Excerpted from Neal Gorenflo:
“Bill Johnson of StructureC3 referred to Uber and Airbnb as Death Star platforms in a recent chat. The label struck me as surprisingly apt: it reflects the raw ambition and focused power of these platforms, particularly Uber.
Uber’s big bet is global monopoly or bust. They’ve raised over $8 billion in venture capital, are on track to do over $10 billion in revenue this year, and have over one million drivers who are destroying the taxi industry in over 300 cities worldwide. They’ve done all this in just over five years. In fact, they reached a $51 billion valuation faster than Facebook, and plan to raise even more money. If they’re successful, they’ll become the most valuable startup in history. Airbnb is nearly as big and ambitious.
Platform coops are the alternative to Death Stars. As Lisa Gansky urged, these platforms share value with the people who make them valuable. Platform coops combine a cooperative business structure with an online platform to deliver a real-world service. What if Uber was owned and governed by its drivers? What if Airbnb was owned and governed by its hosts? That’s what an emerging movement is exploring for the entire sharing economy in an upcoming conference, Platform Cooperativism.”
Why is this happening ?
“Uber signifies a new era in tech entrepreneurship. Its leaders express an explicit ideology of domination and limitless, global ambition. In fact, the global tech sector may be one of the most powerful stateless actors on the world stage today. And Death Star platforms are the tech sector’s avant garde.
Death Star platforms deftly exploit today’s growing economic insecurity and political vacuum. Their business model relies on precarious 1099 contractors. They mix technology, ideology, design, public relations, community organizing, and lobbying in a powerful new formulation that’s conquering cities and users around the world. They wrap themselves in the cloak of technological progress, free market inevitability, and even common good. As a result, cities allow them to break their laws with surprising frequency (Uber and Airbnb are simply illegal in most cities). Weak city governments either drink the Kool-Aid or struggle to contain them.
Millennials, who Pew Research described as detached from institutions and networked with friends, may be Death Star platform’s most ardent users. 50% of millennials are political independents, a huge increase over prior generations. And while Millennials are detached from traditional institutions, they increasingly connect through Death Stars. Most use these services and implicitly accept their ideology as Death Stars mask the complexity of their services—and their politics—behind slickly designed apps. As a result, they along with many others unknowingly join a movement with totalitarian goals, all for the sake of often negligible income, savings and convenience. It’s scary but understandable. US Millennials suffer from the highest debt and lowest employment of any generation since the Great Depression. Not to mention that Death Stars often deliver a better service. I use them occasionally too.
Peter Thiel, founder of PayPal and leading sharing economy venture capitalist (VC), epitomized this ideology in a 2014 Wall Street Journal op-ed entitled, “Competition is for Losers,” in which he encourages entrepreneurs to establish monopolies. Marc Andreessen, another leading sharing economy VC, wrote a similar op-ed in the same publication three years earlier titled, “Why Software is Eating the World,” in which he declared that there was no industry that couldn’t be disrupted by web technologies.
Behind the bombastic rhetoric are powerful real-world drivers. There are sound, if not self-serving, reasons for these VC’s bold calls to action. A technology gold rush dramatically larger than any before has only begun to unfold, and Thiel and his ilk have the most to gain. Jeremiah Owyang’s Collaborative Economy Honeycomb infographic shows a large and growing universe of companies challenging dozens of major industries. Indeed, a recent IBM survey identified corporate executives’ top fear as the Uberization of everything. Zipcar founder Robin Chase believes that everything that can become a platform, will become a platform. If so, then the sharing economy is just the tip of the spear. Silicon Valley could become the power center of the world, with its leaders joining the small-but-growing ranks of stateless, above-the-law plutocrats.
That’s a big claim, but not out of the realm of possibility. There are some compelling leading indicators.
There’s a surface explanation, but much more below that. Technology startups are building platforms to compete in nearly every brick and mortar service sector, and on a global basis. These platforms coordinate economic activity, but do not need to own the key physical assets or employ any of the end-service providers to profit. Uber owns no cars and employs no drivers, but has decimated the taxi business in San Francisco.
