GDP and the platform economy

This signal post gives a short summary of a literature review on GDP and it’s usability as a measure in the increasingly digitalised economy. For more details, download the full report.

A measure for the manufacturing age

Gross Domestic Product was adopted in the 1940s, the age of manufacturing, to measure the strength of a country’s economy and it also became a proxy for well-being. It’s a measure of the monetary value of all goods and services produced by a country. A rapidly increasing portion of today’s economy is technology services, including platforms that offer “free/add-supported” products or act as international online intermediaries to facilitate the exchange of goods, services or information. By definition, the GDP doesn’t measure “free” products. In economic terms, the value a consumer gets from the “free”, and potentially higher quality products is measured by utility or consumer surplus, which is also not captured in GDP.

The slowing of GDP growth

While the GDP of most of the world’s economies has been increasing since its inception, the rate of GDP growth has slowed recently.  More importantly, the growth rates of GDP per capita and GDP per hour worked (labour productivity) have also slowed.  While the root cause of the slowdown in GDP growth has been debated for several decades, most economists agree that a portion of the slowdown is real and not solely an issue with capturing the growth of the platform and technology sector.  Structural issues like demographics as well as the fact that past innovations like the electric motor likely had a larger impact on productivity than recent innovations are all contributing factors.

The uniqueness of the platform economy and the technology sector

While the reasons above partially explain the slowdown in GDP growth, many agree there is a growing proportion of the economy that isn’t being captured as part of GDP.  There are a number of unique aspects of the platform economy and the technology sector that make it challenging to measure, manage, and ensure fair taxation. These include: ability to scale at low cost; “free/ad-supported” pricing models; borderless reach; blurred lines between consumers and producers; venture funding that encourages long-term market capitalisation over short-term profitability; digital services that replace physical products; and there’s a decreasing marginal contribution to GDP as the technology sector grows.

Uncaptured GDP

Given the unique aspects of the platform economy and the technology sector described above, it is possible that some aspects are having a negative influence on GDP growth while other aspects are having a positive influence that is difficult to capture using the current definition of GDP. The growth of the platform economy has been partially based on a culture of “free/low cost” products and services that provide utility and happiness to people beyond their economic value. This consumer surplus adds up to substantial uncaptured GDP.

This additional utility and happiness create a positive feedback loop that drives growth in the technology sector and the platform economy. As people seek to increase utility and happiness, they consume more in the platform economy which leads to its continued expansion as well as growth in uncaptured GDP.

Soft Innovation Resources

Understanding how to encourage the expansion of the platform economy may be key to increasing the rate of GDP growth. Watanabe, et al., postulate that countries (and companies) can increase their rate of growth by diverting a portion of their resources away from R&D and towards enabling Soft Innovation Resources (SIRs) as a complement to traditional R&D. These are soft resources that can be harnessed to drive innovation and growth at individual companies, which rolls up to growth at the country level.

Enablers of Soft Innovation Resources are listed below:

  • Supra-Functionality: People seek out products and services where they experience satisfaction beyond utilitarian functional needs. They desire social, cultural, aspirational, tribal, and emotional benefits.
  • Sleeping or Untapped Resources: These are existing resources that are under-utilized resulting in an unused capacity that may be spread sparsely and difficult to access without technology.
  • Trust: People’s level of trust in various aspects of their lives, society, and the economy can affect their participation and contribution to innovation and the creation of economic value.
  • Maximizing Gratification: Seeking gratification of needs is a key pillar of Maslow’s theories about motivation and human behaviour. As increasingly sophisticated needs are gratified, there is a desire to maintain and build upon the increased level of gratification.
  • Assimilation and Self-Propagation: Sustainable growth can be obtained when past innovations are assimilated into future innovations, effectively creating a self-propagating cycle of innovation.
  • Co-Evolution: The coupling of two or more items which then innovate and evolve along a common path.

The future of GDP measurement

Although the GDP measure has been revised over time, there is widespread recognition that more changes are needed if it’s to remain relevant as the digital economy grows. There is debate about how platforms and the digital economy are contributing to GDP and the amount of uncaptured GDP. For example, the US Bureau of Economic Analysis (BEA) concluded uncaptured GDP would increase the rate of GDP growth by less than 0.01% per year. On the other hand, Brynjolfsson, et al. developed a measure they call GDP-B and they concluded that the consumer surplus from Facebook alone would increase the rate of US GDP growth by 0.1% per year and platforms such as internet search, e-mail, and maps would contribute significantly more. And somewhere in between, an independent study commissioned by the UK government concluded that annual GDP growth is understated by 0.3% to 0.6%, largely due to the platform economy.

