In an article for Ouishare, Juho Makkonen (@Kusti) explains how the collaborative economy, unlike social media, will never rely on only a few key players. Though Jeremiah Owyang has been quoted to say that the collaborative economy is “owned by the 1%”, Makkonen strongly believes that the collaborative economy will result in a more egalitarian society.

At the Ouishare Fest, Nick Grossman, general manager of Union Square Ventures, explained the cycle of bundling and unbundling. New industries often get attacked by innovative startups that try to set up monopolies for themselves. However, many platforms consequently rise to attack the holes in these monopolies. Grossman posed the question:

“what open platforms and standards will break the monopoly of the big collaborative companies? How will we get there?”

Makkonen first wants us to analyze why social media has yet to be disrupted by open platforms by looking at the network effect and a lack of financial incentives.

The Network Effect

The usefulness of Facebook derives from the fact that everyone uses it. This way that you can connect with anyone around the world is called the network effect. As soon as a network is built, it becomes painstaking to have to move it to another platform. For the collaborative economy, marketplaces need to reach liquidity -- an expectation of being able to sell what you list or of being able to find what you’re looking for. Liquid marketplaces are much more useful to the user and leaves room for exponential growth. Most sharing economy platforms rely on the network effect but in terms of locality, which makes it a lot less painful when moving networks to another platform.

The Lack of Financial Incentive

Social media monopolies have yet to be broken because there’s no incentive for people to move. As long as the services are free, people don’t see any problem in essentially becoming the product. However, in terms of the sharing economy, people’s livelihoods depend on these platforms. If an alternative to a platform offers more pay or security, people will go through the pain to make the switch. The three main reasons people use sharing economy platforms are price, convenience and quality -- if you can offer a lower price than your competitor then you will succeed.

Distributed Collaborative Organization

In distributed collaborative organization, the middle man is cut out. DCOs use blockchain technology which is a decentralized way to store information, thereby designed to handle democratic governance and value distributions of organizations where everyone that adds value owns a stake. These platforms only distribute wealth to the providers themselves, enabling the providers to offer cheap pricing to consumers and still get more revenue than they would from a centralized monopoly platform. DCOs compete with quality as well as price and providers are in control of their own destiny, making them more motivated to offer better quality of services.

To set up DCOs, the process needs to be easy and convenient to be adopted by people. By building an open source marketplace platform and a service layer on top of it, you can remove the need for DCOs to have their own engineering staff (which is a major drain of resources). Furthermore, if the marketplace platform infrastructure is decentralized and distributed too, people can own their data.

Though monopolies will likely prevail for a while, with time will come development. The trends predict that the future will hold a lot more distribution of value and wealth, with the potential for DCOs to prevail as the leading organizational model.