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  • - Amazon runs the largest online marketplace in America,

  • capturing 70% of all online marketplace sales.

  • - Google, Amazon, Facebook,

  • they're growing at this rapid speed.

  • - There's a common thread

  • connecting every billion dollar company online.

  • You might think that Amazon, Facebook, and Google

  • are in different businesses,

  • but they're all powered by the same basic trick,

  • a kind of business superpower that's let them take over

  • advertising, commerce, and basically the entire economy.

  • It's not an exaggeration to say this one trick has reshaped

  • the world over the last 20 years.

  • But to see how that trick works,

  • you have to look at the big picture.

  • (upbeat instrumental music)

  • So, the name for this is aggregation theory.

  • And one of the clearest examples is Uber.

  • Before Uber, if you wanted to call a car,

  • you had to go through a dispatcher.

  • Those dispatchers controlled the market

  • because they controlled the supply,

  • and you couldn't get through to a driver

  • without going through their system.

  • Uber changed that.

  • Now anyone can be a driver and the limiting factor is access

  • to Uber's huge pool of customers and ride requests.

  • Uber maintains that pool of customers

  • by giving them a good experience, in this case a good app.

  • Now, you might look at this and say Uber's a middleman,

  • and you'd be right.

  • But the dispatchers were middlemen too.

  • The difference is that Uber keeps its hold on the market

  • by controlling the consumers instead of the suppliers.

  • Locking down the supply of drivers is now just impossible.

  • But as long as Uber has the best service,

  • it'll have the most ride requests,

  • which gives it control over drivers

  • and basically the whole market.

  • And if Lyft wants to edge in on that market,

  • it has to do it by building a better service.

  • The key thing is there's a lot of money to be made

  • in connecting drivers with passengers.

  • That middleman role is arguably the most profitable part

  • of the entire chain.

  • It used to go to whoever could control

  • the supply of drivers,

  • but now it goes to whoever can aggregate

  • all of the customers in one place.

  • Hence aggregation theory.

  • - So what I'm gonna do is I'm gonna walk through

  • the idea of aggregation theory.

  • - The analyst Ben Thompson came up with this theory

  • and it's the best answer we have for how companies

  • like Google, Amazon, and Facebook got so big so fast.

  • For today's businesses,

  • the hardest problem is customer discovery.

  • There's so much stuff on the internet

  • that customers need help finding it.

  • So if you can build a relationship with the end user,

  • everything else takes care of itself.

  • - And you had this overwhelming amount of data available

  • or articles available on the internet

  • and Google comes along and it's a way to find it.

  • The hard problem is finding stuff.

  • And so Google solved the new hardest problem,

  • and what happened is Google could scale

  • basically infinitely so they could basically bring together

  • all of the consumers, aggregate them all together.

  • - Thompson's idea is that for any business

  • you have this chain from suppliers to consumers,

  • with distributors in the middle.

  • And for most of the 20th century,

  • distributors we're integrated with suppliers.

  • So, Ford not only builds the car,

  • it franchises the dealership that sells it to you.

  • But the internet changes that.

  • Instead of locking down the suppliers,

  • distributors are now getting ahead

  • by locking down consumers.

  • So, you see services like Cars.com or Expedia

  • that focus on aggregating customers together

  • by putting all the options in one place.

  • You see it with menu aggregators that wanna be

  • the single source for takeout orders,

  • a kind of aggregator between you and your local Thai place.

  • You've also probably experienced

  • some version of this with Facebook.

  • Even if you don't use the site or even like it,

  • you've probably invited people to a party

  • through a Facebook event,

  • just because it's easier than rounding up everyone's emails.

  • It's where everyone is.

  • And if you're a business,

  • you might end up paying Facebook to get into the news feeds

  • of people who already follow you.

  • Facebook has successfully positioned itself between you

  • and the people you wanna talk to

  • just by being too big to avoid.

  • Then there's Google

  • which is just aggregating the entire internet.

  • How many times have you navigated to a site by Googling it

  • instead of using a bookmark or typing in the URL?

