The Platform Delusion — With Columbia Business Professor Jonathan Knee

Jonathan Knee is a professor at Columbia Business School and senior advisor at the investment bank Evercore. He joins Big Technology Podcast to discuss The Platform Delusion, his forthcoming book about how the term "platform" has become overused to the point that it has little meaning. Is Sweetgreen really a platform. Well, Sweetgreen thinks so (c'mon now). Listen for a discussion covering what should actually be called a platform, the fundamentals of the tech giants' businesses, and whether students should go to startups coming out of school. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

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• 0:43Alex Kantrowitz?

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• 1:15Alex Kantrowitz?

  Hello and welcome to the Big Technology Podcast, a show for cool-headed nuanced conversation of the tech world and beyond. Joining us today is Jonathan Mee. He's a professor at Columbia Business School and a senior advisor at the investment bank Evercore, who just came out with a book with some interesting counterintuitive insight on the tech giants called The Platform Delusion that comes out on September 7. Jonathan, welcome to the show.

• 1:38Speaker 01

  Thanks for having me, Alex.

• 1:40Alex Kantrowitz?

  It's great to have you. The book is called Platform Delusion. There's been a lot of talk about platforms. Clearly, we talk a lot about it here, especially with regard to the tech giants. So it's interesting to hear you, right in the title, say that there's a delusion going on. So I want to hear first, what's the delusion? And who's the people that are, who are the people that are being deluded?

• 2:03Speaker 01

  Well, the basic delusion is that...

• 2:07Speaker 01

  Saying the word platform tells you a whole lot about whether a business is good or great or destined to take over the world, or a fabulous investing opportunity, or should be regulated to death by the government. It's a word that is so laden, has become so laden and has become sort of effectively a trigger word, both for investors and frankly for regulators. And the reality is, the fact that something is a platform by itself tells you relatively

• 2:50Speaker 01

  little that matters about it. I'm sorry, it tells you relatively little that matters about the underlying business. That is, you know, what is the definition of a platform? A platform is a company that doesn't make stuff. It is a company whose fundamental value proposition comes from the connections that it makes. That is, the connections that it enables and enhances, whether that's a connection by being a platform to enable a transaction in a marketplace, whether it's a connection

• 3:27Speaker 01

  to let Alex meet his future wife on a, as a platform for dating, whether it's a connection between a software developer and users, a platform to encourage and enhance innovation. It's, the entire business model is about creating a space that enables two entities, whether it's a person or a business or otherwise, to connect and the value that they create comes from that. So that's what a platform is. Plenty of those, so Google is obviously a platform.

• 4:11Speaker 01

  It connects advertisers with, with, with searchers.

• 4:18Speaker 01

  Facebook is obviously a platform for connecting the various members of the Facebook community, as well as frankly, developers. So there are lots of different platform models, and many of them are great businesses, but even more of them are shitty businesses. So just saying that something is a platform, which everybody does, whether it is or it isn't, because they think if you say the magic word platform, you get three times more valuation. If you read IPO filings, I mean, like every other, every other sentence has the word platform, whether appropriate or not.

• 5:01Alex Kantrowitz?

  Yeah, I've always had a much narrower definition of a platform is. I've always thought that a platform is something that a tech company builds that allows people to build on top of it. Hence the platform, they build a platform and then people build on top. Amazon Web Services is, is one example. But I do agree with you that it's completely an overused term and people just throw it around everywhere. Like I think, you know, we've spoken in the past and you've mentioned that Sweetgreen calls itself like, which is a salad place, calls itself like a salad platform or something like that.

• 5:34Speaker 01

  Food platform.

• 5:35Alex Kantrowitz?

  Food platform, which is so unbelievably absurd. It is, it has become like, you know, artificial intelligence where like, people use this buzzword everywhere and they try to, you know, get technology style multiples on their, on their valuation, which to me is totally insane.

• 5:51Speaker 01

  And, and even where something is a platform, the relentless pounding of the word to suggest that it somehow in itself is telling you something super important about the business is just silly. So take a business like Compass, which is, which is basically a real estate brokerage. Compass is, it just went public. It's a, it's sort of a tech-enabled, high-end, clever, real estate brokerage, but it's a brokerage. All middlemen businesses are effectively platforms. And, you know, real estate brokerage in Compass is a platform. But when it goes public, does it really need to use the word platform 300 times in the prospectus? I mean,

• 6:34Speaker 01

  does that, does it really let people know something super special about the business? Not, not so much.

• 6:41Alex Kantrowitz?

  That's what we call in, in, in this world, trying too hard.

• 6:47Alex Kantrowitz?

  So I'm curious, okay, so you know, you wrote a book about this. So writing a book is is a pretty serious endeavor, takes a lot of time. You have to basically pour your life into it. So why, I mean, why did you write a book about it? Who are you writing for? What were you trying? What was the sense of urgency that caused you to write something? Like, what's the danger in having, you know, people be deluded about platforms? Where's the societal need for us to be able to read book length, you know, digging into something like this?

