The Platform Delusion

The Four Pillars of the Platform Delusion

The Platform Delusion most often manifests itself subtly, as an unspoken assumption underlying confident assertions regarding the direction of the economy or the imagined invincibility of a particular enterprise. Regardless of exact terminology-"the platform economy," "the platform revolution," and "the platform effect" have emerged as common terms-the central fallacy relies on a consistent mythology and the confident expectation of world domination by a select few megaplatforms. This conventional wisdom rests overwhelmingly on four core pillars of belief.

Each of these is demonstrably false.

The Core Tenets of the Platform Delusion

1. Platforms Are a Revolutionary New Business Model.

2. Digital Platforms Are Structurally Superior to Analog Platforms.

3. All Platforms Exhibit Powerful Network Effects.

4. Network Effects Lead Inexorably to Winner-Take-All Markets.

Platforms Are a Revolutionary New Business Model

It is true that business school professors only started writing in earnest about platform business models after 2000. But it is a terrible mistake to date a social or economic phenomenon only from the moment that academics decided to take note. Well before the internet was even conceived, much less commercialized, the average consumer interacted with platform businesses on a daily basis.

The definition of a "platform" business is straightforward. Although they take many forms, what platforms have in common is that their core value proposition lies in the connections they enable and enhance. "They bring together individuals and organizations," a recent review of platform businesses and research summarized, "so they can innovate or interact in ways not otherwise possible."

The persistent confusion regarding what constitutes a platform business, despite the relatively simple definition, is mostly due to unhelpful market incentives. As is often the case, when a moniker emerges

Jonathan A. Knee is the author of The Accidental Investment Banker: Inside the Decade That Transformed Wall Street and the co-author of The Curse of the Mogul. Professor Knee s writing has appeared in The Atlantic, the Wall Street Journal, the New York Times and elsewhere. Knee is a Professor of Finance and Economics at the Columbia Graduate School of Business, and has previously taught at Northwestern University. He is also a Senior Advisor at Evercore Partners, a boutique investment banking firm. Before joining Evercore, he was a managing director and co-head of Morgan Stanley's Media Group.

In The Platform Delusion Jonathan Knee takes apart the magical aura of one of Silicon Valley's biggest conceptual exports." The New York Times
 
"A cogent, arresting argument...Knee s untangling of the complexities of platforms and their backers is steadily accessible and surprising." Publishers Weekly
 
In pursuit of what makes for a powerful and successful tech company, The Platform Delusion by Jonathan A Knee opts for the broad scope. Financial Times

Every generation flatters itself by thinking it has reinvented the rules of business. Knee s book is a jolting and often hilarious exposure of our delusions that teaches, once again, that the fundamentals of business may not have changed quite as much as you think they have. Everyone should read this book. Tim Wu, author of The Curse of Bigness
  
Jonathan Knee mercilessly cuts through the hype and wishful thinking about America s best-known tech giants to show which really has the coveted competitive advantages likely to reward investors. I can almost guarantee you ll be as surprised as I was. James B. Stewart, Pulitzer Prize winning author of Disney Wars
  
In the worlds of business and investing, the word platform has acquired an almost magical significance. Many believe that the term can manifest wealth and prestige for a business. But what does the word really mean? When does it mislead? And how ultimately should we as a society manage the role these businesses play in our life? It s critical questions like these that Jonathan Knee wrestles with and answers in his important new book, The Platform Delusion. Bethany McLean, contributing editor, Vanity Fair, and author of The Smartest Guys in the Room and All the Devils Are Here

Jonathan Knee has done it again. He identifies where value actually comes from in platform companies. (Spoiler alert: competitive advantage, just like your economics professor taught you.) The book is a must read for students of