Don’t fear the guillotine. Platform companies can succeed.

How we foster innovation of platforms while solving the massive issues with them.

Don’t fear the guillotine. Platform companies can succeed.

Don’t fear the guillotine. Platform companies can succeed.

How we foster innovation of platforms while solving the massive issues with them.

Deep down, every platform CEO fears the guillotine, and so does their executive staff. 

How do I know this? I’ve worked at platform companies like Uber for almost a decade and have interviewed or worked with over 100 founders and CEOs running similar businesses. Over the years I’ve grown to recognize their fear, even when it’s buried deep. 

It’s not hard to see why they’re worried. These platform execs have seen many peers marched to the scaffolds by PR nightmares, strikes, or mass exodus to competitors. They know their business might be the headline of tomorrow’s NYTimes–or worse, canceled by the mob on Twitter–no matter how good their brand image is today. 

All it takes is one poor decision from a regional marketing manager, one bug in a payments API, or one bullheaded move from the new “ex-Goldman” CFO to “A/B test a minor commission increase” to send a platform into revolt. Leaders know that no matter how well intentioned, fair, or stable their company is today, they’re just a few mishaps away. 

But the CEO is hardly the only person afraid of instability in a platform business. 

The platform contributors–i.e. the gig workers, the people actually doing the work and selling their goods and services–often have it much, much worse than pampered tech employees. 

Unfairness is rife on many marketplace and gig platforms since the platform wields far more power when it comes to pricing and fees. Well-meaning businesses can become extractive either by accident or under investor pressure. 

Almost just as damaging is how contributors feel like they’re in a black box due to a major data disadvantage. This is information warfare of the most sophisticated sort. Users are buried by marketing mumbo-jumbo, targeted by data dragnets, and indoctrinated by a racketeering blogosphere… only to find out when they really dig in that most competing platforms have commoditized tech and are basically the same. 

That’s a lot of bad stuff. What’s the takeaway? As good citizens of the world, we should all hate platform businesses, right? They make for shaky businesses and extractive labor environments, right? 

Not at all. Far from it. The truth is, these businesses make people’s lives better, and make the economy run more efficiently on the whole. They let people buy and sell more of what they want, at scale, and that matters–a lot. 

But many teeter on the edge of instability for two reasons: 

  1. A lack of trust
  2. Misaligned incentive structures 

Let’s start with trust. 

Platform suppliers distrust their platforms. Whether it’s a gig worker on Uber, an artist on Etsy, or a small business selling on Amazon, the platform’s original magic eventually wears off. 

Over time, a visceral understanding of asymmetric power dynamics takes hold (whether it’s a conscious thought or not). This fear is rooted in our reptile brain, and heightened by the internet. When people see a black box, they almost always fill it with fear instead of trust. Suppliers start to wonder: What is the platform hiding from me? When will the next price change hike come? How is the platform screwing me out of my due? 

In some cases, platforms may indeed be trying to screw suppliers and hike commission rates. But most business leaders are probably frustrated by these distrustful questions because they’re doing their personal best to build a relationship with their community of suppliers. 

Building a relationship between platform and platform contributors that is resilient to these obstacles has been almost impossible in the past. Internet-based interactions (email, chat), commoditized technology (yes, your ex-CTO now works at your biggest competitor) and competitor misinformation (yes, your competitor just bought all your suppliers’ emails from ZoomInfo) add fuel to the fire. 

How to make trust work on the internet. 

If platform businesses are net-positive, but still have these fundamental trust issues, what are we to do? There’s an answer. Let’s talk about blockchain. 

A traditional database is like a black box for people without keys to open it. Both conventional technology and a natural tendency to privacy lead platforms to default to a closed database infrastructure. Data, by default, is only owned by and editable by one party–the owner of the database. 

A blockchain is the opposite of a black box. 

The simplest way to think about blockchain is as a shared database that gives every user and business neutral ground to transact on and share data across. It’s sort of like bringing the magical powers of Santa’s naughty-or-nice to doing business. Everyone agrees that Santa’s list always contains the truth (he sees you when you’re sleeping, after all), and if you ever looked at Santa’s list, you’d trust that it’s accurate, because Santa doesn’t have ulterior motives for recording false info on it. He has one job: record the truth of your behavior.

