The platform era

The economics of digital platforms, including the sharing economy, has become a hot topic – not only among researchers but also with several new books for the non-specialist reader. Yesterday I took part in the Digital Forum organised by the Toulouse School of Economics – home of Nobel Laureate Jean Tirole, one of the first economists to analyse platforms (or two-sided or multi-sided markets). It was a packed event with some fascinating contributions. And on the train to and from Paris, I read [amazon_link id=”1633691721″ target=”_blank” ]Matchmakers[/amazon_link] by David Evans and Richard Schmalensee. This follows on from [amazon_link id=”0393249131″ target=”_blank” ]Platform Revolution[/amazon_link] by Geoffrey Parker, Marshall Van Alstyne and Sangeet Paul Choudary (which I reviewed here), and [amazon_link id=”0262034573″ target=”_blank” ]The Sharing Economy[/amazon_link] by Arun Sundararajan (here).

[amazon_image id=”1633691721″ link=”true” target=”_blank” size=”medium” ]The Matchmakers: The New Economics of Multisided Platforms[/amazon_image] [amazon_image id=”0393249131″ link=”true” target=”_blank” size=”medium” ]Platform Revolution: How Networked Markets are Transforming the Economy–and How to Make Them Work for You[/amazon_image]

[amazon_image id=”B01F26CC4S” link=”true” target=”_blank” size=”medium” ]The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism[/amazon_image]

All three are well worth reading – they all clearly explain the economic characteristics of digital platforms, with lots of examples. Inevitably there is some overlap but in fact the books complement each other nicely and also include different examples. [amazon_link id=”0393249131″ target=”_blank” ]Platform Revolution[/amazon_link] takes more of a business design perspective, while [amazon_link id=”B01BG90H9W” target=”_blank” ]The Sharing Economy[/amazon_link] is specifically focused on peer-to-peer markets. [amazon_link id=”1633691721″ target=”_blank” ]Matchmakers[/amazon_link] has more about the economic analysis and public policy questions including competition – David Evans’ earlier book, a collection of papers, [amazon_link id=”1468102729″ target=”_blank” ]Platform Economics[/amazon_link], was quite heavily focussed on the competition issues.

Some of the examples in [amazon_link id=”B01BO6QMCI” target=”_blank” ]Matchmakers[/amazon_link] are very nice. I particularly liked the case of the US trucking industry. There’s also a chapter on M-Pesa, which I know a bit about; it is a nice description of how it worked in Kenya, although I’d have been interested to read about why mobile money platforms have failed in so may unbanked countries – regulatory barriers in my view. One of the questions about platforms’ success or failure is the extent to which they take advantage of opportunities for regulatory arbitrage on the one hand and can be killed by hostile regulation on the other hand.

Marshall Van Alstyne was one of the participants in the Toulouse School of Economics event and gave a great talk including this chart; he and I agreed that there is a huge research agenda on this subject as we’re entering the era of platforms. I have an issues paper out soonish, sketching some of the questions.

Marshall Van Alstyne at the TSE Digital Forum 16/6/2016

Marshall Van Alstyne at the TSE Digital Forum 16/6/2016

Computing, the British way

I’ve *loved* reading [amazon_link id=”1472918339″ target=”_blank” ]Electronic Dreams: How 1980s Britain Learned to Love the Computer [/amazon_link]by Tom Lean. It’s a thoroughly enjoyable mix of business history and social observation, written with the enthusiasm and affection of somebody who got his first Commodore 64 at the age of 8 as a Christmas present.

[amazon_image id=”1472918339″ link=”true” target=”_blank” size=”medium” ]Electronic Dreams: How 1980s Britain Learned to Love the Computer[/amazon_image]

The book starts with Britain’s pioneering role in computing, opening with Manchester’s ‘Baby’, the first electronic stored program computer, built on wartime expertise. It then skips straight to the late 1970s to explore why conditions then enabled the flourishing of a number of innovative computer manufacturers in the UK, and alongside this supply the expansion of mass market demand. Parts of the story are very familiar, including the competition between Sinclair and Acorn so well told in Micro Men. Other parts are less familiar. I for one didn’t know anything about Prestel, and why it failed where France’s Minitel succeeded so well. One key difference was that the French state gave business and home users free terminals at the rate of 10,000 a week by 1984. Impossible to envisage Mrs Thatcher ever thinking that a good idea.

