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by jacquesm
4303 days ago
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Ubers model (and AirBnb) are comparable to the models employed by sites like 'justeat'. First you are a convenience, you move into an empty field and supply a service that the public loves and suppliers become dependant on. Then, once you've achieved market dominance you start the squeeze, slowly capturing more of the revenue stream. Because a huge amount of the customers now comes to the suppliers through you if a supplier balks they get cut off and that bit of the revenue stream gets redistributed over the ones that remain. Those will soon learn 'not to mess with you'. It's very clever and it works over and over again, there are quite a few industries that have suddenly found themselves in this situation. I call them 'the new middlemen', where the www was initially thought to allow us to cut the middlemen out a new generation of middlemen has stepped up and has exploited the opportunity and has in the process gotten rid of the old middlemen. |
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Salons are middlemen for hairstylists. Hollywood middlemen for movie directors. Labels are middlemen for musical artists. Google is a middleman for advertizers/people's private information. At a larger scale, credit card processing companies are a middlemen between EVERYTHING.
The pimp/middleman taxes what would normally be a direct market transaction between two willing parties. Presumably in a free market (we're getting crazy here and granting classical market analysis some of its claims), two parties will undergo a transaction only if it benefits both parties. This is one of the fundamental justifications for market systems of wealth distribution and social organization. (It ignores whether the transaction hurts third parties to that exchange - externalities - but that's a side discussion).
What a pimp does is take some of the value from the transaction for himself in return for organizing the transaction. In cases where the pimp hasn't actually added any value (he wasn't really required for the exchange) he is said to be "rent seeking" (https://en.wikipedia.org/wiki/Rent-seeking). The classical example of this is chaining over a public river system and charging people to run their boat down it. In this case no value has been added to the river by the chaining, in fact value was extracted and concentrated into private hands.
The situation is less clear when the pimp does add some value. In the case of prostitution a pimp provides security and a first check that the 'John' isn't law enforcement. In the case of credit card companies, they facilitate the exchange of dollars over wires and track down fraudulent transactions (security). In the case of Uber, they provide checks on customers and checks on renters (security). Security is popular. But it isn't always the case. Some pimps provide an upfront investment in machinery, such as mirrors/air conditioning/shampoos. Other times the pimp takes a financial risk.
It isn't always clear when a middleman is a good deal. When is your pimp robbing you as an employee? As a customer? As a service provider? Many small and medium businesses struggle with credit card processing fees as the charges cut into what are usually small profit margins to begin with. Having built the infrastructure once and not having improved on it, do credit card processing companies deserve 3% (I don't know what it is) of every monetary transaction? That's half of most sales taxes, but it goes into private hands. Is the value of providing that infrastructure enough to justify the costs? After how many years does an infrastructure have be in place before it is considered a public good?
The internet was supposed to be democratizing in that it would facilitate direct transactions where there weren't any before. People with information could get it to those that needed it without having news organizations filtering it. Musicians could release without labels taking their cut. Coders could sell programs without coordinating with software stores. But today there are appstores and there are wire transfer services and there are online banks and online social filter systems. Google, Paypal, Comcast, smartphone and device manufacturers and carriers, Amazon, Facebook, Twitter, Apple store, etc all take their slice.
When is it okay to put a chain across a river? What if the river is first dug deeper, or if someone puts up signs? And how long is it okay to leave the chain up?