• 7:23Speaker 01

  So, well, you sound like my publisher. Who's gonna read this? Who's your, who's your audience?

• 7:28Alex Kantrowitz?

  That's true. I know them well. So I guess I can handle them since we've written with the same publisher. Yep, go ahead.

• 7:35Speaker 01

  So, look, you know, the answer is it, it built up over time. I've been teaching a class called digital investing, which is not about how to open an E-Trade account, but is about, is about digital business models and, and how to think about them. And over time, from two, two, I guess, three different angles, I started to say, you know what? This is getting crazy and it's not good for the world, that people are just confusing what the real source of strength of businesses are. The reality is, what makes

• 8:18Speaker 01

  a business strong is a, for the long term, is a competitive, or structural competitive advantages. That is, things, things that allow you to do stuff that other people can't. And some platform businesses have it and some of them don't. And replacing that fundamental insight about what makes businesses good with a bunch of random buzzwords is bad long term, for a couple of reasons. One, you know, in good times like this, look, it's true. If you just bought a NASDAQ ETF for the last few years, you're a fucking genius. You're doing great, right? And, but the reality is, things, things don't go up forever. And

• 9:02Speaker 01

  if, if you don't understand the distinctions and the nuances, things will get bad at some point. And it's just not healthy for

• 9:14Speaker 01

  The world for people to uh to uh sort of make up bases for uh for their success on a post hoc basis that doesn't make any sense. Secondly, there's this notion uh that um somehow these businesses have inevitable success uh built into them. And the place there that honestly uh disturbs me is the number of uh people who come out of business schools where I am, but undergraduates as well, who are going to these businesses on the on the theory that,

• 9:59Speaker 01

  you know, they're gonna get uh insanely rich and it's it's a sure thing and uh uh it's gonna and uh life is gonna be good. And the reality is going to early stage companies uh is not for everybody. Uh it's for a relatively few people. And and when literally 50% of the graduating classes of top business schools are go are either starting their own businesses or going to businesses that have, you know, a few dozen employees, uh uh something something

• 10:37Speaker 01

  is something is wrong. So uh the point of this really is to tell people to stop the music for a moment, stand back and actually take a look at these businesses, look at the distinctions between them, both the very, very successful ones, which are successful for very, very different reasons, but also look underneath the early stage ones, some of which are growing fast, but Or it isn't clear that they will ultimately have a sustainable business model.

• 11:15Alex Kantrowitz?

  Yeah, so I guess part of this is for the students. And by the way, that's a good foreshadow. We'll get to that in the third segment. And then part of it is for investors. You know, Jonathan, you you've worked in finance.

• 11:24Speaker 01

  I'll throw one. I'll throw one other thing, too.

• 11:27Alex Kantrowitz?

  Okay.

• 11:28Speaker 01

  Part of it is also for regulators.

• 11:30Alex Kantrowitz?

  Yeah.

• 11:30Speaker 01

  Just because, again, it's stupid for an investor to say, oh, it's platform business. I'm throwing my money in there. It's also stupid for regulators to say, oh, it's a platform business. We need to regulate the hell out of it.

• 11:42Alex Kantrowitz?

  Yeah.

• 11:42Speaker 01

  That is, you know, market power is something that needs to be looked at closely to make sure that it is not abused.

• 11:50Alex Kantrowitz?

  Yeah.

• 11:51Speaker 01

  Uh, and and that is absolutely true. But again, saying, well, we're going to have a separate category of regulation that only applies to, quote, tech platforms. Really kind of misses misses the point.

• 12:07Alex Kantrowitz?

  Yeah, I mean, Sweetgreen might be careful what it wishes for. If it actually wants to be a platform, then the FTC might not. No, I'm kidding. I don't think that the FTC and DOJ are going to go after every business that calls itself a platform. And I think they're.

• 12:21Speaker 01

  That's right.

• 12:21Alex Kantrowitz?

  They're a little bit more precise than that, but.

• 12:24Speaker 01

  A little, but but to me, the difference between.

• 12:27Alex Kantrowitz?

  Right.

• 12:27Speaker 01

  I mean, and and there are bad things that these different big companies are doing. But some of them are just bad behavior that should be punished for being bad. You know, if it's true that Amazon is stealing data from people and using it to build their own things. That's not an antitrust violation. That's like theft. That's bad, right? Uh, and and Amazon does that and does other things because it's relentless because it has to be because it's a

• 12:57Speaker 01

  tiny margin business. That's a very, very different thing from saying, well, in the case of Google or Apple.

• 13:06Speaker 01

  We need to put some guardrails on the nature of their of how open their their platform is and how they interact with other people who interact with the platform, which makes sense. But again, very, very different situations.

• 13:23Alex Kantrowitz?

