The Rise of the Platform Economy: Policy Issues, Business Choices, and Research Questions

Berkeley Roundtable on the International Economy University of California, Berkeley

The Rise of the Platform Economy: Policy Issues, Business Choices, and Research Questions

August 30, 2016

John Zysman Co-director, BRIE

Professor Emeritus, UC Berkeley

[email protected] www.brie.berkeley.edu

* A version of this talk was presented at the OECD June 14, 2016 “New Approaches to Economic Challenges Seminar” ** See also -- IST “ The Rise of the Platform Economy”Spring 2016 Martin Kenney and John Zysman -- The Next Phase in the Digital Revolution:Fall 2016 BRIE Working Paper John Zysman and Martin Kenney

mailto:[email protected]

mailto:[email protected]

http://www.brie.berkeley.edu

The BRIE/ETLA Collaboration

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Central issues in the platform economy

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Can the Digital Revolution provide real and rising

incomes with reasonable levels of equality?

What kind of society will we create?

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• Productivity & Growth

• Jobs: How many? What kind? What social context?

• Equality: Is that a choice?


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• Productivity & Growth

• Jobs: How many? What kind? Computation Intensive Automation

• Equality: Is that a choice?

• How do we govern the “Platform” phase of the digital revolution?




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TWO PREMISES

• Cloud is the technical foundation: platform is its application manifestation • Platform: algorithms that run in the Cloud

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Era of the Platform and the Cloud

CLOUD FUNDAMENTALS

• Cloud is a question of how computing is done, not where • Cloud computing is enabled by era of abundance • Abundance facilitates virtualization and abstraction

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BRIE Working Paper 2014-2, “Cloud Computing: From Scarcity to Abundance.” Kenji E. Kushida, Jonathan Murray, and John Zysman (2014)

http://brie.berkeley.edu/brie/publications/BRIE WP 2014-2 Cloud2014.pdf

THE CONSEQUENCES OF CLOUD

• For the User

– Availability of power – Speed of development of applications – Value moves up the chain from infrastructure to applications

• For the Provider

– Scale matters – Winner take all characteristics

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THE CONSEQUENCES OF CLOUD

• For the User

– Facilitates Start-ups and Small players

• For the Provider – Facilitates Giants

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What Are Platforms?

There are multiple meanings…

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Digital algorithms that run in the Cloud

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What are platforms?

Digital algorithms that run in the Cloud

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What are platforms?

This is obviously not sufficient

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What are (digital) platforms?

COMPUTER SCIENCE DEFINITIONS

• The key aspect is that platforms provide a set of shared techniques, technologies,

and interfaces to a broad set of users who can build what they want on a stable substrate.

– Platforms all the way down (Stu Feldman)

CONVENTIONAL ECONOMIC USAGES

• Multi-sided digital frameworks that shape, intermediate, the terms on which participants interact with one another

• Algorithm-enabled “cyberplaces” where constituents can act or transact

• Not just matchmaking or markets…. but social community

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The consequences of (digital) platforms?

• Do current things better: Efficiency and Friction

• The ability to do radically different things: Restructuring-Disruption

– Changes what is possible, not just what is efficient – The Economy from Horses to airplanes

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Delusions and side conversations: From the Valley

• The Sharing Economy

• Permissions and Forgiveness

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Are digital platforms restructuring economy and society?

The Platform: Utopia or Dystopia?

THE PIONEERS: Creating a utopia

• Noyce, Jobs, Sanders, Sporck (Gates in Seattle)

THE SKEPTICS: Will it be a dystopia? • Vonnegut (Player Piano) • Davidow-Mohr Davidow (HBR)

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The Platform: THE NEW QUESTION

IS THE DIGITAL REVOLUTION OVER?

• Robert Gordon forces the debate with The Rise and Fall of American Growth

• The core argument: – Drop in Productivity – Dramatic change in life is past

• The IcT technology wave has burst

– Limited scope in the economy – Limited power of the technology

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RESPONSES TO GORDON

• The wave is just beginning: sweeping from pure information services to – Services with everything – IoT – Manufacturing – Industrie 4.0 and its cousins Where we are in the Wave is, for now, speculation and argument

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RESPONSES TO GORDON

• The wave is just beginning:

• How technology is deployed is the key to the impact of technology on productivity

– Depends heavily on attitudes toward workers

The character of deployment is central to Productivity:

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ASK

To consider deployment and productivity in the Platform Era

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What do digital platforms do to jobs?

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HOW WILL LABOR MARKETS WORK

• How will work be organized in the market – Gig, putting out – Contract – Employment

• Job matching

– The friction efficiency story – Uber, Upwork

• Rules for the market and for work

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What does digital do to jobs?

THE BROADER QUESTIONS ABOUT DIGITALIZATION and WORK: The implications of Computation Intensive Automation

• Automation

• Employment

• Equality

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THE EVIDENT

• Automation touches much of work and employment

BUT CRITICAL QUESTIONS REMAIN

• How much is displaced? • How much is created? • How much is transformed

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THE EVIDENT

• Automation touches much of work and employment

BUT CRITICAL QUESTIONS REMAIN

• How much is displaced? • How much is created? • How much is transformed

We cannot know this now

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What balance will emerge?

