The Rise of the Platform Business Model and the Transformation of Twenty-First-Century Capitalism

• Date: 01 June 2019
• Author: K. Sabeel Rahman,Kathleen Thelen
• Published date: 01 June 2019
• DOI: 10.1177/0032329219838932
• Subject Matter: Articles

https://doi.org/10.1177/0032329219838932

Politics & Society

2019, Vol. 47(2) 177 –204

© The Author(s) 2019

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DOI: 10.1177/0032329219838932

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Article

The Rise of the Platform

Business Model and the

Transformation of

Twenty-First-Century

Capitalism

K. Sabeel Rahman

Brooklyn Law School

Kathleen Thelen

MIT

Abstract

This article explores the changing nature of twenty-first-century capitalism with

an emphasis on illuminating the political coalitions and institutional conditions that

support and sustain it. Most of the existing literature attributes the changing nature

of the firm to developments in markets and technology. By contrast, this article

emphasizes the political forces that have driven the transformation of the twentieth-

century consolidated firm through the firm as a “network of contracts” and toward

the platform firm. Moreover, situating the United States in a comparative perspective

highlights the distinctive ways US political-economic institutions have facilitated that

transformation and exacerbated the associated inequalities.

Keywords

United States, political economy, platform capitalism, antitrust, consumers

Corresponding Author:

K. Sabeel Rahman, Brooklyn Law School, 250 Joralemon St., Brooklyn, NY 11201, USA.

Email: Sabeel.rahman@brooklaw.edu

838932PASXXX10.1177/0032329219838932Politics & SocietyRahman and Thelen

research-article2019

178 Politics & Society 47(2)

Over the past few years, Uber’s controversial corporate culture and practices have

raised questions about the firm’s long-term vision and sustainability. Despite the tur-

moil, however, Uber remains one of the most highly valued and influential enterprises

in the world. Perhaps more than any other company, Uber has come to stand in for the

excesses and promise of twenty-first-century capitalism. Uber drivers are the paragon

of the new “gig economy,” in which work is increasingly precarious, insecure, and yet

highly optimized for both firms and end users. But Uber is not just indicative of a new

way of organizing work. It also epitomizes a new form of the firm itself, from its rela-

tionship to its investors and driver-“partner” employees to its political presence as an

active lobbyist and a studious cultivator of a pro-consumer image.

In the past, megafirms such as General Motors or General Electric employed and

provided benefits for a large number of workers across a range of skill and income

levels. The model mid-century industrial firm embodied what the philosopher

Elizabeth Anderson described as a “nexus of reciprocal relationships” between the

firm and its internal and external stakeholders.1 That model supported large work-

forces on permanent employment contracts and concentrated power in the hands of

managers whose goal was stable long-term growth. It was underwritten by “patient”

capital (in Europe often provided by banks, in the United States by passive and dis-

persed shareholders) that allowed for the cultivation of long-term relationships and

stable gains for all of the company’s stakeholders, including labor.

As Gerald Davis, among others, has pointed out, that model broke down in the late

twentieth century.2 The shareholder revolution shifted power from consolidated firms

and powerful managers to investors and securities analysts, transforming the classic

mid-century firm into a “network of contracts” (NOC). In the world of shareholder

value, stock price was the core metric of success, and share value rested heavily on

hitting analysts’ quarterly profit projections. Facing intense pressure from investors

to focus on “core competencies,” firms engaged in aggressive outsourcing, asset

stripping, and labor-reducing strategies. Davis coined the term “Nikefication” to

denote the radical slimming down to the highest-value-added segments of the pro-

duction chain and, in the case of Nike, outsourcing virtually everything except the

design and marketing functions.

The new vanguard firms of the twenty-first century—not just Uber but also

Amazon, Google/Alphabet, Facebook, and others—represent a new type of platform-

based business model that builds on the developments of the 1980s and 1990s but

combines them with new features. Whereas the previous NOC model centered largely

on “price-based competition among producers of relatively similar products,” today’s

platform firms represent a new way to create and capture value.3 They do so, above all,

through their capacity to extract and harness immense amounts of data in ways that

allow them to operate as critical intermediaries and market makers.4 Thus, for exam-

ple, service platforms such as Uber or Upwork provide a link between requesters and

providers of services; goods platforms like Amazon connect buyers and sellers of all

kinds; and information platforms such as Google and Facebook connect end users to

sources of information and media through search, news feeds, and the like.