A strategy for challenging the giant corporate platforms: Duncan McCann of the New Economics Foundation

We talk about a strategy for challenging the giant corporate platforms in Part 2 of an interview with Duncan McCann, who’s working on a platform co-op alternative to Über in Brighton.

Here’s the first part of the interview, and below are the main points we covered in this part. Highlights are in bold.

There’s a global directory of platform co-ops, produced by the Internet of Ownership and funded by the New School – the US-based organisation that Nathan Schneider works for, and the epicentre of the platform co-op movement globally.

The biggest barriers to the development of platform co-ops are the existing, corporate platforms.

It’s difficult to encroach on the territory of some corporate platforms because either the workers or the users, or both, are happy with the service. With Über, drivers know that they’re being ripped off (but passengers don’t tend to know that because drivers are looking for good ratings, which may not be helped by negative comments about the company), but users like it because it’s cheap and easy. They don’t tend to worry about who owns the platform, or about wealth being sucked out of their community. Then there are platforms that, although extractive, are liked by users and providers of services – like Airbnb. The extractive, undemocratic nature of many corporate entities remain unseen, and of course they like it that way. The people who have problems with Airbnb are outside the platform, making it difficult to disrupt.

But there are areas that could be ripe for platform co-ops – where the existing platforms are not liked by either workers or users. Social care is the key example. Cleaning could also work. Commercial cleaning services can often be below par, and not really liked by the cleaners. So when both sides are unhappy, and there’s no competitor, platform co-ops are the way to go. For Airbnb, it’s difficult to see a platform co-op emerging to challenge them. What’s needed in this case is the involvement of the city, to force the creation of a platform, and to embed rules that prevent exploitation, abuse and tax avoidance (Über records all of its income in Luxembourg, so pays no VAT. Any competitors are immediately at a 20% disadvantage).

In the example above, the municipality could own the platform, or they could create a platform that is owned by users and workers. Amsterdam is leading the way in this area. They’ve created Fairbnb. So our platform strategy has to be somewhere between structures being created by workers and users from the grassroots, to the involvement of the municipality – especially platforms that have real people and equipment on the ground, like Deliveroo, Über or Airbnb, which can be provided on a city-wide basis, rather than platforms like Facebook or Google, which are harder to control by municipalities.

It’s a shame that many people who talk the talk when it comes to promoting small, decentralised, co-operative businesses, are happy to use Über, when there are still reasonably-priced alternatives. It’s slightly different with Facebook, as many groups would be consigning themselves to oblivion if they didn’t post their offerings on Facebook, where everyone is (at least for now). There seems to be a certain amount of cognitive dissonance around.

It’s quite bizarre that a company like Über would fight so hard to deny their drivers holiday pay, sick pay, minimum wage etc. If they’d spent their money on this, rather than on fighting it in the courts, and on the marketing that had to be done to counter the bad publicity that it brought, they would have got a lot of goodwill, and the drivers would have ended up with more money, rather than corporate lawyers and tax avoidance experts. That speaks volumes about their strategy.

If people would like to help the movement, the Media Fund is an interesting platform co-op in which the public can invest in quality, non-corporate, independent journalism. And there is Resonate, who aren’t trying to compete with Spotify or Apple Music, which would be very difficult because of their resources and access to the music industry, but instead, are catering for the music lover rather than the passive listener. This is probably a good metaphor for where the platform co-op world is now. It’s not yet ready for everyone to dive into – it’s for people who care, the early adopters.

But really, the thing to do is to reject the corporate platforms, and to tell other people why you’re rejecting them. Don’t get an Über cab, and if people ask why, tell them. It gets difficult when these companies become verbs, and therefore ingrained in the language, but there are still local cab firms, and Duck Duck Go is a perfectly good alternative to Google, that doesn’t harvest your data. Facebook is problematic, but when distributed social media arrives that can assist interactions between Facebook users and others, outside Facebook, then Facebook’s days are numbered.

