Open E-commerce via Network Effects

Open e-commerce solves big enough problems for the largest number of users

All disruptive coalitions surround ourselves with honest enemies so that we can find our weaknesses and successfully allocate our false friends. This high level disruption is always a two-part problem: to identify the reason for the bad UX and focus on ALL stakeholders who can unite into the coalition to solve it, primarily consumers. There is no short-cut to disruption in scale, one must do the work and that work must be done efficiently, driving it to become a collective effort.

Open e-commerce allows for a unique level of efficiency of network effects because the work is typically done by willing stakeholders. Open marketplaces work because stakeholders love it and because they feel that it genuinely serves them well. This is not the same thing as stakeholders having something, or paying for something, but a greater level of involvement that breeds network effects. Such innovation is rare, but it exists in part due to the open nature of the Internet. Good examples are Google Search (minus the tie-in agreement with Apple,) Google Shopping, Google Travel, Craigslist, Facebook Marketplace, Microsoft Windows, Microsoft Bing, ZillowTrulia (minus the Zillow Flex,) Yelp, Wikipedia, and a few others.

To identify these ideas is not always obvious, but, systematically, they all have these telltales:

Open Systems Design

Privacy by Design

Transparency

Mobile Usability

Scalability

All of these elements define one most important question about any disruptive coalition: has it solved a big problem, for a large enough user base, and without causing any new problems?

To win a “yes” answer to this question, a disruptive coalition must drive these ideals despite any collateral damage to our false friends. The collateral damage is often required — there is simply no need for Lycos, Yahoo, or Excite in the world of Google. The survival of disruption itself requires a winning coalition to develop itself into a trillion USD valuation at the price of no longer caring for our false friends. Technology companies must be able to succeed as legitimate legal monopolies or highly popular products. Ideally, once we succeed, we must allow for an opportunity to disrupt ourselves, meaning we must not be able to enter into restrictive agreements with market participants or competitors that may help to maintain our legal monopolies (such as that agreement between Google and Apple.)

However, those products that lie to consumers, platforms with M.O. to restrain free trade, and founders who benefit from the amplified returns of collusion must be disposed of with prejudice, issued massive legal fines. Antitrust violations are a felony under the Sherman Antitrust Act. As citizens of the United States, we cannot allow antitrust violations to be profitable at any given time.

The technology sector is now highly populated by price-fixed or “dynamic pricing” two-sided marketplaces such as Uber Technologies, Lyft Platform, Amazon Marketplace, Walmart Marketplace, Amazon Home Services, IAC/InterActive Corp (Handy, HomeAdvisor), Redfin (Redfin Partner Program), News Corp (Realtor.com-Opcity), Booking Holdings Inc. (Booking.com) DoorDash, Instacart, Postmates, Opendoor Brokerage, Open Listings, Better Real Estate (Better.com) and many others. These are all highly corrosive trends that utilize network effects to leverage price-fixing instead of genuine competition.

For example, in the massively broken US housing industry, already under immense pressure from lack of affordability, consumers are systematically traded between professionals for kickbacks subject to no upfront costs for referrals, now costing tens of billions each year to all homeowners with the higher overall cost of buying a home.

These “typical” collusion agreements between licensed brokers are organized into networks by a large number of VC-backed “paper” brokerages such as Zillow Flex Program, Realtor.com-Opcity, Redfin Partner Agent Program, Opendoor Partner Agent Program, Rocket Homes, HomeLight, UpNest, OJO Labs, and many others. Why? These products are highly profitable, despite the damage they do to consumers.

It is important to recognize that the power of network effects can and is used to promote lies over truth, collusion over competition, pay-to-play over unbiased information. The framework and the government’s ability to regulate all interstate commerce requires, among other things, to support open e-commerce and to help clear the sights for consumers’ interests. The Internet must produce competitive elements very efficiently and at the same time systematically eradicate the opportunity to profit from collusion.

The antitrust battle in the technology sector has started two years ago, in 2018, and it has barely moved anywhere by 2020. Consumers have already lost billions, if not trillions, of USD value due to monopolistic tendencies of price-fixing via online marketplaces and referral networks. There will be blood, and the government must not be afraid to spill it on behalf of all consumers and those of us building legitimate enterprises.

The network effects must always be positioned to promote open e-commerce, not referral fee networks, and not “dynamic” price-fixing platforms. Open e-commerce is always a two-part problem that hinges itself on innovation and, as with all meaningful innovation, it requires an absolute victory over our false friends.

Products like Uber may have won Prop 22 and the right to treat contractors as contractors, but they have not won the right to engage in price-fixing of said contractors. Google may have built a successful search engine, but that does not mean that it can pay someone else to help them maintain their monopoly. Amazon may have built a successful consumer marketplace, but it cannot collude with third-party sellers with the use of price parity agreements.

The Sherman Antitrust Act is the law of the land in the United States of America. Respect this law or not, those coalitions who actively decide to violate it are also required to fall before it.

Open e-commerce is the only true and genuine opportunity to build network effects on the Internet because the application of free commerce solves big enough problems for the largest number of users, and, most importantly, without causing new problems within the target market.

Author: Litesand

Antitrust, real estate, e-commerce, fintech, proptech, bigtech

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