A Deeper Understanding of Platforms

a16z is a famous venture capital firm founded in 2009 by Marc Andreessen and Ben Horowitz. Their podcast discusses tech, culture, current and future trends. I enjoy it because the discussions are usually aimed at understanding a phenomenon and not necessarily praising or condemning it

In this episode, Tim O’Reilly (who popularized the terms open source and Web 2.0.) and Benedict Evans discuss how we make sense of the most recent wave of new technologies —- platforms such as Uber, Lyft, Airbnb, Amazon, Apple, Facebook, etc. — and how we think about the capabilities they might have that we haven’t yet even considered.

Right at the beginning, they discuss a huge misconception about modern technology platforms and where other businesses usually get them wrong. Tim explains that even if the tip of the iceberg (the thing you see or use) might be a website or an app, that particular piece of technology is usually a tiny fraction of the underlying business model. The defensive strategy of competitors is usually to copy and try to imitate the tip of the iceberg (app or website) but it's pointless.

For example, taxi companies. They thought it’s the app. If we have the app, it will work! But the app is only a tiny part of the business model. But the fact that Lyft can deliver 3-min pickup times is because of all these part-time drivers showing up in their own cars that supply automatically rises when there’s more demand.

It's a good reminder that if you want to copy what the new wave of tech is doing you need a deeper understanding of all the economic parts of their model and what makes it so magical.

Just like « selling online » usually involves less online implications and much more physical implications (packaging, shipping boxes, returns, warehouses, photo studio, etc.) than people estimate at first.

« Oh but I think the strategy should be that we make an app like Airbnb and then... »

Then not that much, most probably ;-)

p.s. Yes, the post title is a reference to The War On Drug's new album, you should listen to it.