In our case Santa is a distributed, neutral computing network–but the idea is the same, and the implications are extraordinary. 

If used properly, this neutral record provides a place for people to see in real time what actions are driving value flow (like dollars)–whether it’s a sale transaction or a customer referral. And what’s more–this neutral record can also be programmed to automate that value flow. 

If business is done on a blockchain, where the logic of how money and goods change hands is written into and independently managed by our Santa (a distributed ledger), trust becomes a built-in feature of doing business, not something you have to spend money on marketing to convince people of. 

Next up: misaligned incentives. 

Unfair payment schemes often result in platform upheaval. You’ve read about Uber and Lyft walkouts, Etsy strikes, and calls by famous writers to boycott Amazon. 

And sometimes, as we’ve noted, it’s extractive management practices and heavy pressure from public or private investors at the root of the problem. But it’s usually more complicated than that. A decade of innovation in platform technology has outstripped the world’s payment infrastructure. Payment technology, banking services, and regulations make it hard to pay a distributed, often global workforce in a way that is both fair and efficient. 

It’s not the math that doesn’t work, it’s the complexity of these other factors that makes it almost impossible to make it a win-win for platforms and their contributors. 

A simple example: if a platform wants to share long-term revenue upside with non-employee contributors (who make up the vast majority of workers), how do they do it? If they were employees, the company would just toss them some stock units with a vesting schedule and call it a day. 

This isn’t a realistic option for a platform with 60,000 workers across 15 countries, where it’s often illegal to do so in a practical manner–the legal, administrative, and local banking costs would quickly outstrip the actual value being distributed to the workers. Even long-term cash incentives are near-impossible to manage thanks to low data transparency (see prior section!), complex international banking systems, and no standards for doing so. 

This leaves platform businesses in a pickle. How to align financial incentives of their contributors with the long term success of the business itself? To do so would be both fairer and more efficient for all. 

In addition to providing neutral ground for information sharing, a blockchain offers neutral ground for issuing programmable money. Using smart contracts to program value flow (i.e. the movement of money, legal rights, and any other imaginable store of value), platform businesses suddenly have an extraordinary new tool in their toolbox. Instead of a compensation system that has to use a mix of two extremes–lump cash and stock units–they can turn the dial to any arbitrary location on the compensation schedule. 

Want to pay your top contributors $10k in 48 months if they’re active every quarter? Easy. Want to create incentives that allow thousands of globally distributed actors or businesses to share in the upside of a network proportionate to the value they contribute? Also easy (and previously impossible). 

Programmable money on a secure, distributed ledger also makes for easier movement of funds across borders. Money and other stored value can show up anywhere on the blockchain–then move anywhere else in the world–instantly and with zero fees. A network of local banking infrastructure can easily initiate flow from the blockchain to local fiat accounts far, far more easily than building an infinite web of connections with every other bank in every other country. 

How we get from there to here. 

This is the first time I can say with confidence that this is going to change the way the world works in the next six months.Why? Three things have happened recently to change the game. 

  • First, the hard technical problems with scalability and consensus with distributed computing (i.e. building the Santa we need) have finally been solved, and the only thing left to do is make them accessible to the masses. 
  • Second, half of the world’s Fortune 500 started experimenting with blockchain in 2022, and the stigma associated with crypto is all but gone among serious business people, even in the midst of the FTX meltdown. 
  • Finally, people are building the right practical solutions with this tech, not least of which is Village. At VIllage we’ve brought together blockchain and marketplace expertise like no one else, and we’ve built the tools needed for mainstream businesses to rapidly iterate. 

We are in a special time and place, and for once in the last ten years, platform CEOs need not fear the guillotine–not if they have the guts to start building on chain. If they don’t start soon, they’ll get left behind. In 2023 we’ll see the other half of the Fortune 500 announce their blockchain plans alongside a huge wave of innovative startups building on blockchain to challenge the internet as we know it. 

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