Platform Economies

Chapter 1. Platform Economies: A Conversation with Erik Brynjolfsson and Jon Bruner

Jon Bruner: Networked, on-demand businesses are transforming and reorganizing firms and labor across the entire economy. How would you characterize the broad movement altogether?

Erik Brynjolfsson: As you digitize and network things, you’re able to take processes, codify them, and then replicate them. That means you often get winner-take-most markets, with huge increases in efficiency and less need for labor input—or capital input, for that matter.

One of the things we see is that sales and profits often look like power laws. There’s a distribution with a small number of really big winners and a long tail of companies or individuals that are filling in niche markets. That’s changing the overall distribution of income a fair amount, especially at the very top.

You also get more Schumpeterian competition in the sense that someone who has a better idea is more easily able to overtake incumbents very quickly, so there’s less stability in market shares.

All of this is something we’ve seen on the Internet and in software and media for some time, but as more and more industries digitize, the same economics are coming to the entire economy.

Let’s walk back through some of these factors. When you mention Schumpeterian competition, are you referring to acceleration of the rate at which newcomers replace incumbents?

Exactly. A big part of it is that there’s more turbulence. Another part of it is that when ...