The digital platform economy has impacted employment in many ways. “Traditional” jobs, such as office workers and the service industry, are being enhanced by collaboration, video, and cloud-based platforms. New tech industry jobs are being created in countries that have successfully encouraged the development of platform companies. Finally, many platforms foster the sharing and gig economies and have created employment opportunities for individuals who have an asset, skill, or time to share. In this Signal post, we touch briefly on employment in the tech industry but focus primarily on employment in gig and sharing platforms and provide an update on how the early promises of the sharing and gig economies have played out in reality.
The promise of platforms
Digital platforms are disrupting established business practices and redefining the relationships between producer, consumer, and worker. By creating multi-sided marketplaces and ecosystems, they promise to democratise both consumption and production. Empowering participants and creating environments where workers have flexibility and control over the goods, services, and labour they provide are some of the key goals of platforms.
The growth of the platform economy is part of what the World Economic Forum describes as the 4th Industrial Revolution (4th IR). While the 4th IR includes technological advances in areas like robotics and artificial intelligence, it also includes eCommerce, mobile payments, as well as sharing and marketplace platforms. As these technologies spread globally they bring opportunities for people in developed as well as developing countries. Whether you’re in Spain or sub Saharan Africa, if you have an asset to share, a skill, or a product you produce, the platform economy gives you the opportunity to monetise it.
Policies to encourage growth
While the users of platforms are increasingly global, the development of the platforms, and the tech industry jobs are concentrated in a small number of countries, mainly in the US and China. Other countries, such as Finland, Canada, and the EU as a whole, are actively working to encourage the creation and growth of locally developed platforms. As we wrote in an earlier Signal post about GDP and the Platform Economy, countries recognise the need to encourage the development of platforms to ensure future growth in their economy and employment for their citizens.
In addition to fostering the local tech industry, many countries recognise that some platforms will replace “traditional” jobs. For example, Finnish researchers estimate that 23% of jobs in Helsinki, such as salespeople, waiters, and accountants could be replaced by 2030 through digitalisation technologies such as robotics and Artificial Intelligence. Re-training displaced workers, through government programs or platforms such as Udemy or Google Career Certificates, are part of the solution to increasing employment opportunities.
Other policy initiatives are focused on equity and inclusion of women and minorities in the platform economy, as both tech workers and/or participants in the sharing/gig economy. The International Finance Corporation (IFC) and the European Commission (EC) created Digital2Equal, an initiative involving 17 leading technology companies with a focus on increasing opportunities for women in emerging markets.
The challenges created by the gig and sharing economy
While platforms have technically delivered on their promise of democratising production and consumption, they have introduced new challenges. Some platforms allow producers and “workers” more control over how their work is valued, while others are highly competitive and drive earnings lower.
Producers such as those selling products on Etsy, providing skilled services on Upwork, or renting properties on AirBnB face competition but generally have control over the prices they charge and how they operate. Producers/workers operating on platforms that provide ridesharing, food delivery, or crowdwork participate in a highly competitive environment with little control over the fees they’re paid and none of the benefits associated with being a “traditional employee”.
These challenges have been written about in detail recently, including: being at the mercy of bad reviews, high levels of pressure, working long hours, no employment benefits, low-paying crowdwork, concentrating economic gains in the hands of the platform, and poor working conditions inside eCommerce warehouses.
Creating a fair and sustainable gig and sharing economy
While labour laws and social security infrastructure vary by country, addressing the challenges associated with employment in the platform economy is a key issue for policymakers. The European Foundation for the Improvement of Living and Working Conditions (EUROFound) outlined policy suggestions that include: clarifying employment status definitions for platform workers, setting minimum payment standards, setting up dispute-resolution mechanisms, and allowing platform workers to organise and establish representation.
The unique situation in the Nordic countries is highlighted by TemaNord (funded by the Nordic Council of Ministers). While platform work is still relatively small in Nordic countries, some platforms are being assimilated into the Nordic labour model, such as Foodora in Norway and Hilfr in Denmark reaching collective agreements with workers. However, other platforms are eroding the Nordic model, such as Uber instigating the deregulation of the taxi industry.
The World Economic Forum suggests four steps to build a fairer gig economy: rate platforms on fair work practices, ensure platforms are accountable to existing (or new) regulations, allow workers to organise, and allowing democratic ownership and worker cooperatives.
While Uber is advocating for the creation of a new employment classification for gig workers, some observers take the position that new policies and laws may not be required since they feel existing labour law and social security frameworks already apply to platforms and platform workers in most countries. They assert that a case-by-case assessment of different platforms will clearly identify if the workers are entrepreneurs or employees and which existing laws apply.
Selected articles and websites
The sharing economy has made life easier — and better too
Can work still have real meaning in the age of digital platforms?
WEF – How to build a fairer gig economy in 4 steps
UN Frontier Technology Quarterly – Does the sharing economy share or concentrate?
EuroFound – Employment and working conditions of selected types of platform work
Past Signals related to this one
Finland’s master plan for platform economy
Additional references
The Fourth Industrial Revolution (WEF)
Does the fourth industrial revolution offer hope for workers in the developing world
Finland’s master plan for platform economy
Canada Innovation Supercluster Initiative
Digital2Equal – Case studies on women and the platform economy
Work revolution and digitalisation – what changes are promised for the labour market in the Helsinki metropolitan area? (Työn murros ja digitalisaatio – mitä muutoksia on luvassa pääkaupunkiseudun työmarkkinoille?)
How modern workers are at the mercy of ratings
Survey reveals app drivers’ misery
California judge rules Uber and Lyft must classify drivers as employees
A Data-driven analysis of workers’ earnings on Amazon Mechanical Turk
Here’s what it’s like to work in an Amazon warehouse right now
TemaNord – Platform work in the Nordic models: Issues, cases and responses
Uber CEO advocates for ‘third way’ to classify gig workers while fighting California labour lawsuit
Markus Äimälä: Platform economics and labor law – a lot of noise from nothing? (Markus Äimälä: Alustatalous ja työoikeus – paljon meteliä tyhjästä?)
Rantahalvari: The platform economy challenges social security – perhaps not (Rantahalvari: Alustatalous haastaa sosiaaliturvan – ehkei kuitenkaan)
PWC Legal – Gig economy employment status
Interview study report: Do Finnish companies capitalise on opportunities in the platform economy?
