Speaker unverified: belief

Transcript context

…I love it. Okay, can you walk us through how you've developed a framework for analyzing the power of the platform? It's a very complex problem and the reason for that is each platform we've tried to do a case study on, the industry economics is different. There are so many interesting characteristics that impact the equilibrium state. For us, instead of trying to give you a very abstract high level framework that's not going to relate to the actual situation, it's probably easier to raise a few questions that we think every operator when they think through will find some value in that. I'll throw out the three questions and we can go through them one by one. Number one, how is economic value created on your platform and how does that value change as the platform becomes larger or has more participants attending it? The second question is how does each group of your customers perceive their economic value from your platform and how does that change as your platform gets larger? The third question is what is preventing your competitors from getting to equivalents in that value proposition? That to us is the comprehensive list of questions that you have to think very carefully about and then after that you may be able to get some good insights about whether a platform may have power or not. The first question is, what's going on here economically? Who's gaining and where's the money? I'll give you an example. In Uber, what's going on is you have two sides—drivers and passengers—and they're trying to match and they're highly heterogeneous because each driver passenger is time and location stamped. By having more drivers and more passengers, it makes it possible for Uber to develop more efficient route structures. What more efficient route structures do essentially is to minimize driver downtime. It doesn't change how long it takes to do the drive. That's baked into who it is and where they want to get to, but it does change how much time you have to wait before you get the next ride. Then you look at both sides of this and say, okay, why does greater density create an opportunity for value here? The answer is that it's a better fit. You can pick a driver that's near a passenger. This fit notion is something that's the nature of platforms. You're looking at both sides, must be highly heterogeneous, and you're trying to get a better fit. That's the nature of economic value. Then the question is okay, how does that value that you deliver vary as the participants grow? Because that's the characteristic of platforms that is often how they're differentiated by different levels of participation on both sides. What happens there is that as you are more dense in a specific region, this is a very geographically bounded economic proposition in the Bay Area, for example. As that density increases, you can decrease the amount of wait time for drivers. However, I'd argue all other people at Uber and Lyft that know this much better than we do, I'd argue that's not a linear function.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.