It’s clear there are wide-ranging opinions on the magnitude of uncaptured GDP. International organisations such as the OECD and World Economic Forum are also trying to bring clarity to the situation. Additionally, a number of measures are being developed such as the Human Development Index (United Nations) and the Better Life Index (OECD) with a focus on well-being to augment GDP.

Strategies for future growth

The slowdown in GDP growth is complicated and multi-faceted.  Perhaps some of the structural impediments to growth can’t be mitigated. Perhaps because digital platforms and their ecosystems function as highly efficient intermediaries that increase the flow of goods and services at substantially lower costs, we’re experiencing a temporary downward adjustment and growth will resume from a new baseline. As a result of this complexity, strategies to encourage future growth are challenging and diverse.

At the country level, the literature suggests strategies such as: developing economic measures to supplement GDP and better inform public policy in the digital age; create policies to increase skills training and corporate technology purchases to increase adoption of new technologies; develop policies to encourage experimentation in new technologies and business models; focus on improving the quality and lowering the cost of healthcare and education; increase immigration; enable Soft Innovation Resources; and refine international taxation and shipping practices to increase fairness in the shipping and taxation of digital goods and services.

At the company level, the literature suggests strategies such as: lagging firms should invest in skills training and increase the adoption of new technologies; leading firms should include the enablement of Soft Innovation Resources into their R&D and product development activities; and expand current products and services into platforms and expand platforms into platform ecosystems.

Selected articles and websites

The Economist – Measuring Economies – The trouble with GDP
Harvard Business Review – How Should We Measure the Digital Economy?
OECD – Are GDP and Productivity Measures Up to the Challenges of the Digital Economy?
Robert Gordon – Declining American Economic Growth Despite Ongoing Innovation
Watanabe, et al. – Measuring GDP in the digital economy: Increasing dependence on uncaptured GDP
Tou, et al. – Soft Innovation Resources: Enabler for Reversal in GDP Growth in the Digital Economy

Additional references

MIT – GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy
British Government – Independent Review of UK Economic Statistics: Final Report (2016)
US Bureau of Economics Analysis – Valuing ‘Free’ Media in GDP: An Experimental Approach
Investopedia – Definition of consumer surplus
OECD – Measuring the Digital transformation
World Economic Forum – Welcome to the age of the platform nation
Forbes – Uber will lower GDP
United Nations – Human Development Index
OECD – Better Life Index
OECD – Unified Approach to taxation in the digital economy

Phill White

Research Scientist Global X-Network
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Gaming industry meets the platform economy

In this signal post we discuss the opportunities and threats in how the platform economy is changing the gaming industry. While digitalisation and the internet have already transformed the sector in many ways, technical and business models innovations are continuously giving new shape to the market. Legislative and regulatory approaches are also changing, with a strong need to address the risks and negative impacts involved. Consumer protection and money laundering are just two examples of the societally and economically important challenges in the core of gaming.

In simplified terms, gambling means wagering of money on an uncertain event and uncertain outcome, with the aim of winning more money. Gambling entails consideration and risk-taking as well as the promise of a prize. The word ‘gaming’ is typically, and in this signal post, used in reference to legal gambling, i.e. gambling services (not computer, video and mobile games, although connections to those will be discussed in the last paragraph) offered by companies in compliance with the law. These laws do, however, differ greatly between countries and regions, ranging from total bans to strategic gambling tourism as in Monaco or Macau.

Good (and not so good) use of platform strategies

Online gambling providers employ the same strategies found in other areas of the platform economy. Their systems are based on an eCommerce platform upon which various games and offerings are built. While many operate in a business to consumer (B2C) model, others also offer products and services in a business to business (B2B) model. By gathering feedback from their user base and testing new products and services, the online gambling providers create an ecosystem around their platform to drive innovation and build their customer base.

Providers that are licensed through countries with strict regulatory frameworks, such as in Europe and North America, are obligated to operate in a transparent and responsible manner. There are other countries with less robust regulations and in some cases, online gambling providers operating there use platform technologies such as blockchain, cryptocurrencies, and smart contracts to both build trust with their customers and to operate without complying with regulatory and tax laws.

European context

A recent study prepared for the European Commission paints a picture of the European regulatory landscape for online gambling. Taking into account the growing consumption of online gaming, the report addresses the many challenges that urgently require a stronger regulatory response, such as gambling addiction, protection of minors, consumer protection, integrity of sports, money laundering and crime. What makes regulating and enforcing regulations extremely complex in the online environment is that gambling services are offered across borders, often by virtual gambling facilities that may consist of layered eco-systems of service providers. Services are also available 24/7, their use is made extremely convenient, transactions take place immediately and the user may perceive the game experience as being anonymous.