This signal post summarizes our newest research report on an interview study that explores how Finnish companies view and capitalise on opportunities in the platform economy. The study is based on interviews that were conducted in Finland and in the USA in 2019 with companies from various business sectors such as food, pulp and paper, manufacturing and security.
For more details, read the full report.
Interview study
The aim of our interview study was to find out how Finnish companies view and capitalise on opportunities in the evolving platform economy, the phenomenon that we broadly define as a way of creating value and organizing layered (business or other) activities enabled by digital platforms, information and data.
The guiding research questions for this work were:
- How do Finnish companies understand the concept of the platform economy in general and in their business sector?
- What opportunities and threats do Finnish companies perceive in terms of the technological, social and political aspects of the platform economy?
- What factors act as drivers or barriers in the process of Finnish companies entering the platform economy?
- How do the findings from Finnish companies compare to those from the USA?
In 2019, a total of 10 interviews were conducted in Finland and 8 interviews in the USA, representing various business sectors such as food, pulp and paper, manufacturing and security. The rationale for complementing the Finnish interviews with a handful of American interviews was to gain a rough overview of the similarities and differences between the two, even if meticulous comparisons could not be made based on these limited samples.
Results and recommendations
The results of the study reveal new aspects of Finnish companies’ attitudes and preparedness for the uptake of platform economy opportunities. For example, the companies appeared to be well aware and informed about the platform economy and platform-based business models even if risk-averse attitudes and the legacy of traditional non-platform businesses were described as significantly slowing progress. In comparison, the interviews in the USA focused more on how important it is to make progress fast and learn from the more rapidly changing sectors. The American companies also seemed less risk-averse, more open to data sharing and more strongly customer-driven in their service development.
We conclude our report with a discussion and analysis of the strengths and weaknesses of Finnish companies in the emerging platform economy. These are further processed into recommendations for the Finnish companies and public sector decision-makers.
Key recommendations for the Finnish companies that are willing to capitalise on the opportunities of the platform economy (for details, see the full report):
- Dream big and adopt a bold mindset.
- Identify and address the bottlenecks.
- Build and join partnerships and ecosystems.
- Listen to the customers’ needs and values.
Key recommendations for Finnish public sector decision-makers who are willing to support progress in the platform economy (for details, see the full report):
- Maintain support measures and address gaps in the innovation chain.
- Tap into the positive social and societal aspects and potential of platforms.
- Enable business and safeguard public interest through regulations and improve response time.
- Deepen public-private collaboration.
For more information
GDP and the platform economy
This signal post gives a short summary of a literature review on GDP and it’s usability as a measure in the increasingly digitalised economy. For more details, download the full report.
A measure for the manufacturing age
Gross Domestic Product was adopted in the 1940s, the age of manufacturing, to measure the strength of a country’s economy and it also became a proxy for well-being. It’s a measure of the monetary value of all goods and services produced by a country. A rapidly increasing portion of today’s economy is technology services, including platforms that offer “free/add-supported” products or act as international online intermediaries to facilitate the exchange of goods, services or information. By definition, the GDP doesn’t measure “free” products. In economic terms, the value a consumer gets from the “free”, and potentially higher quality products is measured by utility or consumer surplus, which is also not captured in GDP.
The slowing of GDP growth
While the GDP of most of the world’s economies has been increasing since its inception, the rate of GDP growth has slowed recently. More importantly, the growth rates of GDP per capita and GDP per hour worked (labour productivity) have also slowed. While the root cause of the slowdown in GDP growth has been debated for several decades, most economists agree that a portion of the slowdown is real and not solely an issue with capturing the growth of the platform and technology sector. Structural issues like demographics as well as the fact that past innovations like the electric motor likely had a larger impact on productivity than recent innovations are all contributing factors.
The uniqueness of the platform economy and the technology sector
While the reasons above partially explain the slowdown in GDP growth, many agree there is a growing proportion of the economy that isn’t being captured as part of GDP. There are a number of unique aspects of the platform economy and the technology sector that make it challenging to measure, manage, and ensure fair taxation. These include: ability to scale at low cost; “free/ad-supported” pricing models; borderless reach; blurred lines between consumers and producers; venture funding that encourages long-term market capitalisation over short-term profitability; digital services that replace physical products; and there’s a decreasing marginal contribution to GDP as the technology sector grows.
Uncaptured GDP
Given the unique aspects of the platform economy and the technology sector described above, it is possible that some aspects are having a negative influence on GDP growth while other aspects are having a positive influence that is difficult to capture using the current definition of GDP. The growth of the platform economy has been partially based on a culture of “free/low cost” products and services that provide utility and happiness to people beyond their economic value. This consumer surplus adds up to substantial uncaptured GDP.
This additional utility and happiness create a positive feedback loop that drives growth in the technology sector and the platform economy. As people seek to increase utility and happiness, they consume more in the platform economy which leads to its continued expansion as well as growth in uncaptured GDP.
Soft Innovation Resources
Understanding how to encourage the expansion of the platform economy may be key to increasing the rate of GDP growth. Watanabe, et al., postulate that countries (and companies) can increase their rate of growth by diverting a portion of their resources away from R&D and towards enabling Soft Innovation Resources (SIRs) as a complement to traditional R&D. These are soft resources that can be harnessed to drive innovation and growth at individual companies, which rolls up to growth at the country level.
Enablers of Soft Innovation Resources are listed below:
- Supra-Functionality: People seek out products and services where they experience satisfaction beyond utilitarian functional needs. They desire social, cultural, aspirational, tribal, and emotional benefits.
- Sleeping or Untapped Resources: These are existing resources that are under-utilized resulting in an unused capacity that may be spread sparsely and difficult to access without technology.
- Trust: People’s level of trust in various aspects of their lives, society, and the economy can affect their participation and contribution to innovation and the creation of economic value.
- Maximizing Gratification: Seeking gratification of needs is a key pillar of Maslow’s theories about motivation and human behaviour. As increasingly sophisticated needs are gratified, there is a desire to maintain and build upon the increased level of gratification.
- Assimilation and Self-Propagation: Sustainable growth can be obtained when past innovations are assimilated into future innovations, effectively creating a self-propagating cycle of innovation.
- Co-Evolution: The coupling of two or more items which then innovate and evolve along a common path.