The book has a very nice chapter on the origins and vitality of the UK games industry too. I love some of the early games: Dennis Through the Drinking Glass featured Dennis Thatcher hunting around 10 Downing Street for a G&T while trying to avoid Mrs T. There was a game based on the TV series Auf Wiedersehen Pet, which gave users the chance to play a Geordie brickie building a wall in Dusseldorf – the book doesn’t say how successful this was. The commercially unsuccessful Deus Ex Machina featured Dr Who actor Jon Pertwee, historian E.P.Thompson, rock star Ian Dury and comedian Frankie Howerd; astronomer Patrick Moore turned the gig down. Fabulous.

The book highlights the key role in the spread of computing and programming played by the famous BBC Micro, a complex but hugely successful initiative by the BBC. Many of the successful video games pioneers, including David Braben, started off with this machine, which was also familiar to many from school. The book’s epilogue features the Raspberry Pi – it was obviously written before the launch of the BBC’s MicroBit, now going free to all Year 7 high school students in Britain to prepare them to move on to the Raspberry Pi and other coding efforts.

The hope of course is that these tiny new computers will inspire another generation to innovate and create in the industry. But the history of the 1980s personal computer industry shows as well the importance of the scale and sophistication of American competitors. It is clearly right to try to familiarise and even excite all young people with the potential of the beautiful new machines, but achieving large-scale industrial success with them will need some strategic thinking by the government, of which there is disappointingly little sign at present.

The future is multiple, not singular.

I’ve long enjoyed the blog posts by Richard Jones on economic productivity and growth – his perspective from physics is always interesting. As I met him in real life for the first time this past week, I also downloaded his free e-book Against Transhumanism (download here) – a brief, compelling demolition of the idea that digital technology is hurtling us towards a ‘singularity’. The most famous transhumanist is Ray Kurzweil, I suppose, of [amazon_link id=”0715635611″ target=”_blank” ]The Singularity is Near[/amazon_link]. Prof Jones points out that:

a) exponential growth (as per Moore’s Law) cannot deliver a singularity, as the value of expnential functions is finite – unless the rate of technological improvement is constantly increasing without limit. Seems a stretch, looking at either current productivity figures or any history at all.

b) transhumanism is an apocalyptic religion, not a scientific theory.

c) To quote the e-book: “The idea that history is destiny has proved to be an extremely
bad one, and I don’t think the idea that technology is destiny will necessarily work out that well either. I do believe in progress, in the sense that I think it’s clear that the material conditions are much better now for a majority of people than they were two hundred years ago. But I don’t think the continuation of this trend is inevitable. I don’t think the progress we’ve achieved is irreversible, either, given the problems, like climate change and resource shortages, that we have been storing up for ourselves in the future. I think people who believe that further technological progress is inevitable actually make it less likely – why do
the hard work to make the world a better place, if you think that these bigger impersonal forces make your efforts futile?”

It’s well worth a read, along with the Soft Machines blog.There is a super-clear explanation of the implications of nano-technology,as you might expect from the author of the [amazon_link id=”0199226628″ target=”_blank” ]Soft Machines [/amazon_link]book.

[amazon_image id=”0198528558″ link=”true” target=”_blank” size=”medium” ]Soft Machines: Nanotechnology and Life[/amazon_image]

There’s also a chapter on why it’s unlikely you’ll ever be able to upload your brain to the cloud. Above all, though, the book explains why transhumanism is a Dangerous Idea. The idea of a Singularity has been described as the ‘Rapture of the Nerds’ (attributed to [amazon_link id=”1857238338″ target=”_blank” ]Ken McLeod[/amazon_link]), which makes it sound like the lunatic fringe. But as Prof Jones points out, the Silicon Valley crowd are seriously influential; and their view that technology has its own irresistible dynamic – the techno-determinism – elbows aside the truth that the results of technological discovery are socially determined: “Why would you want to think of technology, not as something that is shaped by human choices, but as an autonomous force with a logic and direction of its own? Although people who think this way may like to think of themselves as progressive and futuristic, it’s actually a rather conservative position, which finds it easy to assume that the way things will be in the future is inevitable and always for the best.”

Written by a physicist but like a true social scientist. The future is multiple, not singular.

Robots, humans and other animals

John Markoff’s [amazon_link id=”0062266683″ target=”_blank” ]Machines of Loving Grace: The Quest for Common Ground Between Humans and Robots[/amazon_link] ends with a reference to Thorstein Veblen’s [amazon_link id=”123033128X” target=”_blank” ]The Engineers and the Price System[/amazon_link] (not a book I’ve read – I’ve always found Veblen really heavy going). Apparently Veblen argued that the increasing technological complexity of society would give political power to the engineers. Markoff draws the analogy with the central role of algorithms in modern life: “Today the engineers who are designing the artificial intelligence-based prorams and robots will have tremendous influence over how we use them.”