  Man, I have so many questions for you about what you just said, but I want to put that aside for a second. We'll get to them. I'm not going to forget them, but I want to get back to the to the premise here, which is the platform thing. I wonder, I mean, it must feel so I was saying earlier, you've been in finance for for many years, you know, of course, working alongside the with your work at Columbia Business School. It must feel kind of lonely to be a man waving a flag out there being like, hey, maybe we should have rational valuations because, you know, I wonder how much of this is people saying, you know, traces back to the word platform and how much of it is just, you know, money trying to find places to get a return

• 14:05Alex Kantrowitz?

  and basically willing to take any signal that there might be more than standard returns. And then platform is, you know, perhaps one of them where people see platform and they invest because, you know, zero interest rate policy just is making money cheap and it's going wherever it can go, going to NFTs, going to Bitcoin, going to any company that raises its hand and say, say, and says it's a platform. And so looking at the broader picture, how much of this is actually just a story about our economy today and how frothy the markets are?

• 14:34Speaker 01

  I, you know, look, there's no question that

• 14:42Speaker 01

  this isn't the first time we've seen this movie, right? There was the first internet boom and there were and there were all, there were different crazy metrics that had nothing to do with anything that people that people hung their hat on. And and over the course of history, I mean, I wrote two books about one about the media industry and one about people who invest in education, which again, each of them had had their their own mythology around to entice people to put

• 15:21Speaker 01

  to put their money into. Things that really, really didn't, really didn't make any sense. There is a natural tendency to want to find a simple, all encompassing theory that will allow you to safely get rich. And unfortunately, there are a bunch of people who have an incentive to encourage those views, right? That is, if you're a venture capitalist, who has a bunch of, a bunch of companies that some of which are good and most of which

• 16:00Speaker 01

  turned out not to be good, you're interested in getting some, if they're not that good, you're interested in getting the greater fool to take you out of, take you out of those. If you're the CEO of a public company that's trading at an insane valuation that you know on the intrinsically probably isn't, shouldn't be worth that, you wanna, you wanna keep the music going. So it's one of these things that takes on a life of its own. And there's a huge sort of incentive to keep, to keep the fly, the flywheel evaluation going once it started. Because the downside, once it collapses in terms of, you know, in terms of employees,

• 16:43Speaker 01

  in terms of not, I mean, in terms of obviously your own wealth, is, is not trivial.

• 16:51Alex Kantrowitz?

  And hearing you say that, I love having finance people on the show. I have to ask you the question. Are you with your personal savings and investments betting on the market? Are you playing it more safe with, you know, bonds and stuff like that? What's, what does it look like inside Jonathan E's portfolio?

• 17:08Speaker 01

  I'm really boring. I, I am, I, I am, I am an ETF kinda guy. Because, look, the reality is, there's only so many hours in a day. And if I'm not going to do the work, I'm not trusting anybody else to be picking stocks. And so it's a mix of ETFs in the in the in the broader public market as well as some some funds for around debt sort of more senior up the capital, a mix of senior

• 17:49Speaker 01

  and more speculative up the capital stack. And then, you know, the and then there's like a little slug that is the fun month, my fun money, which is people who I know, who I think are smart, who I trust. And I tell them, I'll make if they're raising money, I say, I'd be happy to give you money under one condition, which is I don't have to hear a fucking thing about it. Excuse my French until it's over. I don't, I don't want the quarterly update. I'm betting on you. I know you. And this is a little if I lose it all, it's not enough that it's going to kill me. I trust you and we'll see how it goes. But let me know when it's over and not before. So that's my portfolio.

• 18:34Alex Kantrowitz?

  Love that style. I'll send you an email when big technology raises. We're not going to raise. Okay, let's go to break. I want to talk to you about the tech giants. You said some stuff about Amazon that I want to pick apart or pick and dig into. Well, we'll see if it stands and we'll come back right after this on the Big Technology Podcast with Jonathan Ne. This episode is brought to you by App Point. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data. And most teams have no single way to see it, secure it, and prove it's under control. That's exactly what App Point does. For 25 years, they've been the trusted layer beneath the world's most demanding data, now extended

• 19:19Alex Kantrowitz?

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• 19:54Alex Kantrowitz?

  And we're back here on the Big Technology Podcast with Jonathan Ne. He's the author of a new book, Platform Delusion. We've been talking about it. Also professor at the Columbia Business School. Let's get right back into the tech giant discussion now that we've talked about the premise of the book. So I'm kind of curious to hear your perspective. So you don't think that Congress should regulate Amazon for taking data from third-party merchants and using that to improve its own products, data it would only get if these third-party merchants had to use it in order to get to customers. But you are open to some rules and regulation around Google and Apple, maybe because of their mobile operating system, which I think is like, a mobile operating system is the definition of a platform.

• 20:39Alex Kantrowitz?

  You know, it's an operating system where you build apps on top of it. So what's your perspective in terms of the way that we should handle these companies?

• 20:46Speaker 01

  So to be clear, I'm not saying that shouldn't be regulated. I just, it's a different kind of regulation. That's bad behavior.

• 20:55Alex Kantrowitz?

  Yeah.

• 20:55Speaker 01

  That's bad behavior. That should, and bad behavior, you know, gets punished if they did that. Now, we have a real problem.