The future of GDP measurement
Although the GDP measure has been revised over time, there is widespread recognition that more changes are needed if it’s to remain relevant as the digital economy grows. There is debate about how platforms and the digital economy are contributing to GDP and the amount of uncaptured GDP. For example, the US Bureau of Economic Analysis (BEA) concluded uncaptured GDP would increase the rate of GDP growth by less than 0.01% per year. On the other hand, Brynjolfsson, et al. developed a measure they call GDP-B and they concluded that the consumer surplus from Facebook alone would increase the rate of US GDP growth by 0.1% per year and platforms such as internet search, e-mail, and maps would contribute significantly more. And somewhere in between, an independent study commissioned by the UK government concluded that annual GDP growth is understated by 0.3% to 0.6%, largely due to the platform economy.
It’s clear there are wide-ranging opinions on the magnitude of uncaptured GDP. International organisations such as the OECD and World Economic Forum are also trying to bring clarity to the situation. Additionally, a number of measures are being developed such as the Human Development Index (United Nations) and the Better Life Index (OECD) with a focus on well-being to augment GDP.
Strategies for future growth
The slowdown in GDP growth is complicated and multi-faceted. Perhaps some of the structural impediments to growth can’t be mitigated. Perhaps because digital platforms and their ecosystems function as highly efficient intermediaries that increase the flow of goods and services at substantially lower costs, we’re experiencing a temporary downward adjustment and growth will resume from a new baseline. As a result of this complexity, strategies to encourage future growth are challenging and diverse.
At the country level, the literature suggests strategies such as: developing economic measures to supplement GDP and better inform public policy in the digital age; create policies to increase skills training and corporate technology purchases to increase adoption of new technologies; develop policies to encourage experimentation in new technologies and business models; focus on improving the quality and lowering the cost of healthcare and education; increase immigration; enable Soft Innovation Resources; and refine international taxation and shipping practices to increase fairness in the shipping and taxation of digital goods and services.
At the company level, the literature suggests strategies such as: lagging firms should invest in skills training and increase the adoption of new technologies; leading firms should include the enablement of Soft Innovation Resources into their R&D and product development activities; and expand current products and services into platforms and expand platforms into platform ecosystems.
Selected articles and websites
The Economist – Measuring Economies – The trouble with GDP
Harvard Business Review – How Should We Measure the Digital Economy?
OECD – Are GDP and Productivity Measures Up to the Challenges of the Digital Economy?
Robert Gordon – Declining American Economic Growth Despite Ongoing Innovation
Watanabe, et al. – Measuring GDP in the digital economy: Increasing dependence on uncaptured GDP
Tou, et al. – Soft Innovation Resources: Enabler for Reversal in GDP Growth in the Digital Economy
Additional references
MIT – GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy
British Government – Independent Review of UK Economic Statistics: Final Report (2016)
US Bureau of Economics Analysis – Valuing ‘Free’ Media in GDP: An Experimental Approach
Investopedia – Definition of consumer surplus
OECD – Measuring the Digital transformation
World Economic Forum – Welcome to the age of the platform nation
Forbes – Uber will lower GDP
United Nations – Human Development Index
OECD – Better Life Index
OECD – Unified Approach to taxation in the digital economy
Gaming industry meets the platform economy
In this signal post we discuss the opportunities and threats in how the platform economy is changing the gaming industry. While digitalisation and the internet have already transformed the sector in many ways, technical and business models innovations are continuously giving new shape to the market. Legislative and regulatory approaches are also changing, with a strong need to address the risks and negative impacts involved. Consumer protection and money laundering are just two examples of the societally and economically important challenges in the core of gaming.
In simplified terms, gambling means wagering of money on an uncertain event and uncertain outcome, with the aim of winning more money. Gambling entails consideration and risk-taking as well as the promise of a prize. The word ‘gaming’ is typically, and in this signal post, used in reference to legal gambling, i.e. gambling services (not computer, video and mobile games, although connections to those will be discussed in the last paragraph) offered by companies in compliance with the law. These laws do, however, differ greatly between countries and regions, ranging from total bans to strategic gambling tourism as in Monaco or Macau.
Good (and not so good) use of platform strategies
Online gambling providers employ the same strategies found in other areas of the platform economy. Their systems are based on an eCommerce platform upon which various games and offerings are built. While many operate in a business to consumer (B2C) model, others also offer products and services in a business to business (B2B) model. By gathering feedback from their user base and testing new products and services, the online gambling providers create an ecosystem around their platform to drive innovation and build their customer base.
Providers that are licensed through countries with strict regulatory frameworks, such as in Europe and North America, are obligated to operate in a transparent and responsible manner. There are other countries with less robust regulations and in some cases, online gambling providers operating there use platform technologies such as blockchain, cryptocurrencies, and smart contracts to both build trust with their customers and to operate without complying with regulatory and tax laws.
European context
A recent study prepared for the European Commission paints a picture of the European regulatory landscape for online gambling. Taking into account the growing consumption of online gaming, the report addresses the many challenges that urgently require a stronger regulatory response, such as gambling addiction, protection of minors, consumer protection, integrity of sports, money laundering and crime. What makes regulating and enforcing regulations extremely complex in the online environment is that gambling services are offered across borders, often by virtual gambling facilities that may consist of layered eco-systems of service providers. Services are also available 24/7, their use is made extremely convenient, transactions take place immediately and the user may perceive the game experience as being anonymous.
The study emphasizes the importance of European level action. However, specific European Union (EU) level regulation is not suggested, which is in alignment with previous communications by the European Commission. National policies, and therefore national regulations, share a lot of objectives but have also major ideological differences. Harmonisation would, therefore, be a step too far at this point, but joint efforts in effective enforcement, for example, is in the interest of all parties.
The online gaming and betting operators established, licensed and regulated within the EU have organised themselves as the European Gaming and Betting Association (EGBA). The aim of EGBA is to ensure a safe and reliable European digital environment for online gaming by working together with national authorities, EU authorities as well as other stakeholders. The association is committed to a high level of consumer protection while developing regulated services with the goal to be attractive enough to channel users away from unregulated offers.
