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Networks and the Next Economy
Tim O’Reilly
PWC Deals Exchange
April 26, 2018
How is the economy changing?
What are the implications for business?
What does technology now make
possible that was previ...
We have to let go of the maps that are steering us wrong
In 1625, we thought
California was an island
In 2018, we still think in terms of standalone firms.
We need to think about every company as if it is a network
Networks and the Nature of the Firm
“The existence of high transaction costs outside
firms led to the emergence of the fir...
If we want to understand the future of business and the
economy, we have to understand networked platforms
Gradually, then suddenly
Gradually, then suddenly
Large segments of the economy
are governed not by free markets
but by centrally managed platform
Gradually, then suddenly
Artificial Intelligence and algorithmic
systems are everywhere, in new kinds
of partnerships with...
In 2018, we still believe in the “invisible hand”
of free markets
Internet-scale networked platforms managed by algorithm
are fundamentally changing the economic equation
and the very natu...
The invisible hand at work
What happens when there’s only one queue?
And what happens when there’s
only one price for everything?
The algorithms decide “who gets what – and why”
Markets are outcomes. A better designed
marketplace can have better outcom...
Algorithms have become a battleground
The takeaway: You have to think
far more broadly about security
and trust in the net...
We are all living and working inside a machine
“The Uber app is the drivers’ workplace,
as much as the city where they’re driving
is. Each decision about its interface
An Amazon warehouse is a human-machine hybrid
“A business model is the way that
all of the parts of a business work
together to create competitive
advantage and custome...
Who Do You Want Your Customers to Become?
Henry Ford didn’t just rethink
the automobile and the
factory, he rethought the
A Business Model Map of Uber
 A magical app that lets drivers
and passengers find each other
in real time
 A networked m...
What makes an app “magical”?
1. It seems unbelievable at first.
2. It changes the way the world works, so that the
Why simply adding an app doesn’t change the game for taxis
The takeaway: You can’t just add an app
or buy a startup and hope to compete
After a strong start, Walmart’s acquisition
demonstrates how hard it is to
compete with a market-leading
network o...
M&A within a
rather than to
compete with it
How might this play out
For Uber and Lyft?
For Airbnb?
For Facebook or Google?
In 2018, we still think that we can organize our companies
in old ways but do new things
“Doing digital is not the same as
being digital.”
Josh Bersin,
How is this possible?
McDonalds 440,000 employees, 68 million monthly users
Snap ~300 employees, 100 million monthly users
“My grandfather wouldn’t recognize what I do as work.”
– Hal Varian
Many of today’s workers are programs.
Developers are actually their managers.
Every day, they are inspecting the
How Amazon Became a Platform
“[Jeff’s] Big Mandate went something along these lines:
1) All teams will henceforth expose t...
Two-pizza teams
The lessons of technology are also lessons
for the organization of the business
“Services not only represent a
software st...
The takeaway: You can’t just do a digital acquisition and
expect it to transform your company
In 2018, we still pretend that growth goes on forever
Growth goes on forever?
“Doughnut Economics”
Kate Raworth
Fitness Landscapes
The way in which genes contribute to
the survival of an organism can be
viewed as a landscape of peaks ...
Technology also has a fitness landscape
In my career, I’ve watched a number of migrations to new peaks, and I’d like to sh...
It’s very hard to beat an entrenched platform
at its own game
The Rules for Success Change
 IBM fitness function: Maximize competitive advantage by control over hardware
 Microsoft f...
Generosity takes us to the next peak
Tim Berners-Lee, 1990
The World Wide Web
Linus Torvalds, 1991
Big Data
Generous or “Long-term greedy”?
The takeaway: think about how acquisitions will add value to
your network, not just to your company
Pay attention to your “hackers” –
they predict your future marketplace
?? ?
The great opportunity of the 21st century is to use our
newfound cognitive tools to build
better networked marketplaces
A language for networked marketplaces
Network effect: the value of a network is
proportional to the square of the number ...
Asymptotic Networks
“The reason Lyft is able to compete with
Uber is that even if they have fewer drivers
in many cities, ...
Market Networks
In a market network, you’re not
connecting a simple marketplace of
buyers and sellers, but also
“We wouldn’t be able to build defensibility from our supply-
side relationships purely on the basis of a Marketplace
“Once they get some traction, platforms survive
either because:
 They achieve critical mass in a market with
network effe...
The takeaway: There are many opportunities to apply
platform thinking besides “winner takes all.”
In 2018, we believe that technology replaces people
“…47 percent of jobs are “at
risk” of being automated in the
next 20 years.”
Carl Frey and Michael Osborne, Oxford Univers...
Will there really be nothing left for people to do?
Is there really
nothing left for
humans to do?
Dealing with climate change
Rebuilding our infrastructure
Feeding the world
Ending disease
Resettling refugees
Caring for ...
This is what technology wants
“Prosperity in human societies is best
understood as the accumulation of
solutions to human ...
What happened when Amazon added 45,000 robots
“Truck driver shortage projected to triple within a
decade, if nothing changes”
Jeff Bezos calls this “the flywheel”
“I’ve just invested in an AI startup that will put 30% of call
center workers out of a job.”
(A VC who shall remain namele...
This is the master design pattern
for applying technology: Do more.
Do things that were previously
Acquired in 2012,
Kiva is a key part of
Amazon’s business
model, not just an
The best acquisitions anticipate the future.
They don’t chase it.
This was a network-enabling acquisition
51% statistic
The Augmented Worker
Neo: “Can you fly that thing?”
Trinity: “Not yet.”
Uber’s app isn’t quite what Trinity’s got, but…
“In order to fully reap the benefits of a
changing economy—and sustain growth
over the long-term—businesses will need
to i...
LinkedIn acquires
WeWork Acquires The Flatiron School
Like Kiva (Amazon
Robotics), this is a
The takeaway: acquire or partner to supercharge the skills
of your employees and of your network
Use self-directed discovery for problem-solving, and
nonlinear instruction to acquire new skill...
O’Reilly Media
● Providing learning for almost 40 years
● Trends called – Open Source, Web
2.0, Maker Movement, Big Data
Change the world
by spreading the knowledge of innovators
O’Reilly’s Platform-Centered Learning Ecosystem
Foo Camps
Live Training
Tim O’Reilly
• O’Reilly AI Conference
• Strata: The Business of Data
• JupyterCon
• O’Reilly Open Source Summi...
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
LinkedIn acquires Acquire accelerated
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