• 21:03Alex Kantrowitz?

  There's no rules about it right now, especially that stuff.

• 21:06Speaker 01

  That's, okay, that's right. But those rules should not be antitrust rules. Those should be laws and data protection rules. And in fact, look, and unfortunately, you know, Congress is a spineless beast. And they love to complain about regulators.

• 21:27Speaker 01

  But the reason why regulators don't know what they're doing is that Congress refuses to pass very specific laws, even, I mean, even the antitrust laws, if you actually read them, are so broad and vague, it's really just court cases that have defined them over time. And the only way things get passed is by making them vague. So they, what they, what Congress does uniformly is pass a bunch of vague thing and then bitch about it later.

• 21:53Alex Kantrowitz?

  Yeah.

• 21:54Speaker 01

  Because they didn't have the spine to do it in the first place.

• 21:56Alex Kantrowitz?

  Not only that, they don't fund the regulators at all. So it's like they pass these laws that regulators don't.

• 22:02Speaker 01

  But on consumer protection, exactly. And on consumer protection, interestingly, people don't realize this, there is no consumer data protection law, that doesn't exist. The FTC kind of uses its sort of generic authority to, to, uh, to try to regulate this topic. But it needs much more real and specific authority. And, and in fact, I would say one category of regulation that I'm quite sympathetic to, to deal with certain platforms whose, whose advantage does come from having such a unique, um, uh, walled garden of data

• 22:47Speaker 01

  that gives it an advantage over, uh, over others. And that that does limit the, the ability of others to innovate and create, uh, exciting, interesting, competing products. One category of potential, uh, uh, regulation, which I think John Battell has suggested, is that people individually actually own their own data that they create in the context of interacting with these, and that they can port it and share it with others. With other platforms, right? So that is, so something like that, I think is interesting.

• 23:26Speaker 01

  My point again about Amazon is not that Amazon should be free to go around and steal shit from people. It's that it's not an anti, it's, it's not an antitrust issue. It's a bad behavior issue.

• 23:41Alex Kantrowitz?

  Right.

• 23:42Speaker 01

  And, and that should be regulated that way. Whereas something like, you know, search where it's, it appears to be something close to a natural monopoly. You want to put some constraints on the abuse of that monopoly position. You know, it's interesting, the US law, as I said, if you read the antitrust laws, it eve, if you just read them straight, cold, you'd say, well, either everything is illegal or nothing's illegal. It's impossible, it doesn't make any sense. You know, in, in the European context, they have a notion that what is illegal is the abuse of a monopoly position.

• 24:27Speaker 01

  That is not illegal in the US, right? To me, that is the concept.

• 24:32Alex Kantrowitz?

  Correct. The maintenance of monopoly is the, or the way you got it. But once you get a monopoly, you're allowed to be a monopolist. It's really interesting stuff.

• 24:40Speaker 01

  Yes, that's right.

• 24:42Alex Kantrowitz?

  There, there is one bill in Congress right now, one of the six antitrust bills that does have that data portability aspect.

• 24:49Speaker 01

  Yeah, I don't know. I think that's interesting.

• 24:51Alex Kantrowitz?

  It's interesting, but I also sort of have felt that like the, the individual data is not what makes these platforms valuable. It's the combined aggregate data. So, yeah, maybe you could like take your Facebook data, but where do you put it? Like, do you put it in Twitter? Well, they don't really have, like a lot of the.

• 25:06Speaker 01

  I have, I have a, I, I, I think that's the first step. I mean, there are a bunch of really interesting businesses out there that do try to create complete, for instance, in advertising space, you know, like the, the Trade Desk or Live Ramp where they try to aggregate.

• 25:27Alex Kantrowitz?

  Platforms where you can buy ads.

• 25:29Speaker 01

  Yep. Where they and you know, I I'm confident that if if data was portable in that way, there would be entrepreneurs and products that created by people who were who aggregated all of that and and created an important counterweight to what to what the the big platforms have.

• 25:53Alex Kantrowitz?

  Yeah, but I guess that would also require like a consumer or person, if you don't want to use the jargon, deciding to take their Facebook data and like hand it over to a company like the Trade Desk, which is built entirely to target ads to them. And that's a heck of a burden on on the person themselves that I don't think people would generally be thrilled to do, although I've been surprised in this world before. So maybe it will happen again.

• 26:18Speaker 01

  And and I think smart entrepreneurs would say, hey, we'll pay you something. We'll give you some benefit from this and we will and we will promise to only use this on a, you know, you know, you you might have different options for, you know, at different at different value propositions in terms of how the data is used.

• 26:44Alex Kantrowitz?

  Yeah.

• 26:45Speaker 01

  Is anonymized or not and all of that. Yeah.

• 26:48Alex Kantrowitz?

  Totally.

• 26:48Speaker 01

  I just think, but but the point is, it wouldn't be just stuck behind the walled garden.

• 26:54Alex Kantrowitz?

  Right.