According to EGBA, the online gambling market in Europe has an annual growth of around 10% and the gross profits of the sector are expected to grow to €24.7 billion in 2020. Comparing online and land-based gambling, in 2017 the ratio between the two was 21:79. The top three most popular online offers are sports betting (40%), casino games (32%) and lotteries (13%). Interestingly, Europe is the leader, with the share of European services accounting for 49% of the global online gambling market in 2017. The international business opportunities for European gaming services is expected to grow further, especially in several US states where sports betting was recently legalised.
Case of Finland
In Finland, the gaming system is based on the exclusive right principle, and since the merger in 2017, all gambling games are being offered by one single operator Veikkaus Oy. The company is owned by the Finnish State, and the offering covers lucky games, slot machines, instant games and skill games, with one-third of its activity taking place online. Veikkaus has a strong obligation and commitment to operate games responsibly and mitigate risks, and the revenue generated is used for societal causes in its entirety. This means that roughly one billion euros per year is distributed, via the relevant ministries, to beneficiaries in culture, sports, science, youth work, etc.
Even with the long tradition and strong value basis, debates about Veikkaus and the Finnish gaming system in general get heated from time to time. For example, last autumn Veikkaus’ new strategy aimed to address the public discussions about whether the fact that revenues benefit the common good justifies the problems caused, and typically these problems are being borne by those in the weakest position. Building a safe and more responsible gaming environment is one of the big strategic goals of Veikkaus, and the decision to speed up the adoption of compulsory identification on slot machines is one practical step. This means that starting in January 2021 Veikkaus will introduce new technology that will better prevent underage gaming as well as enable players to set a ban on their own gaming.
When it comes to the digital and online world, Veikkaus is a pioneer in esports solutions, and it was among the first companies in the world to offer legal esports betting in 2014. Service development in the esports domain is continuous, and products, services and platforms around esports have been developed in collaboration with Veikkaus and others using a unique concept, the Innovation Challenge Week. The winner last year was German GameBuddy, with their innovation of a social community platform for gamers.
Interesting insights into the Finnish case are also found in the survey commissioned by Kasino Curt in 2019 that gathered citizens’ views on the monopoly, political decision making and negative impacts around gaming. One clear finding is that Finns are not fully content with the current mitigation actions to fix problem gaming: 27% of respondents said enough was done, whereas 44% disagreed. 58% went so far as to agree that gambling machines should be removed from everyday environments such as grocery stores, but 29% would not make such changes. A majority of respondents also thought Finland should break away from the monopoly and introduce a licensing system instead, totalling 40%, whereas 29% disagreed on this. The gaming market and industry implications of such a change would be significant. Public discussions comparing future alternatives are active, and the pros and cons of the licensing system option should be studied carefully in order to see if licensing could be a viable approach in the increasingly global gaming environment expressed in the platform economy.
Connections to computer, video and mobile games
Millennials and Generation Z have grown up in a digital world with easy access to computer, video and mobile games. They have a preference for entertainment where there is skill involved and there is the option to play against other players. Not only are online gambling providers catering to this preference, but physical casinos are starting to replace traditional slot machines with games that resemble video games in an effort to attract younger customers. Additionally, these younger generations grew up playing on multi-player game platforms like Fortnite, CS:GO, and Defence Of The Ancients (DOTA) and are now driving the demand for professional esports tournaments and esports betting.
The near-ubiquitous presence of tablets and mobile device platforms means young people have unprecedented access to mobile games. In many cases, these are simple entertainment. However, there is a growing segment social casino games that are introducing young people to virtual gambling. Social casino games simulate typical card and table games but players wager virtual credits and no money changes hands. The games are often integrated into social media platforms and the outcomes are not always random. Instead, they are based on psychological theories that increase engagement and player satisfaction. In some cases, online gaming providers also produce social casino games and there is growing concern that the use of social casino games amongst young people is a “gateway” to money gambling in adulthood that may contribute to gambling addiction.
Selected articles and websites
Alison Drain: White Paper, The Converging of the Gaming and Gambling Ecosystems
Esportsearning: Top Games Awarding Prize Money
European Gaming and Betting Association (EGBA)
Hackernoon: What is the Future of Gambling Industry?
Hyoun S. Kim: Social Casino Games: Current Evidence and Future Directions
Kasino Curtin tilaama tutkimus osoittaa: suomalaiset eivät luota kansanedustajiin rahapeliasioissa
MintDice: How Cryptocurrency is Changing Online Gambling in Europe
NewsBTC: MECA Coin – Creating a Democratized Online Gambling Ecosystem on Blockchain
Publications Office of the European Union, 2018: Evaluation of regulatory tools for enforcing online gambling rules and channelling demand towards controlled offers
Veikkaus: German GameBuddy wins Veikkaus Innovation Challenge Week
Veikkaus: Responsibility for the individual in focus in Veikkaus’ new strategy – compulsory identification on slot machines brought forward by a year
Veikkaus: Veikkaus – a Finnish gaming company with a special mission
Veikkaus: Veikkaus to hold an Innovation Challenge Week to find startups and begin collaboration – focus on esports
Wikipedia: Gambling
Elections, campaigns and voting in the platform economy
This coming spring in Finland is going to entail lively political discussions. The campaigns for the Parliamentary Elections (April 2019) are already in full swing. And after having dealt with domestic issues, the European Elections will follow (May 2019). Political debates are taking place in the media as well as workplaces, schools and other arenas where people meet. This includes also digital meeting places, and platforms of different type are growingly important in delivering political messages with wide outreach.
In this signal post, we will discuss three aspects of how the platform economy is facilitating political discourse. We will identify both positive and negative impacts on democracy, especially at the time of elections. The three topics are:
- targeted political campaigns
- fake news in politics
- electronic and online voting.
Targeted political campaigns
Digitalisation and the platform economy are changing the way that political campaigns are carried out nowadays. Voting advice applications act as platforms for candidates and parties to declare their agendas and for voters to find a match from their point of view. Another way to benefit from the wide outreach enabled by platforms is for electoral candidates to be active on social media.
While the platform economy promotes broad societal discussions and better informed decision-making, new types of problems also arise. Organized mass campaigns are masked as non-political one-to-one chitchat. Data about voters is being collected, and platform giants together with consultancies like Cambridge Analytica have been known to take targeted political campaigns and personalized adverts to a whole new level. There is little transparency, and the ways used to influence voting decisions are questionable.
