big winners • Reinforce income inequality? • Entry barriers dissolved digitally – Uber/Lyft, Airbnb, and many more especially in financial sectors
  37. 37. If Platform Economy, then • Who owns/controls the platform? –Wikipedia meets Uber meets the Danish Ag Coop • Is power centralized as platform controls the connection nexus – Lock-in and network effects – Power is in the algorithms and data control • Who gets rewarded?
  38. 38. Questions?

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