WHAT INFLUENCES THE BALANCE OF-

• Displacement

• Creation

• Transformation

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Responding to the algorithmic dilemma will affect that balance THE ALGHORITHMIC DILEMMA & the 4th Services Revolution

• The Routine can be automated

• Most of automation can be copied

• The high road adaptation to the algorithmic revolution is innovation effectively using People

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Responding to the algorithmic dilemma will affect that balance THE ALGHORITHMIC DILEMMA & the 4th Services Revolution

• The Question: Does sustained innovation require human imagination and implementation?

• The Answer?

The high road adaptation to the algorithmic revolution is effectively using People

BUT

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THE QUESTION AND ANSWER ARE EVOLVING:

For example • The Facebook exception:

– Market position?

• Machine learning and its high powered cousins!!

– Does this change the game?

• Routine can be copied

– So continuous innovation is required

• Does machine learning automate continuous innovation?

– Or is machine learning just another routine that requires innovation?

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REPLACING OR REDESIGNING WORK?

Back to the Balance

• Will robots / software simply replace workers?

• Will we redesign work to take advantage of human cognition and creativity?

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Algorithms, workers, and productivity

THE HOPE!

Outcomes may not be inherent in technology

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If outcomes are not inherent in technology….

We come back to the deployment question

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DEPLOYMENT STRATEGIES AND WORK ORGANIZATION

Workers: • An asset to be promoted?

• Or a cost to be contained?

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There will be national variations in deployment choices and variations in deployment outcomes

• How will Cyber be integrated into production – Consider Industrie 4.0 – What standards will favor whom?

Promoting Intelligence Augmentation

Possible Routes

1. What is being done by whom

2. What is the nature of human capacity

3. IA Prize

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What world will we create?

Towards an integrated policy conversation

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I. PRIVATE VS. PUBLIC GOVERNANCE Digital platforms structure interactions

• Private structure and public rules

• What should be publicly or privately “governed”

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I. PRIVATE VS. PUBLIC GOVERNANCE Managing Innovation While Maintaining Rule based markets

• The Giant Platforms and Social Policy – Uber

• Transportation

– AirBnB

• Urban Planning

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I. PRIVATE VS. PUBLIC GOVERNANCE Managing Innovation While Maintaining Rule based markets

• A Silicon Valley Mantra: “Don’t Ask Permission, Ask Forgiveness”

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II. POLICY DOMAINS: Break down the silos of discussion

Consider the interconnections between…

• Privacy Big Data

• Competition Policy Labor Law

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II. POLICY DOMAINS How do we group the debates?

• Regulating Protections Workers, Communities, Clients

• Social Policy Markets, Employment, Citizenship

• Market Policy Who gains and how do we compete

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III. INTERNATIONAL RULES AND GLOBAL SYSTEMS

• What format for International Rules?

• The problem with treaties in the ICT world

– Rigidity in fast evolving technology – Who is involved

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IV. THE POLITICS OF DIGITAL TRANSFORMATION

• Structural change is not a matter of bloodless statistics

• Politics of this structural change in a Platform Economy

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IV. THE POLITICS OF DIGITAL TRANSFORMATION: BEYOND EFFICIENCY AND INNOVATION

• Can the era of rapid growth post-WW II help us understand the emergence of the platform economy

– Promoting winner, containing losers

– Fast growth solutions; slow growth problems

• The Implications of the American election

– Fragmentation of interests and the dynamic of mass politics.

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Two Takeaways: Two Critical Issues Going Forward

• Digital Deployment: Human consciousness and artificial intelligence

• Beyond Specific Policies: The politics of structural change in the era of the platform and digitalization

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The fault will lie not in our technology, But in ourselves

• What world will we create in a platform era?

• How will policy matter?

• How do we shape those debates?


Platforms: The Next Phase in the Digital Economy

Thank You

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Platforms: The Next Phase in the Digital Economy

“The Rise of the Platform Economy” Martin Kenney and John Zysman in Issues in Science and Technology http://issues.org/32-3/the-rise-of-the-platform-economy/

The algorithmic revolution---the fourth service transformation Magazine Communications of the ACM - Services science CACM Homepage archive Volume 49 Issue 7, July 2006 Page 48 How Revolutionary Was the Digital Revolution: National Responses, Market Transitions, and Global Technology, ed. With Abraham Newman Stanford University Press 2006

“Choosing a Future in the Platform Economy: Implications and Consequences of Digital Platforms” BRIE / ETLA Collaboration with Support from TEKES and Kauffman

Prior BRIE research on the Digital Economy: www.brie.berkeley.edu

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http://issues.org/32-3/the-rise-of-the-platform-economy/

http://cacm.acm.org/

http://dl.acm.org/citation.cfm?id=J79&picked=prox&cfid=625687609&cftoken=26867275