The Horizontal (informal) Economy
We use the words ecosystem, community, network, systems, contexts and markets to depict something that, as humans, we intrinsically understand, but as professionals, it isn’t easily to articulate, structure, design, monitor and control.
That is because those words are “horizontal” words and we have been brought up with the mindset that is “vertical”. FMCG, Energy, Water, Property, Technology are vertical sectors but when I brush my teeth, I have a touch point with each one of them. Brushing teeth, making tea, going to work, these are horizontal type contexts that is part of our informal economy. The work humans do to connect things up informally so that we may live our lives.
With digitalization comes the effort to formalise, structure and design products and services that could internalize this economy. So where we used to use a notepad, we can now plan our diary with Google. The resource flowing when we interact, is our data. As new products give us more digital tools, and our informal economy gets more structured (some may call this rigid), the entity that coordinates these interactions often emerges to become a tech platform. This is because that way of thinking - “platforming” - is inherently baked into our vertical mindsets of power, control, manage and monitor; and we apply that onto the horizontal economy. After a while, choice and freedom has to be traded off for scale and speed and without realising it, we have sleep walked into a world where platforms have the most control over markets.
The problem of eating up a horizontal into a formal structure to consolidate power and strength is a problem as old as time. Long before corporations, in the Bronze Age, where the method of organizing wasn’t corporations but city states, they had the same problem. So much of the trade network was informal with merchants creating their own styles, systems, social networks evolving into a global commercial network (mostly because tin, a big component of bronze, was distributed and scarce). As the city states formalised the networks, they created “platforms” too - such as marrying their daughter to another king in another city state, expanding their control, power and influence.
I liken platforms to vertical body shapes. We have triangle (ride sharing), inverted triangle (e-gov), hour glass (marketplaces) I can go on ….So whenever I meet a corporation or a government platform, I can’t help but think about their body shapes. ;p
Is there another way of building communities, ecosystems, networks that can be horizontal, keep markets free and not create more platforms and walled gardens? I think so.
Building a market network is not the same mindset as building a platform. It’s about putting the market (in terms of choice and freedom) in control while focusing on coordination. It is not unlike optimising a family network (have you tried controlling your children with a “platform”? Trust me, it won’t end well).
When a platform gets too large, coordination and allocation of resources for monitoring and control gets challenging and trade offs will be skewed because the platform isn’t incentivise for the collective. We see that with Meta, X, and others. When that happens, governments tend to step in and “thinning” of the platform is often the only way (sorry, couldn’t help another body metaphor)
A market network, however, is incentivised around the collective. Markets, if there was an “invisible hand” coordinating it, usually just wants to get bigger because any extraordinary profit will result in copy cats so markets want more choice and more freedoms. This is because a market network is incentivised on speed, access, and quality of connections and interactions. Of course there would be distribution issues, freeloading and other systems issues but for the most part, these could be solved with interventions. Thinking about internalising the horizontal informal economy through a digital market network of data isn’t perfect but it could keep markets free.
I have been working on the horizontal economy for awhile now. Technicalities have already been solved. Market structures, however, are evolving.
When Dataswyft first rolled out the Data Wallet, I was asked - what are we using it for?
I said we will go after all the small market failures in the horizontal economy so that we can watch how the market structure could emerge. And so we did.
Here are some of the digital market failures / inefficiencies we went after:
Giving Membership IDs of both people and businesses in a community (without needing their own app, with no lock in, and ID usable in any other app)
https://dataswyft.com/checkd/membership
Crowdsourcing local business sales for community charity without revealing identity - (Zero-knowledge proof of behaviour to donate)
https://dataswyft.com/checkd/fundraise
Taking attendance in an event (cross border transfer of data on demand with a person you just met)
https://dataswyft.com/checkd/attendance
Access management (or ticketing) (non-transferable access ticket created in minutes and updatable) - this is not a market failure but the verticals do it so badly we couldn’t help ourselves
https://dataswyft.com/checkd/accessmanagement
Sharing credentials already verified by another company (transferring a certified true copy or a notarised credential)
https://dataswyft.com/checkd/sharevc
As more of the informal horizontal use cases come out of the woodwork using our techno-legal protocols, a combination of market and technical patterns are starting to emerge.
(health warning, the following does require an understanding of market design economics and technology - I’m just doing a brain dump of what I found interesting)
Just as the vertical stack has back end and front end, the horizontal “stack” has supply- side and demand side as data and meta data layers flow from left to right. However, the boundaries between the technical services are not arbitrary nor do they follow technical principles of separation of concerns (if they do, we will probably end up building a platform). Instead, the boundaries follow market design principles of safety, thickness and congestion-free, largely a by-product of our data rights protocols. That means many of the technical services could be much more efficient if they were bundled together but they are not bundled together, because our protocols separates them - this allows different market players with an advantage to enter so that rents can be extracted. That in itself has been a fascinating to watch. More of that to come.