Where Will Work Come From Or Value in the Era of the Platform Economy* Martin Kenney Professor Community and Regional Development Unit University of California, Davis & Senior Project Director Berkeley Roundtable on the International Economy & Senior Fellow Research Institute for the Finnish Economy (ETLA) This presentation was first made at the Colegio de la Frontera Norte in Tijuana, Mexico on January 14, 2014. It continued to evolve at various other in the U.S., Europe, and Canada. John Zysman of BRIE has been instrumental in the progress of this line of thinking; a number of the ideas are from our joint work. Technological Change and the Platform Economy The assembly line gives you the corporate capitalist (and industrial union). The Cloud gives you the platform capitalist (and precarious labor)? Or a cooperatively owned platform and a sharing economy? My Proposition Capitalism and its value creation and extraction process is changing as we speak and we need to talk about it. Setting the Stage for the Platform Economy: Digital Technologies • Moore’s Law • Ubiquitous connectivity • PCssmartphonesInternet of Things – Sense, store, process, transmit data • Cloud computing (see Zysman 2012) • Software eats everything (open source) All at decreasing cost Digital Platforms • Software-enabled “cyberplaces” where constituents can act or transact • Create network effects between applications and users, virtuous circles of growth What Is New? • Connect 40, 50% of world population • Characterize nearly everything digitally and then informate • Replace much work with intelligent machines – Brynjolfsson (Vonnegut -Player Piano?) • What is the new “work” • The Makers Movement based on similar tendencies Liquidity event, stock options valuable, no longer Venture Labor now operating companies subject to stock market etc.. Platform firms funded by VCs, e.g. Google, Facebook, Uber – their direct employees Wage, stock options Can become Venture Labor Contingent Compensation Fee for Service or Product contract These are platform builders and VC financed Venture Labor Virtual Project Funding, Kickstarter, Indiegogo, etc.. Open Source commercial Redhat, Github Open Source Wikipedia (no payment) None Financial Reward Liquidity event, capital gains, secure employment, Figure One: Labor in the Platform Economy Apps stores, Youtube etc.. shared advertising revenue, Amazon self-published books, games, such as Zynga, King Digital, Supercell, etc.., affiliate marketing revenue Cyberformal labor monetization. Amazon, Mech Turk, oDesk, etc. Can become monetized if sufficiently visited Cyberformal asset monetization. Ebay, Amazon Market, Uber Craigslist, AirBnB Monetizing assets such as automobile, spare room Free labor such as posting to Facebook, Twitter, LinkedIn, Youtube, Pinterest, Yelp, etc.. All activity on the netGoogle, Bing, Browsers, ad networks Compensated by employer for building website, etc.. Number of Participants Acknowledgements: Thanks to John Zysman, Ruth Collier, Bryan Pon and Lilly Irani for suggestions and comments on this figure. Copyright: Martin Kenney What Is “Work?” • Surfing the internet (Terranova, Lanier et al.)? • Putting content on Facebook, Pinterest, Youtube, LinkedIn? • Creating open source software? – If on GitHub? • Sharing economy -- Wikipedia, Khan Academy Five Forms of Compensated CyberMediated Work 1. Global bidding/cyber-contracting – eLance/Odesk – Microwork – fill up working day -- AMT 2. Industry cyber-transformed, e.g., taxi cab – Uber; hotel -- Airbnb 3. Informal work – cyber formalized, e.g., TaskRabbit, Instacart 4. Virtual consignment – Apps stores 5. Virtual project funding – Indiegogo,Udemy 1. Globally Biddable Contracting Elance/oDesk – Top Hiring and Provider Nations Top 10 Provider Nations Top 10 Hiring Nations United States Australia United Kingdom Canada UAE Singapore Israel Germany Netherlands New Zealand 1 2 3 4 5 6 7 8 9 10 United States India Ukraine Pakistan United Kingdom Russia Canada Philippines Romania China 1 2 3 4 5 6 7 8 9 10 Source: oDesk 2014 Mechanical Turk -- Microlabor Globally Biddable Contract Labor • Lowest price • Contractors largely powerless – Exception if they have rare skills (Kunda and Barley’s gurus) • Little upside for contractor besides possibly learning – Could lead to a permanent job? • Social Outcome: – Replace permanent employees – More