Do users own the company whose products they use?

That sounds like a pretty stupid question – However, more and more people are propagating the notion that users are the centre of everything and ought to be dictators of the companies and content creators they patronize. It’s a notion that users themselves are pretty happy to embrace.

It’s time someone pointed out that it’s a relationship and not a user dictatorship. Just because users didn’t have enough rights earlier doesn’t mean that they are now entitled to control everything.

One example of the users as dictatorship trend

A couple of VCs are writing about how big tech platforms like Apple, Facebook, and Craigslist should be looked upon as Governments.

As I thought about it, it became clear that web platforms really don’t make much. Instead, they create the conditions that encourage others to invest their time and energy to create useful services.

A lot of people have begun using the term ecosystem to describe these big platforms. That captures their decentralized, emergent character, but ecosystems do not have a central point of control. Apple decided to eliminate third-party analytics between one release and the next. That doesn’t happen in an ecosystem. The right analogy is a government.

That’s a typical ‘pandering to the public to get votes/popularity’ type of post.

Creating a Platform is hard, risky work

Let’s look at two examples, Apple and Amazon, to understand what is involved in creating a platform –

  1. A great to good device.  
  2. Selling that device in large enough numbers to get network effects and economies of scale to kick in.
  3. The network/cloud and all the infrastructure.
  4. Getting content providers to agree to deals.  
  5. A means for content providers (big and small) to easily publish to users.
  6. Handling taxes and payments and billing.
  7. Creating a web store, a store on the device, etc. 

There’s a lot of hard work and investment of money and time. On top of that we only see the successes. All the companies (Creative, iRex, Sony) that failed to get the #1 spot are never considered.

Users had little to do with this. Users might not like to hear this – However, it’s the truth.

Users were sitting doing nothing, except getting ripped off by music companies and book publishers, until Apple and Amazon created their ecosystems and made things better.

A company that improves things deserves to get rewarded

Right from the start we’ll separate the various companies that the VC thinks should be Governments into two categories –

  1. Honest companies that were upfront about costs and restrictions like Apple and Amazon. You might not like their terms – However, they are very honest about them.
  2. Dishonest companies like Facebook that have been (and still are) lying about their intentions.

Only addressing the first category in this post.

Both Apple and Amazon have put in a lot of investment and have won a lead in their respective ecosystem wars (music and books). It’s a capitalist country and a free market and now they are entitled to profit from their lead.

If users don’t like certain terms they are free to use a competing service. However, users are not entitled to decide how a company should operate.

The User-Company Purchase Contract

All of us agree to a particular contract when we sign up for a service or buy a product or start using an eco-system. There are a multitude of reasonable options, including –

  1. Not agreeing to the contract and not using the service.  
  2. Agreeing to the contract and using the service.
  3. Finding a competitor with a contract that we prefer and using its service. 

However, it’s unrealistic to say –

We’ll accept the purchase contract, then later we’ll tell the company that since we are its customers we get to decide how the company runs itself.

If you don’t like how a company runs itself either don’t enter the purchase contract or stop using its services. All of us are completely free to do so.

Users trying to get more than they are entitled to

All this talk of ‘doing the right thing’ and ‘customers calling the shots’ is rather unfair. Putting up Craigslist as an example illustrates the unfairness of it perfectly. Just because one company (or a group of companies) don’t want to make a lot of money from their hard work doesn’t mean other companies should follow in its footsteps.

In the ideal state users would want companies that keep providing more value than they charge until they die out and other self-sacrificing companies take their place. This would be an unsustainable system because the people in the company are putting in their time and effort and the difference between revenue and value. You can’t have an economy where everyone is charging less than it’s costing them to produce goods.

The Internet allows companies like this to operate for some amount of time because the few grand successes blind you to the huge aggregate losses. We had an entire Internet bubble with countless failed companies and a lot of people losing their investments and yet we ignore all of that and look at the handful of survivors and assume the Internet Ecosystem of Free Everything is sustainable.

The Internet is a grand machine that lets users fool companies and companies fool users. There are relatively few win-win relationships where both partners are getting a fair return for what they are providing.

Users don’t own a company – no matter how many of its products they buy

In this great age of user entitlement it’ll come as a shock to all the ’empowered’ users – However, they don’t own a company whose products they use.

They can put forward suggestions and request features and organize boycotts and leave and return and do anything they like – However, they can’t dictate what the company does and they definitely can’t expect the company to kill its profits and sacrifice itself for users.

Very smart and very stupid companies do paint the illusion that they are nothing without the customer. However, it’s only the stupid ones that buy into the notion. If a company has created a great product or any product that is in demand it is entitled to charge whatever it wants for the product and to evolve the product in whatever direction it chooses.

Users should be wary of subscribing to the notion that a company is their fiefdom just because they buy its products and they should be especially wary of companies that pretend this is true. We’ve seen what Facebook has done with it and it should be a lesson that if something sounds too good to be true it usually is.

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