And as for those Amazon reviews that put buyers at ease, well, of course, a lot of them are fake. Britain’s competition watchdog is investigating, belatedly.
Let’s take another example, “dark kitchens”. These are food factories typically located under overpasses or on industrial estates, creating meals to be delivered by JustEat or Deliveroo. Independent neighborhood favorites tempted to join the “food delivery revolution” face a fate similar to that of brands on Amazon: being replaced at some point by clones, by fake restaurants instead of nameless electronics companies.
Similarly, on the sprawling online retail platform Shopify, a “store” is now just a sticker. Compliance is handled by companies whose algorithms identify trends, alert manufacturers, and allow them to ship directly to a customer.
Under classical economics, smart people should now be responding to this brave new world of platforms by struggling to build brands for higher quality differentiated products. This is what a functioning market should be like. But it is not happening. Platforms deprive would-be providers of the information they need to make informed decisions, and then punish them if they try.
“As a provider, the information you get is gaslight on a large scale,” says Paul Sanders, market-minded founder of record label and digital music company The state51 Conspiracy, which has developed platforms for smaller music providers over the years. Two decades.
“You are supposed to think from the board they provide you that you are wiser. But they are playing an arbitration game, and they can only do so when there are information asymmetries. “
Sanders points out how Spotify invested in the Distrokid uploader, which last year handled 40% of Spotify’s 60,000 tracks per day. It is typical of a platform market intervention: the quantity increases, but the quality decreases. Unable to implement their own information, a provider has few options other than copying someone else.
Similarly, consumers also lack the information they need to make informed decisions and opt for a quality product, as platforms make use of limited visibility – they can make products appear and disappear from view at will. The result: no niches, no brands, and less competition driving product innovation.
The first victim of Congress’s renewed focus on monopolies is likely to be the idea that falling prices prevail over all other considerations: the strangely so-called “consumer welfare rule.” It has been a useful principle, but it does not take into account this new monopsonist world, where the platforms not only have the aces, but they print and fix the entire deck of cards. Some may wonder if classical economics, which has been on a very good streak, is no longer working. It is not working here.
To survive, capitalism needs powerful mythologies, and one of the most powerful is that it really pays to make a significant personal sacrifice to start a business and become a salesperson. Success is not guaranteed, of course, but hope creates a supply of bright, hard-working suppliers.
Platforms, as configured today, extinguish that hope and remove that incentive entirely; You would really need to be naive or irrational to put yourself at the mercy of an Amazon or Spotify algorithm today. Right now, platform capitalism tastes a lot like a Soviet diesel tractor. That’s Jeff Bezos’ most unsavory legacy.
Andrew Orlowski is founder of the Think of X research network