It is very appropriate that platform-based solutions have been developed to tackle these issues. In Finland, the Vaalivahti initiative has been launched to help citizens identify when political adverts are displayed on Facebook. A simple browser extension, based on the software developed by Who Targets Me, needs to be installed, and an analysis of political ads and why you were being targeted is provided. The platform maintains an up-to-date database of targeted political campaigns, which is open also for researchers and journalists to examine.
Fake news in politics
The 2016 US presidential election, and the alleged fake news attacks surrounding it, was a big wake-up call around the world. Studies and investigations have been conducted with the aim to reveal what really happened, how much fake news and misinformation was being released and by whom, what the real influence on voters was and whether the very election result was affected. One example is the recent study that suggests that the exposure of the average American to pro-Trump fake news was higher than that of pro-Clinton, but the authors emphasize that rash conclusions cannot be made based on this knowledge.
Fake news by foreign or domestic, political or economic actors has the potential to disrupt democracy, especially close to elections. The forms adopted range from fake news promoting to bashing one candidate, but they may also intend to inhibit political speech and suppress voting altogether. Social media and other platforms are being used as the tools and means to distribute fake news, and regulatory governance and rule setting may be needed to address these issues.
An example of suggestions to fix problems with regulatory measures is to require transparency of political advertising on digital media by informative real-time ad disclosure. Such data includes the sponsor, money spent, targeting parameters, etc. This real-time information provided along with the ad should also be compiled and stored for later review.
Electronic and online voting
Platforms can also facilitate the casting and counting of votes by using electronic means. For example, an electronic voting platform could build on voting machines at polling stations. Or, take a few more steps forward, an online voting platform could allow those entitled to vote exercise their right from anywhere, using any device as long as they can connect to the internet.
In Finland, the topic of electronic voting has been discussed from the early 2000s on and several studies and pilots have been conducted by the Ministry of Justice. Electronic voting at polling stations was trialled in three municipalities in the 2008 municipal elections, but problems were encountered in registering votes. Work to develop electronic voting was thus discontinued around 2010, but discussions were reopened in 2016. A working group was then appointed, and a feasibility study on the introduction of online voting in Finland was published in 2017. The conclusion was that even though viable electronic voting systems already existed, they did not meet the requirements and risks outweighed benefits. Core problems included, for example, the reliability of the system and guaranteeing verification and election secrecy at the same time.
New technologies, such as blockchain, may however help solve the issues mentioned above. Blockchain could be used to fight electoral fraud and vote buying while ensuring integrity and inclusiveness. Service development with blockchain-based voting platforms is vibrant, and pilots are showing great promise.
Selected articles and websites
Greenspon Edward and Owen Taylor (2018). Democracy Divided: Countering Disinformation and Hate in the Digital Public Sphere
Hunt Allcott and Gentzkow Matthew (2017). Social Media and Fake News in the 2016 Election. Journal of Economic Perspectives, 31 (2): 211-36
Ministry of Justice. 2017. Online voting in Finland, A feasibility study
Ministry of Justice. Electronic voting in Finland
Palermo Frank, Forbes. Is Blockchain The Answer To Election Tampering?
Palmisano Tonino, The Cryptonomist: Voting in the days of Blockchain technology
Vaalivahti
Who Targets Me
Wikipedia. Voting advice application
Turning common pessimistic beliefs of platforms into positive narratives
In this signal post we tackle four commonly stated beliefs that suggest the platform economy is but a game of global giants and Finland has very little chance to benefit or take part. These critical messages heard over and over again are:
- “We cannot compete with giants.”
- “It is already too late.”
- “Finland is too small.”
- “The US or China is going to take it all.”
While all the above four statements are valid concerns, we will explore them one by one with the aim to extend the discussion from pessimistic caution towards narratives of encouragement. In fact, we’d rather suggest using these statements to challenge practitioners to think of ways to get involved in the value creation networks that indeed are characterised by giant platform companies steering fast-paced developments in a global context. Positive messages have also been emphasised in the national strategy work and ministerial future reviews. Our recommendations for surviving and excelling in this game include the following:
- Join and contribute in an ecosystem.
- Use your unique strengths and find your niche.
- Think digital and global but do not forget about tangible and local.
“We cannot compete with giants”
When looking at the successful platform giants, such as Amazon, Alibaba, Spotify, YouTube, Baidu, Apple, Uber or Airbnb, you may wonder whether there is any room for new entrants. These giants have grown relatively fast and assumed leading or even monopolistic standing in regional and global markets. They are not only dominating the digitally powered business but often disrupting the traditional trade and industries too.
The point is, however, not to pick a fight and compete with one of these forerunner giants enjoying their monopoly position. Although you could do that too, if you come up with a more efficient, attractive or innovative service than what they offer. In fact, the monopoly status of many of these platforms could start to crumble as soon as strong new competitors with fresh ideas get their act together. An alternative newcomer strategy would be to explore interconnected business openings complementary to those of the giants. After all, the platform economy is the perfect environment to make use of business models based on multi-stakeholder value networks and ecosystems, layered services and synergetic alliances.
One should also acknowledge the longer-term fluctuations in economic success. Even giants fall, and monopolies may need to make room for a more diverse market situation. Social media platforms are a good example of an “industry”, where we have already seen pioneers and former market leaders such as MySpace and IRC-Galleria to lose their standing to a multitude of new, specialised platforms for private, professional and other purposes.
“It is already too late”
Again, if focusing on the incumbent giants, one might think it’s all been done already, and that it is too late to start from scratch. But the fact is that many business sectors are only beginning to warm up to the idea of the platform economy. Futures enabled by digitalisation remain in many business areas just visionary talk, as companies and other practitioners still rely on traditional business models, pipe-like supply chains and one-sided market logics. Innovative thinking and openness to apply the principles of the platform economy will provide countless new business opportunities in sectors like real estate, construction, waste management, manufacturing and agriculture.
New opportunities are also to be discovered with applying emerging technologies, such as artificial intelligence, blockchain, robotics and virtual reality. It is definitely not too late to contribute to the development of these technologies and the yet undiscovered potential they have when applied into digital platforms. New services, business models and delivery channels in sight!