The study emphasizes the importance of European level action. However, specific European Union (EU) level regulation is not suggested, which is in alignment with previous communications by the European Commission. National policies, and therefore national regulations, share a lot of objectives but have also major ideological differences. Harmonisation would, therefore, be a step too far at this point, but joint efforts in effective enforcement, for example, is in the interest of all parties.

The online gaming and betting operators established, licensed and regulated within the EU have organised themselves as the European Gaming and Betting Association (EGBA). The aim of EGBA is to ensure a safe and reliable European digital environment for online gaming by working together with national authorities, EU authorities as well as other stakeholders. The association is committed to a high level of consumer protection while developing regulated services with the goal to be attractive enough to channel users away from unregulated offers.

According to EGBA, the online gambling market in Europe has an annual growth of around 10% and the gross profits of the sector are expected to grow to €24.7 billion in 2020. Comparing online and land-based gambling, in 2017 the ratio between the two was 21:79. The top three most popular online offers are sports betting (40%), casino games (32%) and lotteries (13%). Interestingly, Europe is the leader, with the share of European services accounting for 49% of the global online gambling market in 2017. The international business opportunities for European gaming services is expected to grow further, especially in several US states where sports betting was recently legalised.

Case of Finland

In Finland, the gaming system is based on the exclusive right principle, and since the merger in 2017, all gambling games are being offered by one single operator Veikkaus Oy. The company is owned by the Finnish State, and the offering covers lucky games, slot machines, instant games and skill games, with one-third of its activity taking place online. Veikkaus has a strong obligation and commitment to operate games responsibly and mitigate risks, and the revenue generated is used for societal causes in its entirety. This means that roughly one billion euros per year is distributed, via the relevant ministries, to beneficiaries in culture, sports, science, youth work, etc.

Even with the long tradition and strong value basis, debates about Veikkaus and the Finnish gaming system in general get heated from time to time. For example, last autumn Veikkaus’ new strategy aimed to address the public discussions about whether the fact that revenues benefit the common good justifies the problems caused, and typically these problems are being borne by those in the weakest position. Building a safe and more responsible gaming environment is one of the big strategic goals of Veikkaus, and the decision to speed up the adoption of compulsory identification on slot machines is one practical step. This means that starting in January 2021 Veikkaus will introduce new technology that will better prevent underage gaming as well as enable players to set a ban on their own gaming.

When it comes to the digital and online world, Veikkaus is a pioneer in esports solutions, and it was among the first companies in the world to offer legal esports betting in 2014. Service development in the esports domain is continuous, and products, services and platforms around esports have been developed in collaboration with Veikkaus and others using a unique concept, the Innovation Challenge Week. The winner last year was German GameBuddy, with their innovation of a social community platform for gamers.

Interesting insights into the Finnish case are also found in the survey commissioned by Kasino Curt in 2019 that gathered citizens’ views on the monopoly, political decision making and negative impacts around gaming. One clear finding is that Finns are not fully content with the current mitigation actions to fix problem gaming: 27% of respondents said enough was done, whereas 44% disagreed. 58% went so far as to agree that gambling machines should be removed from everyday environments such as grocery stores, but 29% would not make such changes. A majority of respondents also thought Finland should break away from the monopoly and introduce a licensing system instead, totalling 40%, whereas 29% disagreed on this. The gaming market and industry implications of such a change would be significant. Public discussions comparing future alternatives are active, and the pros and cons of the licensing system option should be studied carefully in order to see if licensing could be a viable approach in the increasingly global gaming environment expressed in the platform economy.

Connections to computer, video and mobile games

Millennials and Generation Z have grown up in a digital world with easy access to computer, video and mobile games. They have a preference for entertainment where there is skill involved and there is the option to play against other players. Not only are online gambling providers catering to this preference, but physical casinos are starting to replace traditional slot machines with games that resemble video games in an effort to attract younger customers. Additionally, these younger generations grew up playing on multi-player game platforms like Fortnite, CS:GO, and Defence Of The Ancients (DOTA) and are now driving the demand for professional esports tournaments and esports betting.

The near-ubiquitous presence of tablets and mobile device platforms means young people have unprecedented access to mobile games. In many cases, these are simple entertainment.  However, there is a growing segment social casino games that are introducing young people to virtual gambling. Social casino games simulate typical card and table games but players wager virtual credits and no money changes hands. The games are often integrated into social media platforms and the outcomes are not always random. Instead, they are based on psychological theories that increase engagement and player satisfaction. In some cases, online gaming providers also produce social casino games and there is growing concern that the use of social casino games amongst young people is a “gateway” to money gambling in adulthood that may contribute to gambling addiction.

