The MUCH-NEEDED regulation of PLATFORMS
6 Design principles for humanity-first platforms
Platforms are a wonderful thing. They match demand and supply, they facilitate transactions, interactions, and innovations. They are the 21st century version of the old-fashioned market places that emerged over 4,000 years ago in Iraq and Syria. The market is arguably one of the greatest inventions of human kind; as important as the invention of the wheel and the written word.
Yet, our current system seems to be broken. The 21st century platforms from Facebook to Google, from Alibaba to WeChat, and from Amazon to TikTok do not advance the wealth, happiness or wellbeing of mankind anymore. It isn’t the great invention that we hoped it would become at the beginning of the millennium. It does not empower us humans. Instead it has become an instrument thats too often leads to ignorance, inequality, and depression. It has become a tool to surveil and direct humans in order to maximize platform profit.
This should not be a surprise. There is a saying in the tech world: “if you are not paying for the product, you are the product”. As customers are not directly paying for the services, they are seen as a necessary resource that can be squeezed as a lemon. Another interesting observation that has always fascinated me rings also true: only in the software and drugs industries customers are referred to as “users”.
Interestingly, there are no characteristics inherent to the 21st century platforms or the technology behind these platforms that cause the malignance of the 21st century platform. As always evil is largely manmade and should not be attributed to godlike technology. Famous economist William Baumol showed that the basic rules of the game determine whether entrepreneurial intentions lead to increased wealth and happiness or, in the case of 21st century platforms, to destruction and depression.
Thus, if we really want to use technology for the greater good and create platforms that actually increase the wealth and happiness of humans, we should design rules and regulations that lead to the happiness of the 99% instead of the wealth of 1%. This is not hard to do. The very purpose of this article is to outline a small number of rules that will lead to platforms aimed to help humanity instead of a handful of billionaires.
While there is increased unhappiness with our platforms, a vision on how to adapt these platforms is still largely lacking. This should not be a surprise. History has shown that governments are notoriously slow in regulating new technology. It takes time for civil servants, politicians and the wider public to really understand the technology and how it shapes our society. Typically, new technology is initially seen through pink glasses and there is not much attention towards the negative effects of technology and the abusive powers of the companies behind this technology. And as the millionaires behind the technology become billionaires they starting to actively influence politicians and the general public to keep new rules and regulations at bay. They signal their virtues and pay huge sums to politicians to maintain the status quo of the game. As they are winning, they do not want the rules to be adapted in the favor of the losers; i.e. in this case the users. This was true for the Robber Barrons of the 19th century and rings true for the Robber Nerds of today.
But it is time to stand up and change the music. We increasingly understand how the business practices of Big Tech work. We know that there are various types of platforms with different business models. We see the increasing damaging effects of our platforms leaading to less innovation, greater inequality and more unhappiness. Platforms are increasingly afflicting the very essence of our social fabric leading to an ever-inferior society.
Here we present 6 simple design principles needed to bend the rules in favor of society. When we follow these 6 simple rules, we will get more innovation, more equality and build a happier society.
Design Principle 1: You are the Referee or the Player. You cannot be both. Too many platforms such as Amazon.com or Netflix.com allow the owner to play two different roles. The role of market master and the role of supplier. This allows the market master to obtain all the data on the goods or services sold and use this data to further their own products and services effectively undermining the other suppliers on the market. It is as if you are both player and referee in a football match. This would be imposturous in any competitive game, but is somehow accepted in technology platforms.
Design Principle 2: Transparency of Algorithms. The basic setup, the optimization function, of the algorithms advising customers should be made public. Typically, these algorithms aim to fulfil the objectives of three major stakeholders; the clients, the suppliers and the platform. Transparency of algorithms would reveal which interests are serviced at the core of the platform. Do they really aim to give the client the best match? Or do they aim to maximize their revenue by deliberately giving clients inferior offers? A simple visualization could be showed on any website to reveal where the real loyalty of the platform lies; does it lie with its customers, with its suppliers or predominantly with its own shareholders?
Design Principle 3: Open Data & Services. Just as PSD2 opened up banking services in Europe and guided the standardisation and sharing of transaction data, we need rules and standards for the sharing of interaction data. This will facilitate the transfer of users/clients between platforms. This will imply that a Facebook client can transfer all his/her data from the Facebook platform to any other social media platform and retain not only his/her data, but also his/her contacts/network.
Design Principle 4: Subscription central business models. If we really want to ensure that the interest of clients is put first, users should not be considered a resource anymore, but first and foremost clients/customers. This means that the business model of the platform should be predominantly oriented to servicing these happy clients. Where platforms currently generate their revenue through advertisements and kickbacks or through selling services and data to third-parties, in the future over 50% of total revenue should come from client fees and subscriptions. Revenue from kickbacks, fees and advertisement revenue will remain possible, but they will never be more important than client revenue.
Design Principle 5: Maximizing Market Share. Platforms should not be allowed to have a market share of over 33%. Platforms tend to winner-takes-all structures as they profit from economies of scale, network effects and customer switching costs. In the end this leads to less customer choice and innovation. It should be prevented by strict and clear competition rules.
Design Principle 6: Enforcing the Ethical Enterprise. The combination of powerful technology, vast amounts of data and a deep understanding of human psychological weaknesses such as cognitive biases enables technology platforms to guide human behavior through all kind of persuasion tactics. This is especially worrisome in relation to the mental health of children and teens and other vulnerable groups. But is also relevant in other discussions (e.g. information bubbles and the increased radicalization of our societies). Every platform business should therefore have an ethical officer present on board-level (i.e. a Chief Ethical Officer) who would be required to report on the ethical behavior of the platform to shareholders and to an independent ethical regulatory authority. When the ethical behavior of platforms is not up to standard, significant fines (e.g. 4% of revenue as in the case of GDPR violations) can be presented to the violating platform.
The preliminary list of 6 design principles is not complete. Yet these design principles are a good and necessary start if we want our 21st century society to flourish for billionaires as well as workers.