With incredibly low costs, global reach, scientifically developed user interfaces, and massive funding, Death Star platforms have a shot at duplicating this kind of success in every major city and service sector around the world. This has VCs salivating. The multitude of incumbents spread across many industries and geographies that play by the rules face steep odds against the lawlessness, network effects, and focused power of Death Stars.
At a deeper level, fundamental changes in the startup world are underway. Tech startups have to venture into the brick and mortar world as the low hanging fruit in information-intensive industries has been picked. Google, Facebook, Apple, Microsoft, Amazon, and more have established their global monopolies. Tech must leave the nest, and its newest startups can because it’s significantly faster, cheaper, and less risky to start companies than before.
The assembly line creation of technology startups has been largely perfected. Silicon Valley’s VC-driven ecosystem has significantly reduced the considerable cost and risk of starting a venture. Funding is at record levels. There’s large corps of professionals who specialize in building startups. The technology is also cheap, meaning that startups need significantly less funding than before…unless they want to “disrupt” a brick and mortar industry.
These new dynamics explain Uber. Uber didn’t raise record amounts of venture capital to develop a new technology. Their technology is pedestrian. Most of it was developed by taxpayer-funded US government programs decades ago. They have combined old technology in a new way, but that’s relatively cheap to do. The $8 billion they’ve raised is to establish a global monopoly—in the real, physical world—in as short a time as possible. That takes a lot of marketing and lobbying muscle, and that’s really expensive.
What are indicators of the Death Star platform’s rising political power? Uber’s David Plouffe, formerly President Obama’s campaign manager, literally besieged Portland’s mayor, ultimately forcing him to create a favorable policy. Bloomberg’s “This is How Uber Takes Over a City” gives an eye opening account Uber’s strong arm tactics. As of this writing this, Airbnb is running an $8.3 million campaign to defeat a San Francisco voter proposition (Prop F) designed to limit Airbnb’s negative impact on the city’s skyrocketing housing costs. This lobbying activity is just the tip of the iceberg. Uber and Airbnb are using a good bit of their $10 billion+ collective war chest to hire a global army of lobbyists. In their language, they’ve put “boots on the ground” in hundreds of cities.
This is a big departure from the past. Tech investors used to avoid startups with significant regulatory risk because there were plenty of better, less risky opportunities. That’s not the case anymore. Now tech investors must and can take on the physical world.
Moreover, the huge investment raises and regulatory friction add up to much more than the sum of their parts. It’s like 1+1=10. The more money Death Star platforms raise, the more press and customers they get. The more they break the rules, the more press and customers the get, which enables them to raise even more money. Taxi drivers strike? Jackpot! And the cycle repeats. It’s a blitzkrieg. It’s shock and awe entrepreneurship. It’s the sound of a new hegemonic bloc coming to power.
Here’s what’s at stake. As Detroit shaped the world in the image of the car in the 20th century through an alienating and resource intensive system of highways and suburbs, so might Silicon Valley shape the world in the image of Death Star platforms in the 21st.
If you’re outraged by the power of tech giants now, just wait until tech dominates the majority of services you depend on to live. If you’re worried about how tech companies use your personal information now, just wait until they can track you 24/7 online and off. If you’re frustrated by how tech companies wield power over you as user now, just wait until you’re algorithmically fired by a Death Star because of one random bad rating. If you think incumbents like taxi companies suck, just wait until a win-at-all-cost tech titan like Uber’s Travis Kalanick rules the roost. If the diversity of your city’s locally-owned businesses is already suffering, just wait until sterile, centralizing Silicon Valley apps create an even more boring and unresilient monoculture. If you’re worried about housing costs, just wait until every city’s housing market is like San Francisco’s, where one bedroom apartments rent for an average of $3,500 a month, the highest in the US. If you’re pissed by today’s unprecedented inequality, just wait until Death Star platforms destroy millions of jobs (Uber can’t wait for driverless cars, yippee!) while shifting more risk and cost onto providers.
Bottom line, what seems like a bad situation for the 99% today could become much, much worse tomorrow.”
What can we do about it ? See our next excerpt on Platform Cooperatives as alternatives, on the 10th.