“Finland is too small”
As a small, remote country it is easy to think we cannot make a big difference in the global game. Our domestic market is not big enough and we are but a population of some five million. The platform economy, however, is the perfect arena for even a small actor to grow and achieve international success. The European Single Market is our extended home ground, and there are no barriers that couldn’t be overcome in terms of global growth either. And again, platform strategies are all about alliances and partnerships, and the Finnish can surely find their niche as a part of these platform ecosystems.
The high level of education, expertise and skills in Finland is an important asset in the platform economy. ICT skills, databanks as well as knowledgeable citizens are a key resource in developing platforms as well as in introducing them in the consumer market. The compact domestic market can also be taken as an advantage, if used as a test-bed and proof-of-case to explore and market forerunner services. Well-connected stakeholder ecosystems can collaborate on domestic applications and then expand internationally, as we have seen with the example of mobility as a service business.
“The US or China is going to take it all”
The US and Chinese platform ecosystems are undoubtedly dominating the platform business for now, and for the time being Europe is largely dependent on the US-driven ecosystem. Finland and Europe among other countries and regions can nevertheless contribute to the development of these agglomerates. For example, it has been suggested that European public values could be employed to bring important value-centric platform policies into the big picture. The EU General Data Protection Regulation (GDPR) is already one major step forward, and besides privacy, values such as accountability, fairness and democratic control could be similarly promoted. The European strength in the traditional markets to balance power relationships and support stakeholder collaboration among (1) the market, (2) state and (3) civil society makes a strong case in the platform economy too. It could indeed provide a more acceptable alternative to the current focus of the US ecosystem on the market or that of the Chinese ecosystem on the state.
Another counter-argument to the dominance of the US, China or any other superpower is that even if the platform economy strives on digital solutions on the global level, many practical applications have roots in the tangible, physical world too. These types of local aspects are manifested in e.g. services and products being produced and consumed, which means business opportunities can be found both near and far.
Selected articles and websites
Valtioneuvoston kanslia, Työ- ja elinkeinoministeriö, Innovaatiorahoituskeskus Tekes: Digitaalisen alustatalouden tiekartasto
Finnish Government, Ministry of Economic Affairs and Employment: From transformation to new growth, Futures Review of the Ministry of Economic Affairs and Employment
Ailisto, et al. 2016: Onko Suomi jäämässä alustatalouden junasta? Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja 19/2016
van Dijck (2018): European public values in a global online society, Keynote at the workshop: “Platform Economy: Innovation, Entrepreneurship and Public Policy Perspectives”
Tackling fake news and misinformation in platforms
The online world is increasingly struggling with misinformation, such as fake news, that is spreading in digital platforms. Intentionally as well as unintentionally created and spread false content travels fast in platforms and may reach global audiences instantaneously. To pre-screen, monitor, correct or control the spreading is extremely difficult, and often the remedial response comes only in time to deal with the consequences.
In this signal post we study the problem of misinformation in the platform economy but also list potential solutions to it, with forerunner examples. Defining and establishing clear responsibilities through agreements and regulation is one part of the cure, and technological means such as blockchain, reputation systems, algorithms and AI will also be important. Another essential is to support and empower the users to be aware of the issue and practice source criticism, and this can be done for example by embedding critical thinking skills into educational curricula.
Misinformation − the size of the problem
Fake news or misinformation, in general, is not a new phenomenon, but the online world has provided the means to spread it faster and wider with ease. Individuals, organisations and governments alike can be the source or target audience of misinformation, and fake contents can be created and spread with malicious intentions, by accident or even with the objective of entertaining (for example the news satire organization The Onion).
Digital online platforms are often the place where misinformation is being released and then spread by liking, sharing, information searching, bots, etc. The online environment has not yet been able to adopt means to efficiently battle misinformation, and risks and concerns involved vary from reputation damage to global political crises. The most pessimistic views even warn us of an “infocalypse”, a reality-distorting information apocalypse. Others talk about the erosion of civility as a “negative externality”. This view points out that misinformation could, in fact, be tackled by companies in the platform economy analogously to how negative environmental externalities are tackled by manufacturing companies. It has also been suggested that misinformation is a symptom of deep-rooted systemic problems in our information ecosystem and that such an endemic condition in this complex context cannot be very easily fixed.
Solutions − truth, trust and transparency
Remedies to fake news and misinformation are being developed and implemented, even if designing control and repair measures may seem like a mission impossible. Fake accounts and materials are being removed by social media platforms, and efforts to update traditional journalism values and practices in the platform economy are being initiated. Identification and verification processes are a promising opportunity to improve trust, and blockchain among other technologies may prove pivotal in their implementation.
Example: The Council for Mass Media in Finland has recently launched a label for responsible journalism, which is intended to help the user to distinguish fake content and commercials from responsible and trustworthy journalism. The label is meant for both online and traditional media that comply with the guidelines for journalists as provided by the council.
Algorithms and technical design in general will also have an important part to play in ensuring that platforms provide the foundation and structure that repels misinformation. Taking on these responsibilities also calls for rethinking business models and strategies, as demand for transparency grows. One specific issue is the “filter bubble”, a situation where algorithms selectively isolate users to information that revolves around their viewpoint and block off differing information. Platforms such as Facebook are already adjusting and improving their algorithms and practices regarding, for example, their models for advertising.
Example: Digital media company BuzzFeed has launched an “outside your bubble” feature, which specifically gives the reader suggestions of articles providing differing perspectives compared to the piece of news they just read.
Example: YouTube is planning to address misinformation, specifically by adding “information cues” with links to third party sources when it comes to videos covering hoaxes and conspiracy theories. This way the user will automatically have suggestions to access further and possibly differing information on the topic.
Selected articles and websites
BuzzFeed: He Predicted The 2016 Fake News Crisis. Now He’s Worried About An Information Apocalypse.
BuzzFeed: Helping You See Outside Your Bubble
Engadget: Wikipedia had no idea it would become a YouTube fact checker
Financial Times: The tech effect, Every reason to think that social media users will become less engaged with the largest platforms
Julkisen sanan neuvosto: Mistä tiedät, että uutinen on totta?