  • If you wanna know where a restaurant is

  • or when a historical figure was born,

  • it seems archaic to look it up direct from a source.

  • Just Google it.

  • This one company has become the aggregator

  • of all of the internet-accessible information in the world.

  • And the bigger that pool of facts becomes,

  • the more powerful Google is.

  • - As the internet got larger, Google got better.

  • It linked its quality to the scale of the internet.

  • - The idea of aggregation theory has become really popular

  • in the tech world and there's a growing argument

  • about what it means for antitrust law.

  • The story of aggregation theory is all about competition.

  • In some ways it's even more competitive

  • because instead of locking down suppliers,

  • you're competing for consumers.

  • But there are also all of these winner-take-all effects

  • on the internet specifically

  • that combine with aggregation theory in really scary ways.

  • There isn't a lot of reason to use

  • the second best search engine

  • or the second best e-commerce platform

  • or the second best social network.

  • So as soon as one company gets a lead,

  • they end up controlling all of the users,

  • which makes them even more powerful

  • and harder to compete with.

  • - Open markets are predicated on the idea

  • that if a company harms people,

  • consumers, workers, and business partners

  • will choose another option.

  • We're here today because that choice is no longer possible.

  • - To see how the internet makes this stuff weird,

  • imagine a strip mall.

  • There's a big Walmart and lots of little stores next to it.

  • People go to the Walmart for most things,

  • but if you're selling candles,

  • you still might be able to carve out a niche

  • for a candle store.

  • You'll make a better margin that way

  • than selling wholesale to Walmart,

  • and Walmart can only stock so much.

  • Physical retail makes it hard to do everything at once,

  • just because there's only so much space

  • and only so many customers you can draw in.

  • But the internet lets you build an infinite Walmart,

  • extending beyond time and space,

  • unbounded by the laws of physics.

  • Instead of shopping around through different stores,

  • everyone just goes to the infinite Walmart.

  • Because it's infinitely large,

  • customers know it will have whatever they're looking for.

  • And because it can contain an infinite number of people,

  • businesses know they'll get more sales

  • inside the infinite Walmart

  • then making a go of it on their own.

  • Now, think about the boss of the infinite Walmart.

  • Regular boss stuff like choosing inventory

  • and selecting shelf placement gives them

  • almost God-like power.

  • It's not just that they control the biggest store.

  • They control access to all the customers

  • and as long as they hold that power,

  • it's hard to imagine any infinite Targets

  • popping up to challenge them.

  • Pretty soon, people are launching businesses entirely

  • to succeed within the walls of the infinite Walmart,

  • basing their entire concept of retail

  • around the boss's arcane rules.

  • This is basically the tech dream.

  • Don't just capture the sales,

  • capture the entire marketplace,

  • and then use that vantage to jump

  • into more and more lines of business.

  • Aggregation theory shows us how that works

  • and why the internet keeps producing

  • these huge unstoppable businesses.

  • Once you've aggregated all of the customers in one place,

  • you can jump into almost any market.

  • Amazon started by selling books,

  • but now it's selling groceries, dog food,

  • prescription drugs, security cameras, voice assistance,

  • and tons of other things.

  • The basic logic of aggregation theory

  • lets the company expand and expand

  • until it incorporates almost everything.

  • The internet doesn't have to be like this.

  • We used to have a more decentralized web

  • and some products like streaming video and cloud hosting

  • have resisted the winner-take-all dynamic.

  • But if you're wondering how tech companies got so big

  • and so aggressive, this is basically why.

  • Most founders and tech investors don't wanna solve problems

  • or figure out better ways to do things.

  • They just wanna use the internet as a place

  • to build their own infinite Walmart

  • and make themselves the boss.

  • Thanks for watching.

  • Let us know what you think in the comments.

  • And if you like this video,

  • check out this other one about how Amazon ended up

  • taking over the entire internet.

- Amazon runs the largest online marketplace in America,

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B1 walmart infinite theory uber facebook amazon

The one theory connecting Google, Facebook, and Amazon

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    林宜悉 posted on 2020/12/02
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