Monday, December 7, 2015

Dainik Jargon - Everyday Economics - What is a platform?

Author's Note - The old adage of "Eat only what you kill" is true more today for our consumption of knowledge than our diet. Often we assimilate concepts without questioning the premise and grossly oversimplifying assumptions involved. 

Physics can get away with saying things like "This theory is only true in a vacuum in the absence of friction." That luxury cannot be extended to management science. It has a duty to explain the deviations, exceptions or failures of its concepts and theories. And what is our duty? To ask questions, of course. This article is an attempt to provide a farcical perspective to management and economic concepts. The idea is to go from "Are you kidding me?" to "Yes, it does make sense." I'd rather go from being a skeptic to a fan than the other way round.  

To market, to market, a gallop a trot,
To buy some meat to put in the pot;
Three pence a quarter, a groat a side,
If it hadn't been killed it must have died

- To Market, To Market (Nursery Rhyme)

On a chilly night on Dec 5 a year ago, Shiv Kumar Yadav, a driver registered with Uber raped a 27 year old female professional in Delhi. Litigation followed. Apart from arguing the case for stringent punishment for the accused, the prosecution insisted that Uber was also culpable in the crime. After all, by not conducting a thorough background check of the driver, it had exposed its customer to bodily harm.

Uber argued – not my car, not my driver, not my problem. You can’t touch me bitch, I am on the cloud.

Welcome to the new world of the Asset Light Model – a farcical Matrix like world where nothing is real and everything is a platform. What is a platform you ask? Well it’s a mystical entity that brings buyers and sellers together and takes a cut of the profit. Sound familiar? Of course it does, that is the job description of a pimp. Yup, the platform is basically a dalaal – available as an app on both iOS and Android. 

From the point of view of economics, it serves to mitigate information asymmetry, increase capacity utilization and prevent adverse selection.  Basically, guaranteeing a good fuck while reducing the risk of contracting syphilis. And if you still do, whispering “I told you so” and allowing you to rate your experience on a 5 star scale.

Historical evidence suggests a platform is rarely fair to both sides. Whichever side is not the key driver of the network effects gets shortchanged. It's good to know which side you're on. All in all, it is a smart business model that enables the company to take a simultaneous shot at becoming a monopoly and a monopsony. Kick-ass!
In retrospect, Uber did own up to the fiasco and agree to carry out more stringent checks before on-boarding drivers and also added an SOS button in their app. But they’ve set a dangerous precedent by suggesting that companies respond best to heckling and bans. Now I have a few choice hashtags ready next time I get screwed over by a marketplace and can’t find which side of the platform to punch in the face.

No comments :

Post a Comment