• 26:55Speaker 01

  It would create a marketplace for people to figure out how to use this stuff. It it would be in play. It would be in play. And I think that's be an interesting way to to to move to move the needle. But you know, some of those bills have crazy, just straight up crazy stuff like.

• 27:15Alex Kantrowitz?

  I know. I've I agree with you. I've written about.

• 27:17Speaker 01

  I mean, you know, oh, you can't, you can't let a consumer compare my marketplace product with with another product on the same screen. Well, I mean, that's called transparency and innovation. And that's, you know.

• 27:32Alex Kantrowitz?

  Well, I don't.

• 27:32Speaker 01

  Consumers.

• 27:33Alex Kantrowitz?

  Yeah, I don't know if the laws go that far, but there are definitely some that really made me scratch my head essentially, especially the one that like ended or would end the tech giants ability effectively to acquire companies, which to me was just so beyond. Ridiculous, like you can't, you can't cut off the exit path to startups just because you're not happy with

• 27:53Speaker 01

  That is something, some, sometimes the unintended consequences you can't see, but that one, it's pretty obvious.

• 28:00Alex Kantrowitz?

  Pretty obvious.

• 28:01Speaker 01

  That if you can't, if you can't exit, nobody's going to put money in the first, uh, first, uh, instance.

• 28:07Alex Kantrowitz?

  Yep. Uh, okay. So we've touched on Facebook a little bit. Um, you know, the platform book is interesting because Facebook is one of those platforms. Um, and I view it as the most vulnerable of the tech giants. It doesn't have an operating system. You don't need to go to Facebook. You do need to go to Apple or Google. If you're going to use a phone, you need to go to Microsoft. Most often, if you work in a company, uh, Amazon, if you want stuff delivered, I mean, you could get around Amazon, but it's tough. You're definitely using websites that have AWS on the backend. Facebook, you don't need to use. So what is your view on the health of Facebook as a platform and where it's going from here?

• 28:45Speaker 01

  Look, you know, when you, uh, when you read the emails, the internal Facebook emails, uh, that were, uh, revealed in those congressional hearings, uh, as much as Facebook likes to strut around, they're obviously scared shitless.

• 29:01Alex Kantrowitz?

  Yeah.

• 29:02Speaker 01

  They are, they are, those are the emails, not of a master of the universe who's confident that, that they control everything. Uh, they are people who are, uh, deeply sensitive to their inherent vulnerabilities. Um, social networks, the, the, the phrase that Zuckerberg used in those emails is, you know, there's a finite number of what he called, uh, social mechanics, that is different ways that human beings would interact, uh, through some of different kinds of net, uh, networks. And it's very difficult, you know, WeChat notwithstanding, which is a kind of weird, incredible Uber app,

• 29:47Speaker 01

  but it's in the Chinese context. It's not clear. It, it, it's not clear that, you know, that a Facebook could have effectively built a, um,

• 29:59Speaker 01

  A um uh something as powerful as the companies that they ended up buying rather than just ending up buying them from from within one social mechanic to build another social mechanic. So, um, you know, that said, what they have done, and if you look at the the building of Facebook relentlessly is figuring out how to keep people engaged, how to make it sticky, how to make it make the experience integrated into your day to day life in ways that you don't even realize, whether it is it's how you sign into things, it's how

• 30:44Speaker 01

  you contact certain people, it's how you make certain day to day decisions. Um, they've done a fabulous job of that. And if you kind of look at the the product roadmap over time, they've done a fabulous job. That doesn't mean it's not incredibly uh vulnerable in in its way. That is, uh, you know, whether you look at TikTok or, you know, that one of the one of the fights that is being had in the litigation right now is, you know, is YouTube a social network? Because if it is, it looks like it might be bigger than

• 31:23Speaker 01

  um, and it is clearly in some ways that it might be from a market definition, that's actually quite an important question. Um, yeah. So, look, it is, uh, so what I would say is, it is definitely vulnerable. Um, it the demographics that its core proposition has is not, uh, putting aside Instagram for the core Facebook, you know, is very, uh, does does not, you know, my daughter is 17, she I don't know anybody in her world beyond

• 32:02Speaker 01

  very narrow use cases that that is on that is on Facebook. That said, they've run the company smartly and well. Uh, and it's, uh, and if you look at

• 32:16Speaker 01

  You know, people always focus on the absolute R and D budgets of businesses. And so you always, every year, there's an article that says, Amazon has the biggest, more R and D than anybody in the world. But if you look at R and D, the big fixed costs as a percentage of revenue, Facebook crushes all of these. So they know about their vulnerability and they are investing to keep these people there.

• 32:50Speaker 01

  So.

• 32:51Alex Kantrowitz?

  There's something of like a business miracle, actually, if you think about it, because I, social media, social networking especially is like the most fickle of all spaces when it comes to the people using them. There've been so many networks that have come and gone, you know, the thing about, obviously, the ones we talk about, MySpace and Tumblr, but even the upstarts that had a moment, Peach. They were gone in a moment. People got bored and they left and Facebook just finds this way to, you know, keep reinventing itself and build new products that are sticky. Whether it's, you know, copying directly, something like stories or, you know, I, I've personally just moved to New York from San Francisco and I furnished the entire apartment from Facebook Marketplace.

