How can a company ban a president in an ecosystem? How can a company delete contents put by a president? How can a company wipe out digital histories? Interestingly, we are just beginning a new dawn in how future economies would be wired; I explained some elements here. Pure and simple, the great empires of the future will be those which control DEMAND. Those empires will shape policies and how nations relate with their citizens.
It comes down to the near-marginal cost of digital technologies and the compounding accelerating returns of network effects which super-aggregators have used to link nations and continents around them. And in doing that, they become very powerful. Investors who understand that playbook have made tons of money. Yes, the techno-gene in these aggregators does not just deliver alpha but also political imbalances where big voices could be muted overnight!
Why? The raw materials are the users because those users provide the critical factor of production which is now used to produce the final products. For any tweet on Twitter, a user is adding in the production system, feeding Twitter algorithms, to engage everyone. Anything that can break that supply chain, from the angle of the platforms, must be immediately managed.
It comes down to a virtuoso circle of network effects with its accelerating returns, generating a positive loop that keeping many users will favor a platform rather than pandering to bullies who will scare everyone. This differs from the industrial age firms like Shell where governments control access to the raw materials (crude oil deposits). They will fold to politicians!
If you want to win in the 21st century digital economy, you must control or influence demand, not supply. In the industrial age economy, power went to gatekeepers of supply. Today, the empire builders are those that control demand. This is possible because digital supply is unbounded and unconstrained, making it largely not a factor. Digital utilities like Google, Facebook, and Twitter which control demand become the new gatekeepers.
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In the digital age, what matters is not who controls supply, but who controls demand. Supply is largely infinite as there are many ways to get to the web, and because it is infinite, users congregate to platforms to help them navigate and make sense of the web.
In 1980, before the digital age as we have it today, the most powerful people in media were newspaper publishers. They were the people you needed to reach to get your message to the world. They decided what everyone read on the dailies and they were powerful. They controlled supply and by controlling supply, they shaped everything including advertising.
And because their raw materials which are used for production are provided and supplied by their users, presidents and nations have limited influence. Leaders must understand that in the Facebook-Twitter-Google age, the old advantage – only them could be heard via government newspapers, radio and tv stations – has been calibrated out by the unbounded digital distribution channels.
What needs to happen? Industrial age styled political leadership must evolve because new empires (mainly American) are in charge!
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