The usefulness of platforms doesn’t increase linearly with numbers of users, it increases exponentially, the more people join them. This means that corporate platforms tend towards monopoly, and we already have that in search and social media, with others trying hard to do the same. It’s a winner-takes-all mentality that squeezes out competition and produces monopoly. Über were thwarted in China by their Chinese counterpart, DiDi, as DiDi’s pockets were even deeper than Über’s. Now the two companies have combined – Über sold their Chinese business to DiDi in return for a stake in DiDi, and so they’re now intimately linked through ownership of each other, with a tacit agreement to divide up the world.

We’re going to see this kind of thing happen much more, and we’ll have a world where single platforms have monopoly and monopsony power. Monopsony power is where one company is the dominant buyer in a market, and rather than overcharging the consumer, they provide their services at or below cost, to push out competitors. Über is losing money hand over fist, and Amazon’s margins are wafer-thin, but they’re exerting monopsony power. For example, Amazon control around 50% of all book sales, and so are able to exploit publishers in the same way that Über are able to exploit drivers.

It’s very difficult to compete with corporate platforms that have seized monopoly or monopsony power over the markets they operate in. It’s better to try to create co-operative alternatives where the corporate sector hasn’t yet achieved monopoly control.

We can’t let this continue – we need alternatives. These can either be the grassroots platform co-op option, but also municipalities, together with unions, running some of these platforms locally, where it’s too difficult for a platform co-op to emerge. These two strategies can work hand-in-hand, depending on what’s happening in the market, and how the buyers and sellers in the market view the existing platforms.

If people want to become involved in the creation of new platform co-ops, the New School is developing a platform co-op starter kit. It’s interesting to note that Google funded the development of the kit, to the tune of a couple of million dollars. Obviously Google don’t feel threatened. There’s going to be no platform co-op in search, so maybe they feel that this is something they can do to improve their image. $2 million is nothing to Google, so this could just be a simple case of greenwashing (or ‘ethicalwashing’?). But that’s a good place to look at some resources to help you think about how you might start one. And if you’re a worker in a platform company, talk to other workers, to your union – think how great it would be if you shared in the profits and the decision-making of your company. And finally, think carefully whether there’s an alternative to any corporate platform that you use.

Platform co-ops could be an important part of the new ‘Preston Model’ of local development. Preston realised that council laundry services were all located outside the area, and were not co-operatively owned. They helped create a local co-op to do the work instead. It’s not a platform co-op, but they could easily do the same for taxis, for example.

Also, Über was very difficult to start. They had to integrate maps, payments, seamless user experience, for which they spent over $10 million, possibly ten times that. When it was developed, layering maps with real-time positioning, automated payments etc. was almost impossibly difficult, but now you can buy it out-of-the-box for a tiny fraction of the price – probably around a quarter of a million. So one of the huge barriers to entry in the platform game (cost) has come down. It means that municipalities can have a seat at the table too.

When Austin, Texas required cab drivers to be fingerprinted, Über and Lyft left in a strop, but instead of causing chaos, a diverse ecosystem of local cab companies developed, including a not-for-profit called Ride Austin, who gained about 50% of the market. Über and Lyft saw this as an existential threat to their model. Not only did it not cause problems for the city, but the drivers were better paid, money wasn’t sucked out of the community, and if other cities learned from this experience, they might want to purge themselves of the corporate taxi platforms. They rushed back into Austin, were suddenly happy to comply with fingerprinting legislation that they’d left in a huff about, they subsidised their activities in Austin from elsewhere, so that they were cheaper than competitors (things you can do if you have deep pockets, but not if you’re a local company), and in 6 months, they’d driven Ride Austin back down to 10% of the market.

We don’t have to think about how to tackle the global problem of corporate platforms, but instead, we need to be developing local co-operative alternatives that can act as beacons for innovators and municipalities everywhere.