• 33:31Alex Kantrowitz?

  And I'm planning to write about this at some point and it is amazing. I mean, it puts, it just embarrasses Craigslist how good it is. Because it has that integration with, with Facebook Messenger that you can just connect with people real quick when you're interested in stuff. And of course it has the machine learning algorithms working behind the scenes. So if you start searching for stuff, it says, well, how about this? And it's very easy to find what you want. So I, I, I think it's, that's going to be a massive, massive product for them. And by the way, just one last thing about Marketplace, it kept me on Facebook more than I'd ever been on Facebook before in years. And I was like, I had never spent this much time, but I'm back. So.

• 34:13Speaker 01

  You know, and, and you know, on the antitrust front, you know, when you, when you read those emails, you can interpret them two different ways. And depending which way you interpret them.

• 34:24Alex Kantrowitz?

  Yes.

• 34:25Speaker 01

  It has big, big implications for, for antitrust. So, I mean, when you look at them talking about, you know, they spent $20 billion on WhatsApp, which at the time had like a couple of dozen employees. I mean, it was growing very fast. And he was obviously afraid that this alternative social mechanic would become huge and they wouldn't have any way to compete with it.

• 34:50Speaker 01

  But it's one thing if somebody says, oh, I see an alternative social mechanic. I'm going to buy it and kill it so that it doesn't take over. That's not what they did. They basically said, look, I'm in the social business. I can't be in that part of it. So I'm not going to be able to compete with that. I want to, I want to, but I'm really good at managing social networks. So I want to buy one as many of these alternative social mechanics and then optimize them. So he bought this business for $20 billion that lost money. And by the way, still loses money or still, I mean, I forget what the latest numbers,

• 35:34Speaker 01

  but it's basically irrelevant. They don't really have a revenue model.

• 35:37Alex Kantrowitz?

  For the amount of users it has, it's not a giant business that you imagine.

• 35:44Speaker 01

  But they then invested billions, making it a far better product on, you know, the shareholders dime. It still doesn't make any, still doesn't have a revenue model. It's much, it's huge now. It's more robust. It's still largely, they've started to integrate a bit. It's still largely on a different tech stack, still largely a completely separate business. And honestly, you ask yourself the question, you know, if it had been on its own, what, you know, the idea that they let them buy it for $20 billion, they invest in it and made it an incredible product, which it is, who is hurt by that?

• 36:30Speaker 01

  It's not like they, it'd be one thing if they bought it to, you know, there are companies that, that are vulnerable and they think a good strategy is to do whack a mole, just buy a bunch of competitors or people who they think are smarter or better than them, doing exactly what they do and then fucking killing them. Right? That's something antitrust authority should stop.

• 36:52Alex Kantrowitz?

  Yeah.

• 36:52Speaker 01

  But here, if you look at it carefully, what he's saying, he's saying is, look, there are these alternative social mechanics. We could run, you know, I, I, I would like that to be part of our overall company. We're good at managing different social mechanics. Let's buy it and be the person who blows it out and optimizes it. It'd be one thing if you thought, if you saw anything that they did that suggested that they were making it less good. Uh, you know, sure, you would have a concern. Now, the argument could be that, oh, uh, they were afraid somebody, you know, if Twitter

• 37:33Speaker 01

  had bought them, you know, Twitter, you know, Twitter would become a much broader competitive Facebook. But the reality is we chat, notwithstanding that's just not how these products tend to work. People have, people go to different things for different purposes.

• 37:49Alex Kantrowitz?

  This is a narrative violation, Jonathan. I gotta, I gotta be careful. No, I'm kidding. I'm glad that you're bringing this up. It's, it's good to have this alternate perspective here, and I don't think it's one that gets aired enough. Facebook does have its problems, I'm not saying it doesn't, but I've definitely kind of laughed at the idea, uh, that it's a monopoly. Let's go to one more break. You mentioned earlier that you're seeing students go to startups and not to other jobs, and that's something of concern to you. Uh, I'm personally curious to unpack that a bit. Let's do that in our final segment here on the Big Technology Podcast. We'll be back right after this.

• 38:55Alex Kantrowitz?

  And we're back here for one final segment on the Big Technology Podcast with Jonathan Neek. He's the author of The Platform Delusion, a book that comes out next week, Tuesday, September 7th. Also professor at Columbia Business School. He also works with Evercore, an investment bank. Jonathan, let's go to this last point, which is where students should be going after school. It used to be, I think, you know, from prior interviews I've listened, that you've given that a large chunk of people were going into finance. Now it seems like a majority of students, or the plurality of them, are going to work in tech as their first job. You, you know, expressed some, some concern about this in

• 39:36Alex Kantrowitz?

  the beginning of our conversation. And so let me just propose this to you. Isn't it a good thing that kids are, you know, leaving school and trying to build stuff as opposed to working in financial services? And I know it's sort of going to be sacrilege to, you know, someone who's worked in investing for a long time. But I personally think, you know, isn't it, it's more creative, it's where the future is going to be, it's not, you know, just trying to make money off of other people's money. Why don't, why aren't we going to celebrate this type of stuff?