efficiently allocate people to work 2. Industry Cyber-Transformed Uber – Taxi – Monetize Car and Driver AirBnB – Hotel -- Monetize Excess Space Airbnb Model Credit card information Travelers – Picture, various information, credit card Background check information AirBnB, Uber, etc.. Facebook, LinkedIn links Entire platform hosted by Amazon, etc.. Airbnb validated pictures Providers – Various information including pictures Industry Cyber-Transformed • Breakdown former barriers to market competition (taxi rules, zoning, anti-discrimination) – But these barriers are eroding (Airbnb pays hotel tax, Uber/Lyft get commercial insurance, etc..) • Providers largely powerless vs. platform owner – Little upside for contractor • Convenience and often lower price for consumers • Social Outcomes: – Convenience, efficiency, mobilization of slack assets – Erosion of barriers that protected labor (taxi medallions, unionized hotel workers, etc..) 3. Informal Work -- Cyber-Formalized Task Rabbit InnoCentive – Innovation Outsourcing InnoCentive • Total Registered Solvers: 355,000+ from nearly 200 countries • Total Challenges Posted: 2,000+ External Challenges & thousands of Internal Challenges (employee-facing) • Project Rooms Opened to Date: 500,000+ • Total Solution Submissions: 40,000+ • Total Awards Given: 1,500+ • Total Award Dollars Posted: $40+ million • Range of awards: $5,000 to $1+ million Informal Work -- Cyber-Formalized • Cyberhistory is long – eBay, Craigslist • Have created a number of large platforms • Movement of control and monitoring to the Cloud • Social Outcomes – Greater efficiency and price discovery – Greater transparency in terms of taxation, trust etc.. – Social power moved to platform owner 4. Virtual Consignment Model Virtual Consignment • Produce the work prior to compensation no investment by platform owner – From apps ($30B payout) and Youtube videos to Yelp reviews • Can become viral • Increase in downloads results in exponential increase in income Returns to Producers for Cyber Consignment Winner take all returns $ Of course, platform owner always wins But if there is referral, research shows that long-tail refers to winners ipso facto they subsidize winners! Super long tail Very small return Discoverability an issue Items, videos etc.. Virtual Consignment • The Apps stores have now paid out $15 billion • YouTube – YouTube Partner Program – Created in 2007 – 1M+ creators – 1,000s of channel earning $100K+ –Vidcon Convention 2014 – 19K+ • Udemy – Online courses Virtual Consignment Model • Platform owner gets content at no cost • Content provider bears all costs • Content provider has two forms of upside – Payment through platform owner – Ancillary income sources from audience • Appearances, testimonials, product placements, items • Content provider return characterized by long tail • Social Outcome: – Enormous opportunities for new work but WTA 5. Virtual Project Funding • Crowd “charity” funding – Kickstarter ($612M) and Indiegogo ($98M) • Cyber platform for angels – Angel’s List Concluding Reflections Second Machine Age suggests much work will be displaced I am hypothesizing new types of work and organization thereof are emerging Labor Atomized Throughout Society • Online human activity, both work and not work, creates (or transformed into) value • Most “long tail” work is not sufficiently valued to produce substantial income, but forms the corpus from which certain work becomes valuable – Flappy Birds etc. • Where is the work place – potentially everywhere! Winners Take All? • Does entrepreneurial economy reinforce income inequality? • Platforms serviced of relatively lowlycompensated contractual or consignment workers with a few big winners • Platforms themselves are WTA • Barriers to entry dissolved digitally – With approving state New Classes? • Creative class (Florida) • Cognitive-creative class (Alan Scott) • Symbolic analysts (Reich) Or Old Classes Weakened • Gig economy (Friedman) • Precariat (Standing) Or Better to Think About How It Works Platform economy If It Is a Platform Economy Is a Social Wage Proper Response? • Extend reward for the “lucky” individual to the milieu – Many of the consignment economy winners may be one-off “hits” • Increase entrepreneurship – As we cannot know a priori who will win, e.g., Flappy Birds • Support creative activities • Increase consumption Thank you