Saturday, February 25, 2017

Platform Capitalism by Nick Srnicek, Polity. 2016.

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Capitalism, when a crisis hits, tends to be restructured. New technologies, new organisational forms, new modes of exploitation, new types of jobs and new markets all emerge to create a new way of accumulating capital. Since the 2008 crisis, the dominant narrative in advanced capitalist countries has been one of change. In particular, there has been a renewed focus on the rise of technology: automation, the sharing economy, endless stories about the ‘Uber for X’ and, most recently, proclamations about the internet of things. These changes have received labels such as ‘paradigm shift’ from McKinsey and ‘fourth industrial revolution’ from the executive chairman of the World Economic Forum and, in more ridiculous formulations, have been compared in importance to the Renaissance and the Enlightenment. We have witnessed a massive proliferation of new terms: the gig economy, the sharing economy, the on-demand economy, the fourth industrial revolution, the surveillance economy, the app economy, the attention economy and so on. But what unites these divergent phenomena?

In essence, all are symptomatic of how twenty-first-century advanced capitalism is coming to be centred upon extracting and using a particular kind of raw material: data. And the business model which is adequate to this shift is the platform – digital infrastructures that intermediate between different groups. This is the key to its advantage over traditional business models when it comes to data, since a platform positions itself (1) between users, and (2) as the ground upon which their activities occur, thereby giving it privileged access to record them. Google, as the platform for searching, draws on vast amounts of search activity (which express the fluctuating desires of individuals). Uber, as the platform for taxis, draws on traffic data and the activities of drivers and riders. Facebook, as the platform for social networking, brings in a variety of intimate social interactions that can then be recorded. And as more and more industries move their interactions online (e.g. Uber shifting the taxi industry into a digital form or John Deere creating agricultural platforms), more and more businesses will be subject to platform development. Platforms are, as a result, far more than internet companies or tech companies since they can operate anywhere that digital interaction takes place.
Image Credit: (Pixabay CCO)

A first important aspect is that these digital platforms produce and are reliant upon ‘network effects’: the more users that use a platform, the more valuable that platform becomes for everyone else. Facebook, for example, has become the default social networking platform simply by virtue of the sheer number of people on it. If you want to join a platform for socialising, you join the platform where most of your friends and family already are. Likewise, the more users that search on Google, the better their search algorithms become, and the more useful it becomes to users. But this generates a cycle whereby more users beget more users, which leads to platforms’ having a natural tendency towards monopolisation. It also lends platforms a dynamic of ever-increasing access to more activities, and therefore to more data. Moreover, the ability to rapidly scale many platform businesses, by relying on pre-existing infrastructure and cheap marginal costs, means there are few natural limits to growth. One reason for Uber’s rapid growth, for instance, is that it does not need to build new factories – it just needs to rent more servers. Combined with network effects, this means that platforms can grow very big, very quickly.

This is exacerbated by a second dynamic of digital platforms: their insatiable appetite for data means that the most powerful platforms are also continuously expanding through new acquisitions. If collecting and analysing this raw material is the primary revenue source for these companies and gives them competitive advantages, there is an imperative to collect more and more. As one report notes, echoing colonialist ventures:

From a data-production perspective, activities are like lands waiting to be discovered. Whoever gets there first and holds them gets their resources – in this case, their data riches.

For many of these platforms, the quality of the data is of less interest than their quantity and diversity. Every action performed by a user, no matter how minute, is useful for reconfiguring algorithms and optimising processes. Such is the importance of data that many companies could make all of their software open-source and still maintain their dominant position due to their data. Unsurprisingly, then, these companies have been prolific purchasers and developers of assets that enable them to expand their capacity for gaining information. Mergers relating to big data, for instance, have doubled between 2008 and 2013, while globally, tech-related mergers and acquisitions rose to a record high in 2016. The vast cash glut of these companies and their frequent use of tax havens contributed to making this possible. A large surplus of capital sitting idle has enabled these companies to build and expand an infrastructure of data extraction.

The end result of these basic dynamics is a tendency for companies to grow big, to grow fast and to monopolise their core businesses. These consequences pose significant political challenges, particularly as these companies come to control the basic infrastructure of digital society. As our future becomes even more digitally-dependent, we must challenge the economic dynamics that lead to a vast centralising of power within the hands of a few massive platforms.

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