• 40:06Speaker 01

  So, so you will be shocked to know that I'm not interested in shilling for the financial services industry. It is true that when I went to business school in the 80s, and I think through the 90s, about half of the top business school students went to banking or consulting. Though what those two things have in common is those are service businesses. They're basically sales businesses. And the chances that 50% of the people who graduated from those schools would, should be in sales, and should be in those industries was low. People did that for the same reason, frankly, that they're going to startups now, which

• 40:47Speaker 01

  is it's the hot sexy thing. And they've spent their whole lives outperforming and, and telling everybody that they're, that they are the winners of their generation. And going at that, in that era, going to Goldman Sachs or McKinsey were the things that said, I'm, I'm a winner. And in this generation, going to, you know, being entrepreneurial and going to either, either starting your own company or going to an early-stage company is the thing that sort of screams out, "I'm, I'm a winner." But in both, what, those decisions have a couple of things in common. One is that it's not done, it's not done often, not always, but there's just no way

• 41:32Speaker 01

  that that percentage of people either wanted to, grew up wanting to be bankers or consultants, or grew up wanting to be, you know, entrepreneurs. It's, it's a social construct and making decisions based on that is, is foolish. So that, that's just something that it has in common. Unfortunately, one thing that they don't have in common is that, at least with banking and consulting, you learn something. You have systematic training, you have exposure to a wide range of industries and functions. So even if you fooled yourself into thinking that you wanted to be a consulting or a banker,

• 42:15Speaker 01

  after two or three years, when you realize that it's miserable and that you're not a salesman or a saleswoman and you want to do something else, you actually will have developed skills that allow you to pivot. Okay? However, if you go to an early-stage company and you realize, probably around the same time that that early-stage company collapses, because by definition, most of them do, that that's really not what you want to do. The trouble is, you're standing there with your pants down and nowhere to go, because you didn't learn anything.

• 42:55Speaker 01

  And, and you realized that that's not actually, that's not actually what you want to do. I also think from a social point of view, this, that's what you were suggesting, you know, going and creating this, this nonsense about, oh, you know, the, you know, early-stage companies are the lifeblood of our economy. Well, you know, this reminds me of my work in media. In media, everybody is a winner. If you only count the hits... Every producer is a friggin genius. And similarly, if you only count the early-stage companies that grow up into become Google, and you don't net out the 99% of them that close down, well, yes, it's a winner.

• 43:37Speaker 01

  But in terms of incremental value to society, having really smart people go to established companies and make them better and fill them with innovation and creativity, the incremental value to society of that is better than the incremental value of just throwing them against the wall on random startup number 6,400.

• 44:05Speaker 01

  Now, if you, if you

• 44:07Alex Kantrowitz?

  Wait, hold on. Let me make the counterpoint here.

• 44:10Speaker 01

  There are people who love to do it.

• 44:11Alex Kantrowitz?

  Yeah.

• 44:12Speaker 01

  There are people who love to do it. They should do it. Don't get me wrong. There is value for, there are real entrepreneurs out there. There are people who really, you know them, you've met them. They, but there are also a bunch of people who you also know, they're just faking it, and it's a mistake.

• 44:28Alex Kantrowitz?

  Okay, I just want to bring up the counterpoint here because I feel like it should be addressed and have you respond to that. The counterpoint would be a few things. First of all, the idea that you don't learn in a startup, I think that there's a fair argument to say you learn a ton because you're crossing all these different business functions and you're largely taking more responsibility than you would at a larger company. You're going to be in much, you know, better shape, no matter what happens. That's one. And two is that like, you know, if, when it comes to starting a company, you can go, you know, work in a job, or you can, you know, try to actually, you know, get control of the means of production yourself. I mean, it is called capitalism, not laborism.

• 45:11Alex Kantrowitz?

  So there seems to be, you know, an argument out there. When I think, I definitely, I mean, I'm biased here. I started my own company, although I did it after working in, you know, for other people for 10 years.

• 45:24Speaker 01

  Exactly, you did.

• 45:26Alex Kantrowitz?

  Yeah.

• 45:26Speaker 01

  Which is what enabled you to do it. If you had done it

• 45:29Alex Kantrowitz?

  Yeah, agreed. I couldn't have done it out the gate. No.

• 45:33Speaker 01

  Exactly. But look, and on your first, so that's my answer to your second point. And to your first point, Are there examples of people who went to startups and it happened just like you described? And they learned a lot because they were they were doing multidisciplinary things and what have you. And they learned a lot really quickly. Sure, it happens. But more often what happens is there are a bunch of people who don't know what the hell they're doing, running around with a chicken. They have no direction. There's nobody there to explain how it's done. It's not gonna it's not gonna actually get enough traction for you to actually learn anything that is then transferable to any other context that's useful.

