Can you explain this whole section for me? I didn’t quite understand it, thanks

No problem. The idea here is to think of a platform company’s strategy as a two-axis graph. On the x-axis you have an infinite number of potential use cases. For example, if you’re Apple your platform is the iPhone. You have native functionalities such as maps and camera and SMS. You also have an app marketplace where an infinite number of apps can be created that work on your platform. Each of those apps is a point on the x-axis.

The y-axis is the number of people using each of those apps.

Instead of Apple releasing an iPhone with, say, a universal translator app and spending the time and money to develop it themselves, they can let independent app developers build that app and list it on the market place. If lots and lots of people use that translator app, however, they may decide to build that functionality into the next generation of the iOS.

Thus, “the highest nail gets hammered down”. The app (or other use case) most popular with the most valuable customers often gets absorbed into the core design of the platform company, but the platform company itself didn’t have to take the risks to find out what would be popular.

Same thing with Netflix. They know in advance what types of shows will be popular with what types of customers, because they’ve let other shows onto their platform and tested it. So if they find a winning combination based on shows made by others (such as dark, gritty, superhero movie with a strong female lead), then Netflix can release Jessica Jones.

Hope that helps!

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