[amazon_image id=”0062266683″ link=”true” target=”_blank” size=”medium” ]Machines of Loving Grace: The Quest for Common Ground Between Humans and Robots[/amazon_image]  [amazon_image id=”1614273707″ link=”true” target=”_blank” size=”medium” ]The Engineers and the Price System[/amazon_image]

[amazon_link id=”0062266683″ target=”_blank” ]Machines of Loving Grace[/amazon_link] is a history of the tension between artificial intelligence (AI) research, which substitutes robots for human activity, and ‘intelligence augmentation’ (IA) complementing human skills. It is also a call for those engineers to ensure their work is human-centred. It’s all about the humans, not about the machines, Markoff concludes. The book dismisses what he calls the ‘Apocalyptic AI’ tradition embraced by people like Ray Kurzweil and Hans Moravec, looking forward to the Singularity, the [amazon_link id=”1503262421″ target=”_blank” ]Frankenstein[/amazon_link] moment when our machine intelligence creation becomes conscious and alive. Yet Markoff worries about the failure of the ‘AI’ (rather than ‘IA’) researchers to stay alert to the dangers of not writing people into the algorithmic script.

[amazon_image id=”0141439475″ link=”true” target=”_blank” size=”medium” ]Frankenstein: Or, the Modern Prometheus (Penguin Classics)[/amazon_image]  [amazon_image id=”1614275025″ link=”true” target=”_blank” size=”medium” ]Cybernetics: Second Edition: Or the Control and Communication in the Animal and the Machine[/amazon_image]  [amazon_image id=”0691168423″ link=”true” target=”_blank” size=”medium” ]The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about It[/amazon_image]

The danger has always been apparent. Norbert Wiener’s [amazon_link id=”1614275025″ target=”_blank” ]Cybernetics[/amazon_link], “Posed an early critique of the arrival of machine intelligence: the danger of passing decisions on to systems that, incapable of thinking abstractly, would make decisions in purely utilitarian terms rather than in consideration of richer human values.” (A comment that struck me because economics is of course purely utilitarian and notorious for setting the ‘richer human values’ aside.) Another danger is pointed out later in the book, attributed here to Alan Kay: that relying on machines, “Might only recapitulate the problem the Romans faced by letting their Greek slaves do their thinking for them. Before long, those in power were able to think independently. ” Markoff cites evidence that reliance on GSP is eroding memory and spatial reasoning. There is also, surely, the problem Ian Goldin underlines in his book [amazon_link id=”B00SLUBSJ8″ target=”_blank” ]The Butterfly Defect[/amazon_link]: that greater reliance on complex networks means greater vulnerability when they go wrong, or are attacked.

[amazon_image id=”B00IIB2CUY” link=”true” target=”_blank” size=”medium” ]The Coming Of Post-industrial Society (Harper Colophon Books) by Bell, Daniel (1976) Paperback[/amazon_image]

To go back to the Veblen point, his was a political argument in the Progressive era. Accumulations of political power, via ownership of assets including technology and skills, always trigger political struggles. Daniel Bell made a similar point in [amazon_link id=”B00IIB2CUY” target=”_blank” ]The Coming of Post-Industrial Society[/amazon_link] – that the political faultline of the post-industrial age would be technocratic expertise versus populist demands. Perhaps he was too early: we seem to be deep into a populist backlash against the technologists right now. But for me the question isn’t so much whether the robots are human-friendly as whether the political and economic structures within which technological advance occurs are human-friendly. It isn’t looking promising.

Anyone prompted to mull over the question of what makes a silicon-based non-human being intelligent should read this wonderful article about carbon-based non-human intelligence. If it’s ever a case of us against the machines, we’ll have the dogs, dolphins and chimpanzees on our side.

Of robots and dogs

I’m part way through [amazon_link id=”0062266683″ target=”_blank” ]Machines of Loving Grace[/amazon_link] by John Markoff, which is about whether ‘robots’ spell automation (substitutes for humans) or augmentation (complements to humans), and the history of the tension within the field of AI between these strands. A review will follow in a couple of days. But one sentence early in the book stopped me short:

“Humans appear to want to believe they are interacting with humans even when they are conversing with machines. We are hardwired for social interaction.” [my italics]

[amazon_image id=”0062266683″ link=”true” target=”_blank” size=”medium” ]Machines of Loving Grace: The Quest for Common Ground Between Humans and Robots[/amazon_image]

So given that we are building the machines, why can’t we hardwire them for social interaction too? I want Siri to love me as much as my dog loves me – and is inclined to love other humans apart from the postman.

Dog of loving grace

Dog of loving grace