In exploring the API Economy on this blog, I have explored the challenge of resolving tensions of purpose and also the critical role of trust. A recent story on gaming by Uber drivers of the Uber driver management algorithms highlighted another challenge of API Economy businesses. In an economy of standardised API-driven interactions, exit is the only remaining option to signal dissatisfaction.
Business models like Uber can encourage a line of thinking that soon in the future all transactions & interactions will be seamlessly managed by standardised interactions across APIs. We will lose the cost and complexity of human service interactions as we fit all of our interaction needs into code that can exchange information between systems. Everything in this API Economy runs incredibly smoothly, until it doesn’t. The problems that I explored in previous posts above are the thin end of the wedge of examples of what happens when people and interactions fall outside the standard patterns of an increasingly locked-down platform economy.
As an aside, it is worth noting that classical economics has explored many of the implications of this algorithmic, API-driven utopia. The assumptions inherent in the futures being forecast increasingly start to align with the traditional models of economics. The API Economy is seeking to bring about (or also assuming) perfect transparency of information, frictionless transactions, rational maximisation of self-interest and a reduction of all interactions to transactions in universal markets. At its extreme in the exploration of perfect competition and general equilibrium under the Arrow-Debreu model, economists effectively conceived of a global economy that exists for only a single moment in which all present and future transactions are completed. All work thereafter is fulfilling previously agreed futures and insurance contracts. The limitations that have been research at length of such traditional models would be worthy considerations for the advocates of an API Economy future. As examples, Behavioural Economics has explored the extent to which we are not rational maximisers and we much better understanding the issues of uncertainty of information in a complex world.
Exit and Voice in the API Economy
I ready Albert O Hirschman’s book Exit, Voice and Loyalty many years ago and it helped me see that the traditional economic model ignores our ability to create and exchange new information. Hirschman points out that traditional economics only has one option for a dissatisfied consumer. They have to not purchase, exiting the market. The dissatisfied consumer has to hope that their signal will be picked up and correctly interpreted. For example, Uber Drivers frustrated with returns have to withdraw their services. Unfortunately, instead of helping drivers to improve returns, Uber may respond by tightening the system rules to prevent driver exit or seeking to automate drivers away. Uber hopes that it can force any remaining drivers into voiceless Loyalty, where they take no action. For drivers, exit is a blunt tool of improvement. It is also a path to social and economic exclusion.
Hirschman points out that through history consumers have an alternative, complain, collaborate and work with others to improve matters. Voice is an important input in our current economic system. Hirschman highlights in some examples there are even potential policy benefits to restricting market exit to encourage voice. Engagement matters and community is where we express our voice whether inside organisations or across boundaries. The losses of disappearing community are more than economic. With increases in inequality forecast, building exclusion deeper into the system of economics could have profound social ramifications.
Voice is in danger of being lost if everything is an API. APIs don’t allow for a counterpart’s voice. Organisations that increasingly leverage APIs will need to be aware of the loss and carefully manage their engagement with counterparts to foster open discussion and the opportunities for learning. Community leadership will be an ongoing responsibility to ensure the luddites do not feel tempted to smash the machines in frustration at their economic exclusion. An API is the foundation of a more seamless and frictionless economy, but need not be a replacement for all human interaction. We may work for money but we also work to fulfil messy complex and changing human needs too.