Unbundling Platforms and why there are no enterprise marketplaces
By: Michal Bacia
Tags: Artificial Intelligence, Marketplaces, Platform, Future Of Work, Blockchain

To answer this question, let’s start with… decision making! How do we, as individuals or companies, make decisions and why do we make decisions are fascinating questions. It’s definitely outside of the scope of this article. What is important here, is that in every decision there’s some input data involved. There is some kind of a decision making “engine”/black box inside people’s brains or consciousness that makes decisions based on internal (memory, company record) and external data. Data input -> Decision engine -> Decision.

This means that data input is very important because different data will result in a different decision generated by the same decision engine. It’s also important to recognize that the human body alone sends 11 million bits per second to the brain for processing and we live in a world that generates 2.5 quintillion bytes of data each day (and accelerating). At the same time, the conscious mind seems to be able to process only 50 bits per second. It’s impossible to consciously process all the available data, either as an individual or a company, so some sort of compression and selection mechanism is needed. With no formal selection or curation process, we use shortcuts or biases to reduce the amount of data to process. Contextual data is often used for curation (formally or as unconscious biases). For example, provenance, who published, is as important as what they published. Another very important selection mechanism is reputation, a record of historic interactions and outcomes associated with the data source (a promise made by a stranger has a different weight than a promise made by a lifelong friend). Interestingly, humans can keep track of about 100–150 people we interact with, which is also the maximum number of people in a tribal society, with no organized structure. At the same time, we can potentially directly interact with 4.4 billion internet users.

Web 1.0 -> 2.0

Internet adoption created a huge amount of new, user-generated data/content (Web 1.0). The Internet tech stack didn’t include tools for curating the data or establishing a consensus about the data (like the audited financial statement in the analogue world). The Internet didn’t come with tools to handle extremely important contextual data, identity and reputation, either. The closest early proxy for reputation would be Google page rank, which could explain why Google search became so relevant and popular. Web 1.0 no link between the existing analogue infrastructure (gov. issued documents, audited financial statements) and the digital world either. To fill this void, data curation, identity/provenance, reputation and also value transfer were bundled together and handled by the emerging private platforms like Amazon, Apple, Facebook, Google, Uber, Airbnb, and others. This is how Web 2.0 emerged. This bundle created the secret sauce of the platform business: trust provided to all participants. Strangers don’t have to trust each but they can trust the platform.

Web 2.0 platforms were so successful because they solved the most important Web 1.0 problems related to data processing and value transfer. They provide incredible benefits for their participants, manly reduce the cost and risks of the decision-making process by 1) reducing the amount and complexity of data that needs to be processed by users; 2) providing consensus about data, standards and interoperability inside the platforms; 3) handling identity and reputation, 4) recently, starting to provide recommendations and even more curation by applying AI/ML

Successful doesn’t mean perfect. There are a number of issues with the dominating platforms and marketplaces, most of which are natural consequences of platform architecture, both in terms of technology and business models.