Interviewed: Venture Capitalist Brad Burnham on Skinny Platforms

Photo credit: Lisbon Council. Used under Creative Commons.

A while back, I ran into Brad Burnham, partner at Union Square Ventures, one of New York City’s best-known venture capital firms. In the course of our conversation, I asked him what he was most excited about these days. His answer surprised me: He was eager to see a new generation of peer economy businesses arise that extract less value for their shareholders, and retain more value for the communities they served. He calls this next wave of services, "skinny platforms." We talked about them, and he explained his vision to me.

Much later -- and in a totally separate conversation -- I listened as Shareable co-founder Neal Gorenflo echoed some of the same themes that Brad had spoken of as Neal talked about sharing, where he thinks it is going, and what he would like to help make happen in the world. He believes owning together is the new sharing. He sees "platform coops" emerging where the users of a web platform share in its ownership and control.

I thought, “Is this possible? Could it be that Brad, one of the most prominent venture capitalists in America, and Neal, someone who helps lead the charge toward a more equal, open, co-owned society have similar visions for where the world is going and what needs to happen?”

I decided to find out by asking Brad if he would let me interview him for Shareable. Brad kindly consented.

The short answer to the question of whether Brad and Neal have similar visions? Sort of.

Neal and the Shareable community celebrate sharing, community, openness, and sustainability in all forms. They see it as a growing movement, possibly a next big step in our society, enabled by technology. This sharing and openness are to them ends in and of themselves.

Brad, too, believes that there is a next phase of society on the way that involves sharing and openness -- but he calls it the peer economy, and sees it as a simple extension of free market capitalism. He believes it will, over time, result in a broad distribution of wealth, and thinks we will all need to alter our ideas of ownership considerably along the way to get there.

Distribution of wealth, openness, changes in ownership models -- both visions are playing with the same themes, but from very different starting points and with different assumptions.

Maybe by triangulating between these two visions, we can catch a glimpse of what the future -- the shared future -- will really end up looking like?

What are your thoughts on the current sharing economy? What's good and what’s bad in it? What are the strengths and weaknesses?

First of all, I think "the sharing economy" is a bad term. I think nobody is really sharing anything. I think it's a for-profit model of really advanced capitalism, if you ask me, and I think the peer economy is a better term because it describes transactions between peers, or certainly at least transactions without traditional intermediaries. That's what I think of when I hear the term.

I think that sort of archetypal examples like Airbnb and Uber are excellent, excellent executions and implementations of this. If you think about how fundamentally transformative those are, it gives you a sense of ... you know, I think the possibility of where the economy is going. As one sort of quirky example, I was in the city of Porto in Portugal last week, and it has this beautiful, ancient downtown center that, as a result of the lack of much of an economy in Portugal over the last few years, is basically falling apart. What's actually been happening in the last couple of years is that people have been buying up these old houses in downtown Porto and turning them into Airbnbs, which is perfect, because it's a very picturesque town.

It's very attractive to tourists. There are no hotels downtown, and it creates an opportunity for tourists. It restores this infrastructure. It brings life back to the downtown. It feels, to me, like a fabulous outcome. It's very decentralized. You know what I mean? It's a bunch of individuals making a bunch of individual decisions to make investments in a bunch of properties which then can be supported through making those properties available to rent to people who are passing through and want enjoy that beautiful old city. Then if you look at ride-sharing generally, or Uber more specifically ... What an incredible leap forward for people to be able to essentially clock in and clock out in a way that works for their schedule. They're parents, they're freelance graphic designers.

Whatever it is that they're doing, they can construct their employment around their schedule, and that's a huge difference from any structured employment that we've seen in the past. I think these things are creating a lot of value - in fact, a lot of subtle value that we don't even completely understand yet. I also think we've only begun to scratch the surface and that this model, essentially displacing the bureaucratic hierarchy with a very efficient and highly-designed networks that connects creators and consumers directly is going to transform not just transportation and housing and finance, but it's going to just roll through every other aspect of the economy.

Readers at Shareable are interested in developing a sharing economy that can benefit everyone equally -- the end users in the economy every bit as much as the corporate players, and enrich the communities they act in rather than extracting everything. Is that possible with the peer economy? It'd be hard to argue that Uber does that. Uber is extracting the money -- the equity -- for their shareholders.

I disagree. I believe that free market capitalism has created enormous amount of wealth for a very large number of people, and that the alternative systems have not succeeded in creating that amount of wealth. I think that the peer economy is a logical evolution of free market capitalism. The large incumbent bureaucratic hierarchies that dominate sectors of the existing economy actually constrain free market capitalism, because they've gotten to a point where they control policy and politicians, and affect the ability for people to compete, and stuff like that. I think the peer economy is an extension of that free market capitalism.

This economy has created an inordinate amount of wealth for a few individuals, but the greater good, the community, has not seen that same rise, that same lift.