• 46:16Speaker 01

  And, you know, you have the, you know, the experience of running around like a chicken without its head on, doing a whole bunch of things badly without anybody, without any oversight or anybody to even tell you how to do it right or how to do it better or any way to benchmark. And then it's over. And then you go and sell yourself based on the fact that you did that and that you're somebody who's happy to run around uselessly without learning anything.

• 46:49Alex Kantrowitz?

  Right. Yeah, I guess that happens. It must happen in all jobs where it depends a lot on, you know, the project you're on, the manager you have, the company you're working for, how it's doing at the particular moment. There are so many different variables. But there has there been this myopia where people view tech as, you know, a can't miss, you know, get rich quick type of industry where you position yourself perfectly for the future? Yes, and it is good to, you know, to pour a little bit of reality into that.

• 47:25Speaker 01

  And again, it's not just it's not just tech. It's early stage tech. So, I mean, going to a going to an established tech place to to to to learn some basic things before you cast out, well, to learn two basic things. One, some basic business things. And two, Whether you really are an entrepreneur.

• 47:48Alex Kantrowitz?

  Yeah.

• 47:48Speaker 01

  That is whether that's what you want to do.

• 47:50Alex Kantrowitz?

  Yep.

• 47:51Speaker 01

  And then, and if both of those things are the case and you figure that out, then blow, blow out of there and, and start something. That's great.

• 47:59Alex Kantrowitz?

  Totally. All right. Last question for you. You come into contact with students all the time. How are they doing? Are you optimistic about the current crop that you're teaching? And, and how has COVID impacted with them? Is this going to be something that sets this generation back? Or do you think they'll get over it pretty quick and be resilient?

• 48:19Speaker 01

  Wow. It's a good question that I don't really know the answer to, because I haven't seen them back yet. We start teaching next week, right? Well, we, I've dealt with them from afar for, for a year now. I would say they've handled it better than I thought. So I'll give you my, my, my answer, but it's more driven honestly by watching my 17 year old deal with this than, because that I see up close.

• 48:57Alex Kantrowitz?

  Yeah.

• 48:58Speaker 01

  And it's been very painful.

• 49:02Alex Kantrowitz?

  Yeah.

• 49:03Speaker 01

  But I think like with all things in life, I think people who are resilient, it will make better.

• 49:14Alex Kantrowitz?

  Hmm.

• 49:16Speaker 01

  Because it, it, it will show them certain obstacles that, and how to get around them, and also show them certain opportunities that they wouldn't have seen before. And they will get, oh, they will both get over it and they will figure out how to use it to actually make them stronger and better. But you know, I forget what the analogy is that there's two different kinds of flowers and psychologists always and you often see this with the in the same family who were brought up in the same environment where one thrives and the other just completely collapses. And they call that the something and the something. There's two different kinds of

• 50:01Speaker 01

  flowers. Yes, exactly, yes. But my point is, my point is that I don't think it will be a one way thing. I think some people will will will not fully recover or ever catch up. And I think it is all of our collective obligations to focus on those people and do everything we can to make sure that they come back to life as all of us come back to life. Because, you know, it's people are built different in different ways. So I do think what you're going to see a bunch of incredible innovations and incredible upside opportunities that come out of this

• 50:45Speaker 01

  darkness from from folks in category A. But I also think there are going to be some lingering very serious issues. And I also think there are some dangers about people taking the wrong lessons from, you know, for instance, the fact that, geez, I didn't realize you could do all of this without actually seeing another human being. So let's just everybody be virtual. That I think there are many contexts in which that is a wrong, the wrong answer in terms of optimizing, optimizing businesses and optimizing, optimizing society. So I think

• 51:30Speaker 01

  it'll take us a while to figure out what the right lessons are and what the right mixes.

• 51:38Alex Kantrowitz?

  Absolutely. Yeah, it's gonna be, it'll be fascinating to see how this turns out. And I do really wonder, especially with the young people, how this impacts them, changes the way that they socialize, the way they think about business, and really impacts the way they learn. And I think it's fascinating to hear and almost certainly true that it'll be a great outcome for some people who are pretty supposed to handle it well, and it'll probably crush others. We'll see the impacts of society for years to come. So, okay, the book is called Platform Delusion. You can preorder it now and get it next week. The author is Jonathan E. Jonathan, thank you for joining. Thank you, Alex, and welcome to Brooklyn.

• 52:18Alex Kantrowitz?

  Yeah, it's good to be back in New York. I missed it. And I'm looking forward to spending the next little bit of time here. And yeah, and on we go. So, thank you to Nate Guatney for doing the editing and mixing this on a short timeline. Thank you to Red Circle for hosting and selling the ads. We have some new advertisers this week. We're excited about that. And thanks once again for you all for listening. There wouldn't be a show without you, and I appreciate you being here. We will see you next Wednesday with Tech Insider or Outside Agitator. Once again, this is the Big Technology Podcast. Thank you all for listening. See you next time.

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• 53:49Alex Kantrowitz?

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