Very interesting thread about the relevance of Coase's Nature of the Firm for the platform age. I've written a few things about how working on a dynamic ridesharing* service in 2009 helped me connect Coase/Williamson to digital business models, so here's a few summary comments.
The current focus of the public debate is the often contentious relationship between drivers and platform, but in order to understand the structure of the industry, it's also important to look at the underlying relationship, namely that between driver and passenger.
A key problem we had to consider when conceptualizing our service was how to safeguard both drivers and passengers. Turns out when you look into the history of taxicab and limo services, it is fraught with what we like to call "contractual hazards"...
This starts with cabbies who don't know how to drive (or where to drive) to shakedowns to (threatened or actual) physical violence from both sides. For such a simple and low-cost service, a ride is actually quite a complex and risky contract.
Taxicab and limo service pre Internet era tended to be highly fragmented and rely public regulation to safeguard these contracts. The Internet and especially the emergence of mobile devices in the late 2000s kicked off a number of attempts to defragment the dispatch service.
"Defragment" is another word for concentrating (and, in the hope of the companies and investors monopolizing) and vertically integrating the central market-making bundle of services: matchmaking, pricing and payment processing, reputation management and recourse.
This bundle of services is often falsely labeled disintermediation ("Uber owns no cars, etc.") in that it allows non-professionals to provide services, but indeed it is the opposite: a centralized information control operation with scale economies on both sides — an intermediary.
An interesting anecdote is that initially, most drivers considered "the algorithm" provided by the dispatch platforms as more equitable than old-era dispatches (there's no reason to be nostalgic about the taxicab industry), altho this perception changed quite a bit since then.
The emergence of matchmaking platforms doesn't only ask novel questions about the contractual relationship between suppliers and platform, but about our very concept of a market, and especially about the safeguards that facilitate exchange. Coase is still a good starting point.
A longer thread on (dis)intermediation in the information age is here. @threadreaderapp unroll plz.
medium.com/@oliverbeige/m…
medium.com/@oliverbeige/m…