Yeah, and I think that is true. It's probably been always true. If you look at the Robber Barons in the 19th century, the original infrastructure of the industrial revolution created a huge concentration of wealth that wasn't well-distributed, and then, as that infrastructure matured, you know, we got into a period where we had the broadest distribution of wealth in the late '50s and '60s, and now we're actually moving the wrong way, in my opinion, to a much higher concentration of wealth for a variety of reasons. I think it's not the peer economy's fault that that's happened. I think it's a kind of intermediate step -- a kind of adolescent step, and I do think that it is largely happening as a result of not having the right conception of what rights and data are.

They're extracting too much value, and I think another generation that will compete with them will be thinner, and it'd take less out of that. It's natural creative destruction of capitalism. As we move to the next generation, my hope would be that we see a broader distribution of wealth, and a greater level of agency and empowerment for the people who are participating in the economy.

Okay, so you see (the current set of Peer economy startups) as sort of an intermediary first step in what's a very nascent industry, and there will naturally be follow-on players that, just by virtue of competing with these big players, they're going to go thinner and there's going to be more distribution of wealth. Less extraction...

Yeah, and I think it should be all of our goals to accelerate that process. You know? If it took seventy years for that to happen during the Industrial Revolution, I would hope that we could do it in 20, or maybe 10.

How does that square with your job as a venture capitalist? Of trying to ... You know, your job, first and foremost, is to provide a big return on your fund for your partners.

Our job is to invest in ways that, as you said, we can deliver the highest possible return. The answer to the question is that we invest in disruption and disruption creates the highest possible returns. I think there is an open question about what the future ... You know, I mean, broadly speaking, what the future of capital is. Meaning, I think one of the reasons we have the disparity that we have today in wealth, and it is that we're seeing returns to capital that are significantly outpacing returns to labor.

I think that's not sustainable over the long term, and I think, if you think about the next generation of the peer economy being a thinner network where the returns to capital are lower, the returns to the labor are higher, then that's a ... The nice thing about it is it's the creative destruction of capitalism. We want to participate in that. We think we can generate a return participating in that, and we think that's what we should be doing.

So you feel like what we're seeing right now is sort of a blip where capital is returning a lot more than labor. Is this the early phase, to bring it back to the peer economy? This is very early days of peer economy, and we're going to see a much different peer landscape evolve in the next, say, ten years or twenty years that will look very different from the current way it is?

First of all, I think "blip" is...

Too short a word?

Little too short of a word. I think it's a transition. It's a period of time, and I think that our goal as a society should be to shorten that period of time, but I think that we're talking about a fundamental transformation of the global economy, and that there is enormous amount of vested interest in not only in the new peer economy but the traditional bureaucratic hierarchies. There are a lot of things that could disrupt or disrail this natural evolution. I think they would be corrupting of the free and open market, but they would be ... Protection is for various incumbents, and either the old incumbents or the new incumbents, and that I can't begin to predict what the implications of those policy moves might be.

What, if any, advice would you have for somebody thinking about starting a peer business or a peer co-op?

Yeah. I don't know what I think about community ownership. I don't know how necessary it is. I think there's a lot of folks who come at everything we've talked about today, and all of the goals that we've discussed about having creators and consumers empowered, and with real agency, and the ability to create their own lives, and that's where they're coming from. I understand. They assume that, because they have this kind of historical model of what ownership means, they assume the only way to get there is to have some kind of cooperative ownership of the underlying infrastructure. I'm not sure that's true. I think you can have, as an example, individual rights in - let's stay away from the word "ownership" - in data, and all of a sudden, the network itself becomes much more like the protocol that underlines the Internet.

You know, TCP/IP. Nobody really owns that, and nobody needs to own that, but it's also not owned cooperatively. It's just a definition. It's a defined way that people are getting to interact. If we enrich that protocol up into the data layer, then all of a sudden we have an understanding of how people are going to interact with data, then everybody can own themselves. You don't have to create a shared ownership of a data layer. You can have an open public data layer.

You think peoples' concept of what ownership is needs to change fundamentally moving into this peer world? We're got a lot of baggage with us that we're carrying with us from twentieth century and before about what ownership is?

I think that's probably fair to say. I mean, I don't know whether it's ownership, but I think, you know ... Obviously everybody's conception of the world is shaped by their experience of the world. I think that experience informs the way people think about the structure of the economy, including the ownership. It really comes down to: so much of the economy today, and going forward, is created within networks and really determined by the data within those networks. Ownership, in that context, is very, very different than back when we were talking about ownership of land. Use this example of the tragedy of the commons, right?

Everybody just has a very clear idea that if you have a central square and everybody grazes their crops on the central square, there's no grass left. Unless you control that, either through some cooperative arrangement, or ownership arrangement, you have a tragedy. If data is a non-rival good, where's the tragedy? We can all feed on that central square without impinging in any way on the other's use of that.

The tragedy in that sense comes into play when only one person gets access to the data?

Yeah, I think ownership is going to be different.

I feel like we just got to the real start of the interview right there at the end!