“What has happened in effect is that though the processing capability of a “wired” customer or service supplier has gone up dramatically, this typically has not facilitated any major societal value shift or new societal network emergence. If anything, the history of the Internet since c 2010 is an increasing walling off of what were once open societal network areas, even as end user devices have got more powerful. What has happened is that an increasing part of the “hard to automate” workflow is outsourced to the supplier and user at the network edge (via their smartphones) and much within is automated. But whether it’s Google ousting Yellow Pages, Apple iTunes ousting Tower Records (Napster was truly Societal, and look what happened there), Amazon ousting the local bookshop or Uber ousting a Taxi firm near you, a Firm is still very much in charge.”
Excerpted from one of the best analyses I have seen on the logic of netarchical capitalism, i.e. firms enclosing and controlling peer to peer exchange platforms or knowledge commons.
From Agile Elephant:
“what are these replacement economic entities going to look like when the firm sheds transactions? Who will operate and own them? Will they be bedded in the “society at large” or not? There is an implication in Kilpi’s work that these are not intermediary structures, the WTF essay assumes they will be set in these newfangled Internet networks and called “Plaftforms”. However, if you look at the example given in the essay as a harbinger of the new – Uber – it is clearly just another Firm, using t’Internet rather than t’Phone. As to value exchange, it remains a centrally placed intermediary. All links lead to and from Uber. All transactions (logistical and financial) are routed through Uber’s servers, within its own network. If this is a “new” network economy, it is a highly centralised and closed network, with all nodes owned and run by Uber, as any before. All that “society at large” is doing is supplying or ordering a taxi ride and paying for it at the edge if the network, as it did before, just that now its by App transactions rather than ‘phone or hail ones.
In this case one “traditional” Firm, the original Taxi Company (or in fact many Taxi Companies), have just been replaced with another, newer, one – Uber. A new Firm has used newer technology to reduce the transaction costs in a well worn existing business model (order taxi – route taxi – pay taxi) and is now using good old fashioned In-Firm competitive advantage to take market share from existing Firms with higher transaction costs. Uber only needs a “very different kind of management” insofar as it is managing more machines, less people in its workflow. It’s network is a good old heirarchical network, just more automated.
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Transaction Costs per se are clearly only a part of this story.
Just follow the money – these UberFirms would not have “Unicorn” valuations if the surplus in the value chain was going to be spread across a host of other small players in a network, their backers are taking a Firm bet on where much of the surplus ends up.
And follow the spend – its all about market growth, including using investment money to undercut incumbents to gain mass market share fast, and increasingly to lobby against forces trying to recreate level playing fields in terms of regulation & employment laws.
In fact the major economic drivers of these UberFirms’ advantage are not the technology driven transaction cost reductions from ICT, but the labour and regulatory savings. And this has been true overall for many a decade. The big driver of outsourcing was lower regulatory and labour costs in developing countries, not the transaction cost reduction from adoption of ICT on every desk and cheap global telephony. What has really changed in UberFirms is who the employees nominally work for, their working conditions, and which regulations the UberFirms believe they can avoid.
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What has happened in effect is that though the processing capability of a “wired” customer or service supplier has gone up dramatically, this typically has not facilitated any major societal value shift or new societal network emergence. If anything, the history of the Internet since c 2010 is an increasing walling off of what were once open societal network areas, even as end user devices have got more powerful. What has happened is that an increasing part of the “hard to automate” workflow is outsourced to the supplier and user at the network edge (via their smartphones) and much within is automated. But whether it’s Google ousting Yellow Pages, Apple iTunes ousting Tower Records (Napster was truly Societal, and look what happened there), Amazon ousting the local bookshop or Uber ousting a Taxi firm near you, a Firm is still very much in charge.”
(http://www.theagileelephant.com/transaction-costs-lead-to-network-economies-wtf/)