Elon Musk has given us someone to blame for the fact Twitter seems so terrible nowadays, but it’s far from being the only internet platform that seems terrible. Facebook is a mess. Young people tell me that Instagram has ruined itself in the quest to be like TikTok and that TikTok is a shadow of its former self.
I wouldn’t know about any of that. What I do know is that Amazon, once famous for providing an amazing internet shopping experience, now boasts a website groaning with spammy ads. Musk loves to be at the centre of every drama, but there is something bigger and broader at work than his travails.
The writer and activist Cory Doctorow has coined a memorable term for this tendency for platforms to fall apart: enshittification. “Here is how platforms die,” he wrote in January. “First, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves.”
Perhaps this is just nostalgia and such complaints are the disaffected grumbling of an out-of-touch cohort of early adopters. Or it could be the “headwinds” effect, familiar to any cyclist, which is that you always notice headwinds but take tailwinds for granted. Similarly, whenever a platform changes, we obsess over what is worse and quickly forget what is better. This negativity makes evolutionary sense: the secret of happiness may be to focus on what’s going well, but the secret of survival is to pay attention to what’s going badly.
Nevertheless, I’m quite sure enshittification is real. The basic idea was sketched out in economic literature in the 1980s, before the world wide web existed. Economic theorists lack Doctorow’s gift for a potent neologism, but they certainly understand how to make a formal model of a product going to the dogs.
There are two interrelated issues at play. The first is that internet platforms exhibit network effects: people use Facebook because their friends use Facebook; sellers use Amazon because it’s where the buyers are, while buyers use Amazon because it’s where the sellers are.
Second, people using these platforms experience switching costs if they wish to move from one to another. In the case of Twitter, the switching cost is the hassle of rebuilding your social graph using an alternative such as Mastodon, even if all the same people use it. In the case of Amazon, the switching cost includes saying goodbye to your digitally locked eBooks and audiobooks if you move over to a different provider. Doctorow is fascinated by the way these switching costs can be weaponised. His short story, Unauthorized Bread, describes a proprietorial toaster that only accepts bread from authorised bakers.
Both switching costs and network effects tend to lead to enshittification because platform providers see early adopters as an investment in future profits. Platforms run at a loss for years, subsidising consumers — and sometimes suppliers — in an effort to grow as quickly as possible. When switching costs are at play, the logic is that companies attract customers who they can later exploit. When network effects apply, companies are trying to attract customers because they will draw in others to be exploited. Either way, exploitation is the goal, and the profit-maximising playbook will recommend bargains followed by rip-offs.
Now for the question only an economist could ask: is this bad? It might not be. “Bargain, then rip‑off” is an annoying narrative arc for any customer, but if those early bargains are good enough then the customer may end up ahead on the deal. Competition for the market can be as vigorous, dynamic and customer-focused as competition in the market. It will all seem the same to customers. Even if an early adopter has been showered with free goodies, or with products and shipping provided well below cost, what they will perceive when the laws of economic gravity reassert themselves is — well, enshittification.
While it’s possible in theory for competition to work well even when network effects and switching costs exist, it’s probably best to assume that they are gumming up the works. Paul Klemperer, one of the pioneers of switching-cost models, has argued that antitrust authorities should try to ensure compatibility between rival platforms, reducing switching costs and pushing against the ability of any one company to monopolise a network.
That means maximising interoperability: the ability to send posts to your Facebook friends, and read their posts, even if you’ve decided to leave Facebook and use a different social network; the ability to take your eBooks and audiobooks out of Amazon’s ecosystem (you paid for them, after all); the ability to put any kind of ink in your printer, any kind of razor blade on your handle and any kind of bread in your toaster.
Interoperability cannot be guaranteed by law. There are too many hard cases, too many grey areas, too many legitimate technical obstacles. But regulators can operate with a presumption in favour of interoperability, as they do for switching phone providers or making transfers between banks.
Market forces cannot solve every problem, but they can do a lot. And they work much better if users are free to come and to go. Everything in a market economy has the potential to be enshittified: the taxi company can be late every time; your local bistro can serve you microwaved ready meals; the coffee shop can double its prices. They don’t, because they know you’ll leave and never come back. There’s a lesson in that for the platforms — and those who regulate them.
Written for and first published in the Financial Times on 3 March 2023.
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