London School of Economics and Political Science: Dealing with the disinformation dilemma: a new agenda for news media
Science: The science of fake news
The Conversation: Social media companies should ditch clickbait, and compete over trustworthiness
The Onion: About The Onion
Wikipedia: Fake news
Wikipedia: Filter bubble
Public sector ambitions in the platform economy
Ecosystems in the platform economy can accommodate all and any stakeholders, and the public sector among other actors can decide on the degree of ambition in the role they want to take. The most lightweight option would be to simply follow the field and allow market driven development of platforms proceed. In a more active mode the public sector would monitor and react to upcoming challenges and, for example, adjust taxation and regulation to match with the new landscape. Further on, a genuinely proactive role would entail active support for platforms and participation as a partner in platforms. The most ambitious option would be to aim to become a forerunner and contribute to strategic steering of the platform economy development. In this role the public sector could take on responsibilities in ecosystem facilitation but also show the way by embedding public services and internal processes to platforms.
In this signal post we introduce a few examples of the public sector taking ambitious and active part in the platform economy. These cases exemplify how visions are being turned into the new normal and how implementation steps have been taken in Finland and Estonia. The three topics covered are (1) platforms of open public data (serving among others further platform development), (2) provision of public services in platforms and (3) the visionary idea of citizenship as a platform (and for sale).
Open public data
Open public data means information produced or administered by a public organisation, and it is made available free of charge for private and commercial purposes alike, very much in line with the platform economy thinking. In Finland, metadata of public open data is collated in the Avoindata.fi service and then the European Data Portal. Although ‘work in progress’, many forerunner examples of novel open data initiatives are already running or under preparation. Often regulatory changes are needed to proceed towards open data effectively yet safely and securely.
Example: The Finnish Transport Agency maintains the NAP service (National Access Point), where since the beginning of 2018 all passenger transport service providers are obliged to open up their data on their services. The foundation for the system was laid in the innovative regulatory update, the Act on Transport Services, and accessing this data in the service, maintained by the transport authority, is expected to accelerate development of, for example, more comprehensive journey planners and advanced transport services.
Example: The government is proposing in Finland a new act on the secondary use of health and social data, intended to enter into force in July 2018. It would pave the way for a centralised electronic licence service and a licensing authority for the secondary use of health and social data. Finland already has extensive high quality data resources that could be put to more flexible and secure use instead of the current situation of dispersed datasets in different information systems by different authorities. The new act aims to streamline data requests and access as well as improve data security and thus benefit research, innovation and business but also teaching, monitoring, statistics, official planning, etc.
Public services in platforms
Digitalisation, in general, has been widely adopted as a target in public service provision, but the platform economy provides an even wider opportunity to more efficient, more accessible and less bureaucratic services. Education and social services among others are already making first steps in employing platforms, and a platform of platforms could also be envisioned, enabling seamless information exchange and navigation between services. For example, imagine managing your academic milestones, entitlement to study grants or other social assistance as well as medical records or unemployment situation not using separate manual processes but interlinked platforms with one-stop-shop principle. For a first implementation step, platform synergies could be built along administrative branches, such as education, or along specific fields of activity, such as administrative processes linked to building, construction and environmental permits.
Example: Suomi.fi is an online service in Finland that functions as a portal to public services and information. Although not a fully developed platform of platforms, this online service already demonstrates the single point of access principle in action. Suomi.fi empowers the user to find and then access a multitude of public services as well as their information and authorisations. For example, you could use the service to check your vehicle registry information and, if necessary, communicate electronically with the authorities to update it.
Citizenship as a platform
One imaginative or even utopian idea is to bring not only public sector data or services into platforms but to provide and exercise citizenship as a platform. Ultimately this would mean that an individual could choose their preferred digital citizenship platform and thus be, for example, entitled to public services and subject to taxation according to this choice. Citizenship as a digital platform would allow individual value-based decisions on citizenship rather than based on criteria such as country of birth. While the full concept remains theoretical, the first partial applications are running.
Example: E-Residency is a government issued digital identity launched by the Republic of Estonia in late 2014. It allows entrepreneurs from anywhere around the world to set up and run a location independent business but does not entail, for example, tax residency or citizenship rights to reside in Estonia. This legal and technical platform is the first of its kind, and the digitally accessible user benefits include company registrations, document signing, online banking, etc. The system also contributes to more transparent financial footprint through monitoring of digital trails. Between the launch and February 2018, over 33 000 applicants from 154 countries have established over 5 000 companies as e-Residents.
Selected articles and websites
Avoindata.fi − Open Data and interoperabilty tools
European Data Portal
Finnish Transport Agency: Service providers of passenger transport can now store data in the NAP service
Ministry of Finance: Open data: Opening up access to data for innovative use of information
Ministry of Social Affairs and Health: Secondary use of health and social data
Republic of Estonia: eResidency – Become an e-resident
Suomi.fi – information and services for your life events
Wikipedia: e-Residency of Estonia
Finland’s master plan for platform economy
A couple of weeks ago (October 2017) the Prime Minister’s Office, Ministry of Economic Affairs and Employment and Finnish Funding Agency for Innovation Tekes published the national roadmap for digital platform economy for Finland. The first half of the report paints the present picture of the platform economy as a global phenomenon and Finland’s position in it. The second half drills into the national future aspirations for success and growth and introduces a vision and roadmap for Finland. Furthermore, an atlas of ten sector-specific roadmaps is presented and an action plan to fulfil the vision is outlined.
Top-down meets bottom-up
Finland is a pioneer in launching such a comprehensive national vision, roadmap and implementation plan for digital platform economy. Germany, Japan, Singapore and even the EU have touched upon the topic in their industrial or STI (science, technology and innovation) policies, but not with such focused dedication as Finland. The Finnish strategy is to harness platform economy as an enabling tool that has potential to generate growth for businesses as well as enhance productivity of the entire society. A key element of the vision is to develop national competitive edge out of the platform economy.
But why the choice of national and collective approach, when the leading platforms (from the US) have typically emerged as market-based business innovations? The Finnish initiative seems to embrace the platform economy as a wider phenomenon that covers the potential for value creation and capture not just for companies but for citizens and the state alike. Platform ecosystems therefore extend to all actors in the society, and governmental institutions can step up to take active part. According to the report, the foreseen role of public sector includes for example:
- facilitating society-wide dialogue and aligned national vision
- implementing a competitiveness partnership between public and private sectors
- strengthening the development and business environment for platforms
- developing the knowledge base, resources and tools
- showing example by open public data and platforms launched by the public sector
- other enabling support such as regulative measures.
