I’m forever enamored with the idea of “scale.” You hear it a lot. Sure, some companies are doing it well. But if you dig under the surface of the companies that say they are scaling, they really aren’t. Take Zenefits. One of my favorite companies of the past five years, a noted unicorn, recently became both a PR and an HR disaster with its frat-house culture and crazy tales of office hijinks. But more interesting is that Zenefits raised a whopping $583 million for its “platform.” But was it really a platform? To set the stage, I use the term “platform” to describe a mechanical automation of tasks. Less human interaction, less cost, and therefore valuations in the billions. Platforms are fundamental to scale. And scale is fundamental to valuations. Ultimately, with all the AI and machine learning we are quickly amassing, a platform shouldn’t require any human interaction. Mostly, the platforms that we have been promised, building, and using the past 20 years are rudimentary enablers with specific interfaces that just replace paper. Which is exactly what a computer does, lest we forget. We haven’t hit the machine age just yet.
Any business owner that set up Zenefits would appreciate the platform. It seemed magical, linking to all your services and integrating accounting software, payroll and insurance. And the customer support was amazing. But behind the interface was a necessary human factor. And this factor was a lot larger than anyone realized.
Their platform that promised scale was nothing more than what Amazon built years ago with its Mechanical Turk. A place where menial tasks can be paid out to the lowest bidder. And I mean menial tasks. So play all this out a few degrees. This decade will be defined as building platforms to simplify steps and processes so that any human can become a knowledge worker. But at the end of the day, just like Yelp knows, you can’t afford to pay a human. But they haven’t figured out the machine intelligence yet either. So next decade, following our expertise of turning humans into TaskRabbits, the machines will be ready to replace them. Just imagine what the valuations will be then. Finally, a true startup unicorn.
Business makes money when you do something the second time. Margins are a result of how exacting you do that, and how many times you are able to do it. My advice, so that you have a job when the machines rise, is to not fall into patterns. Be the one defining the pattern, or the one that has the keys to the machine that makes the pattern.
– James Rice, Digital Strategy