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Are we fueling fake markets?

June 27, 2017

 "In one generation, the Internet went from opening up new free markets to creating a series of Fake Markets that exploit society, without most media or politicians even noticing." - Anil Dash

 

Every time we ask Google a question, buy something from Amazon, or install an app, are we fueling fake markets?
 

 

 

 

Open Markets

 

The idea of unregulated markets dominated the 90s. One of the first things people created when the internet became public were open markets.

 

The best example being eBay, where anyone could sell 'vintage' WWE cards, usually a portrait of a ridiculous wrestler with their physical information and other useless statistics. Worse, there were people who bought them!

 

I digress.

 

Later, sellers could buy "preferred positioning," on eBay’s search results, mostly large suppliers hogging an entire product line. 

 

Around this time, Google launched with its page ranking system supported by a secretive but 'fair' algorithm with publishers and readers on either side.

 

However, the ne'er-do-wells realized the monetary value of coming first on search results and started relentlessly spamming links from their grandma's basement (who are these grandmas?). The same spammers were probably buying WWE cards on eBay.

 

 

 

Rigged Markets

 

Google's response was to rage war against the spammers by frequently changing their algorithms. Small publishers and business owners could not keep up with the constantly changing requirements and their listings got pushed down. 

 

I mean, how often do we visit the 10th page of a Google search result? Well, if I search "software developer in Dhaka," all among my keywords, my website doesn't even show up in the first 10 pages (I stopped after 27).

 

The only ones who could keep up with Google's demands were the big companies that could afford it and the rich kept getting richer. 
 
With good intentions for improving user experience, Google started to show its own tools on top of the page (e.g. Google Flights when you search for a flight). Hugely convenient for buyers, new revenue stream for Google, and the third party suppliers lose out. 
 
Similarly, Amazon –through its algorithm—recommends its own products, which are not necessarily the cheapest or the best quality. 
 
Anil Dash sums it up: "This shift to rigged markets was perfected in the app stores, where the major players like Apple and Google choose which apps get featured and promoted, and prevent the creation of any apps that would displace or threaten their market dominance." 

 

 

 

Fake Markets

 

Although the big companies were unfairly skewing the market platforms they hosted, suppliers could still compete and buyers still had a choice. 
 
Enter Uber.
 
Uber is an app where riders can request a ride from a pool of independent drivers and one agrees to pick you up. There's a buyer and a supplier, kind of like Amazon. 
 
Unlike Amazon, Uber drivers don't set the prices. Uber regularly changes the price of a ride, usually without the drivers' consent. Additionally, the algorithm that matches drivers with riders is opaque to both parties. Lastly, Uber exaggerates the size of its market by showing non-existent cars on riders map. 
 
The Uber market has some strange traits: 
 
•    We can't trust the information provided by Uber

 
•    We don't know how the matching algorithm works
 
•    As market suppliers, drivers can't set prices

 

If applied to any "hard" product or service market, regulators would work towards correcting these characteristics. Imagine if pharmaceutical companies did not have to explain what type of chemicals were included in their medicine.

 

But because apps like Uber are "cool" in the political space and uses market language like "we support entrepreneurs", regulators are afraid to, well, regulate. Instead, they are welcomed by the community and hailed as a disruptive idea. 

 

It's not helped by the cloud of complexity and secrecy that the big companies cover its products with. How are regulators, who are rarely programmers by night, supposed to penetrate these clouds of complexity?What kind of questions would they ask?

 

We should not get used to Uber's low prices; this is just a short term tactic to push out the local taxi services.  When that happens, guess who's going to pay for the uncontested price hikes?

 

That's right, we the consumers. 

 

 

 

Fake News

 

Another example of a fake market is Facebook advertising and publishing. Incredibly convenient for publishers and readers alike, Facebook's content discovery algorithm is just as opaque as Uber's. Unregulated Facebook content delivery has led to the phenomenon of fake news. 

 

I  totally believed that the pope endorsed Donald Trump.

 

In response, whenever a bold politician steps up to put pressure on Facebook to open up their algorithm, they are ridiculed by the cultural rhetoric of "leave the cool tech companies alone" and "you don't know what you're talking about."  

 

Oh, the irony of Mark Zuckerberg considering a political career.

 

If we choose to challenge this status quo, we are inadvertently challenging our own user experiences. Am I going to stop using Uber? Probably not, because it's too damn convenient. Will I de-activate my Facebook account? I've tried, but I can't wait 2 weeks!
 
So what do we do about it? We can educate and not contribute to the cultural rhetoric. Let’s encourage our elected representatives to challenge the big companies. Update: Google just got hit by a $2.7bn fine by the European Commission for promoting its own shopping comparison service at the top of search results. Kudos to the EC for such a bold move!

 

We can support lobbyists like Anil Dash. Check him out, this post was inspired by his writing.

 

So, who do I personally blame for fake news? Those spammers still living in their grandmas' basements. Listen up grandmas - time to kick out your grandchildren.

Have other ideas about how to challenge the status quo? Leave a comment below.

 

 

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