In short, the Finnish hypothesis for how to accelerate and benefit from the platform economy is to activate both the bottom-up (innovators, businesses, individuals, etc.) and top-down (governments, authorities, regulators, etc.) stakeholders. No getting stuck in the chicken-and-egg dilemma, but getting started on all levels and in a nationwide public-private-partnership.
Other interesting messages
Strengthening of the knowledge base and education to support skills in the platform economy has received a lot of attention in the Finnish roadmap report. This covers both formal education as well as further training along the career path. What is especially highlighted is software design skills, but what about entrepreneurial mindset, data-driven innovativeness and cross-sectoral service thinking?
The value of data and the vast potential for its usage is also emphasized in the report. Data economy as a concept is being mentioned, and especially the role of the public sector is explored in terms of developing rules, providing common technical specifications as well as showing the way with public data resources.
Selected articles and websites
National roadmap report: Digitaalisen alustatalouden tiekartasto
Videos from the launching event (October 23, 2017): Suomi ja tekoäly alustatalouden aikakaudella
Further information: Suomi ja tekoäly alustatalouden aikakaudella
Platforms and blockchain to bring on beneficial disruption to taxation
Digitalisation and platform economy are usually perceived as a challenge to taxation as it is difficult to monitor and enforce taxation in the digital and global economy. New rules are needed for deciding which activities are taxable and which are not in the in sharing, collaborative and platform economies. A recent US study points out that platform businesses such as Uber and Airbnb have an impact on all three of the major categories of revenue sources: consumption taxes, income taxes and property taxes. The situation is especially relevant for Nordic countries, where the tradition of a strong tax base has been the precondition for an affluent society. The main goal is to develop taxation so that the platform economy can strive while ensuring sufficient tax revenue without compromising innovativeness.
The platform economy could, however, be the solution to these new challenges. If we have a more comprehensive look at taxation, expanding from acute challenges to long-term system-level opportunities, platforms together with blockchain and artificial intelligence technologies could help reform and improve taxation systems.
Why is this important?
Tax authorities around the world are urgently trying to find short-term and long-term fixes to the challenges linked to digitalisation and platforms. The sharing economy is one of the areas, where heated debates have accompanied the introduction of new tax measures (see e.g. Finland, France, Sweden, the US or Australia). Approaches vary from exempting small-scale peer-to-peer activities from taxes to treating gig workers as business owners or considering ride-sourcing equal to taxi travel. The importance of the issue is put into the scale in a study by PwC, estimating the value of transactions in Finland’s collaborative market in 2016 to over 100 million euros.
The European Union (EU) has been active in surveying tax challenges in the digital economy and collaborative economy. Counter measures are being designed and implemented by the Member States respectively, but joint actions and strategies on a European level and globally are also needed to ensure fair operating environment. The EU agenda stresses that all economic operators, including those in collaborative economy, are subject to taxation either according to personal income, corporate income or value added tax rules.
While the authorities are baffled, so are the individual users and producers of platforms. We are currently in a paradoxical situation, where online platforms rely on digitalisation and automation, yet the related tax procedures, deductions and declarations are largely a manual and messy burden.
Things to keep an eye on
The responses from tax authorities do not, and should not, limit to quick fixes within current tax schemes but also explore long-term considerations on principles of taxation and novel means to implement them. Examples of progressive ideas include the suggestion of a specific tax on digital economy and taxation of platforms based on bandwidth or other activity measures such as number of users, flow of data, computational capacity, electricity use or number of advertisers. It has also been proposed that tax rates should differentiate according to the origin of revenues to better steer platform-based business: a different tax burden for revenues generated by one-time access and another tax rate for revenues generated by data exploitation.
Curiously enough, the challenge could be turned into the solution, as the platform economy especially together with blockchain and artificial intelligence technologies could provide the means to more efficient future schemes of taxation. One key problem is that information of and data from platforms does not reach tax authorities. By employing blockchain and distributed ledger it would be possible to remove the need for any intermediary and improve transparency and confidentiality. For example, blockchain applied to payroll would enable removal of businesses as a middle man and allow automatic tax collection using smart contracts. And having data in distributed ledgers would enable analysis of that data for monitoring of tax compliance and horizontal communication between authorities among other things. In fact, blockchain has been argued to provide solutions from digitalisation challenges ranging from anonymity and lack of paper trail to tax havens.
Another forward-looking idea to taxation from the world programmable economy domain involves smart contracts, cryptocurrencies and programmable money, such as Bitcoin or ether by Ethereum. These are currently perceived as a source of trouble to tax authorities, but what if they were soon to be the favoured choice and solution promoted by the state as an active party? This would mean tax authorities having access to the information on payments, on which employers would be obliged to report. Authorities could thus stay on-track in real-time even when the banking and currency system grows more and more decentralised. Furthermore, even national tax planning and writing could be transformed using artificial intelligence and machine learning in time.
Selected articles and websites
Australian Taxation office: Providing taxi travel services through ride-sourcing and your tax obligations
Australian Taxation office: The sharing economy and tax
EUobserver: Nordic tax collectors set sights on new economy
European Commission: A European agenda for the collaborative economy and supporting analysis
European Parliament: Tax Challenges in the Digital Economy
France Stratégie: Taxation and the digital economy: A survey of theoretical models
IBM: Blockchain: Tackling Tax Evasion in a Digital Economy
Institute on Taxation & Economic Policy (ITEP): Taxes and the On-Demand Economy
Kathleen Delaney Thomas, University of North Carolina Law School: Taxing the Gig Economy
OECD: Addressing the Tax Challenges of the Digital Economy
PWC: How blockchain technology could improve the tax system
Sitra: Digitalisation and the future of taxation
Sky Republic: Automating & Assuring Trust Using Enterprise Blockchain in the Era of the Programmable Economy
Skatteverket: Delningsekonomi – Kartläggning och analys av delningsekonomins påverkan på skattesystemet
TEM: Jakamistalous Suomessa 2016 – Nykytila ja kasvunäkymät (Collaborative Economy in Finland –Current State and Outlook)
The Financial: Artificial Intelligence to transform tax world
Verohallinto: Jakamistalous
Wikipedia: Bitcoin
Wikipedia: Ethereum
WU & NET Team: Blockchain: Taxation and Regulatory Challenges and Opportunities, Background note