Unbundling the unbundlers – The end of winner-takes-all

Global scale networks, venture funding, data hoarding, and capital-labor inequality have come together to find a new home in the platform economy. Platforms concentrate and create winner-take-all economics at a scale that we haven’t seen since the Gilded Age.

All that is, however, poised to change.

Web3 holds the promise of fundamentally rearchitecting market infrastructure and governance, backed by protocols designed for minimal extraction. Done right, this would move us from a world of winner-takes-all to a world of winners-share-all, as they build together and benefit together.

Earlier this year, I joined forces with Boson Protocol as Advisor, Market Design, to work on designing markets for a Web3 world. A lot of my work in Platform Revolution and Platform Scale codified market design for a Web2 world. Rethinking this for a Web3 world is fascinating, both from an intellectual and from a building-in-real-time perspective.

This essay is the first of a series on reimagining markets for a Web3 world.

Let’s dive right in!

A brief history of Web2

As digital technologies start getting adopted in the enterprise, we’ve increasingly seen the unbundling of the traditional corporation. John Hagel in his seminal 1999 paper – Unbundling the corporation – was among the first to articulate this shift. Over the course of the two decades that followed, we’ve seen the corporation increasingly get unbundled as new generations of digital technologies progressively reduce transaction costs.

Even as the Web2 era saw traditional vertically integrated corporations getting unbundled, there was a new form of ‘horizontal concentration’ created by marketplaces and platforms. These marketplaces and platforms organized entire markets by bundling market infrastructure and governance for these participants.

In Platform Scale, I identify two primary functions that platforms and marketplaces perform.

• First, they provision an infrastructure to facilitate market transactions.
• Second, they govern the transactions that ensue.

While platforms and marketplaces vertically unbundled production from distribution and encouraged distributed and decentralised production, the ability to horizontally bundle market infrastructure and governance enabled them to centralize governance and rewards.

Web3 provides a new paradigm for managing and enabling transactions. In the management of markets, the single biggest shift enabled by Web3 is the unbundling of market infrastructure from market governance.