Selected articles and websites

Alison Drain: White Paper, The Converging of the Gaming and Gambling Ecosystems
Esportsearning: Top Games Awarding Prize Money
European Gaming and Betting Association (EGBA)
Hackernoon: What is the Future of Gambling Industry?
Hyoun S. Kim: Social Casino Games: Current Evidence and Future Directions
Kasino Curtin tilaama tutkimus osoittaa: suomalaiset eivät luota kansanedustajiin rahapeliasioissa
MintDice: How Cryptocurrency is Changing Online Gambling in Europe
NewsBTC: MECA Coin – Creating a Democratized Online Gambling Ecosystem on Blockchain
Publications Office of the European Union, 2018: Evaluation of regulatory tools for enforcing online gambling rules and channelling demand towards controlled offers
Veikkaus: German GameBuddy wins Veikkaus Innovation Challenge Week
Veikkaus: Responsibility for the individual in focus in Veikkaus’ new strategy – compulsory identification on slot machines brought forward by a year
Veikkaus: Veikkaus – a Finnish gaming company with a special mission
Veikkaus: Veikkaus to hold an Innovation Challenge Week to find startups and begin collaboration – focus on esports
Wikipedia: Gambling

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd

Phill White

Research Scientist Global X-Network
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Elections, campaigns and voting in the platform economy

This coming spring in Finland is going to entail lively political discussions. The campaigns for the Parliamentary Elections (April 2019) are already in full swing. And after having dealt with domestic issues, the European Elections will follow (May 2019). Political debates are taking place in the media as well as workplaces, schools and other arenas where people meet. This includes also digital meeting places, and platforms of different type are growingly important in delivering political messages with wide outreach.

In this signal post, we will discuss three aspects of how the platform economy is facilitating political discourse. We will identify both positive and negative impacts on democracy, especially at the time of elections. The three topics are:

  • targeted political campaigns
  • fake news in politics
  • electronic and online voting.

Targeted political campaigns

Digitalisation and the platform economy are changing the way that political campaigns are carried out nowadays. Voting advice applications act as platforms for candidates and parties to declare their agendas and for voters to find a match from their point of view. Another way to benefit from the wide outreach enabled by platforms is for electoral candidates to be active on social media.

While the platform economy promotes broad societal discussions and better informed decision-making, new types of problems also arise. Organized mass campaigns are masked as non-political one-to-one chitchat. Data about voters is being collected, and platform giants together with consultancies like Cambridge Analytica have been known to take targeted political campaigns and personalized adverts to a whole new level. There is little transparency, and the ways used to influence voting decisions are questionable.

It is very appropriate that platform-based solutions have been developed to tackle these issues. In Finland, the Vaalivahti initiative has been launched to help citizens identify when political adverts are displayed on Facebook. A simple browser extension, based on the software developed by Who Targets Me, needs to be installed, and an analysis of political ads and why you were being targeted is provided. The platform maintains an up-to-date database of targeted political campaigns, which is open also for researchers and journalists to examine.

Fake news in politics

The 2016 US presidential election, and the alleged fake news attacks surrounding it, was a big wake-up call around the world. Studies and investigations have been conducted with the aim to reveal what really happened, how much fake news and misinformation was being released and by whom, what the real influence on voters was and whether the very election result was affected. One example is the recent study that suggests that the exposure of the average American to pro-Trump fake news was higher than that of pro-Clinton, but the authors emphasize that rash conclusions cannot be made based on this knowledge.

Fake news by foreign or domestic, political or economic actors has the potential to disrupt democracy, especially close to elections. The forms adopted range from fake news promoting to bashing one candidate, but they may also intend to inhibit political speech and suppress voting altogether. Social media and other platforms are being used as the tools and means to distribute fake news, and regulatory governance and rule setting may be needed to address these issues.

An example of suggestions to fix problems with regulatory measures is to require transparency of political advertising on digital media by informative real-time ad disclosure. Such data includes the sponsor, money spent, targeting parameters, etc. This real-time information provided along with the ad should also be compiled and stored for later review.

Electronic and online voting

Platforms can also facilitate the casting and counting of votes by using electronic means. For example, an electronic voting platform could build on voting machines at polling stations. Or, take a few more steps forward, an online voting platform could allow those entitled to vote exercise their right from anywhere, using any device as long as they can connect to the internet.

In Finland, the topic of electronic voting has been discussed from the early 2000s on and several studies and pilots have been conducted by the Ministry of Justice. Electronic voting at polling stations was trialled in three municipalities in the 2008 municipal elections, but problems were encountered in registering votes. Work to develop electronic voting was thus discontinued around 2010, but discussions were reopened in 2016. A working group was then appointed, and a feasibility study on the introduction of online voting in Finland was published in 2017. The conclusion was that even though viable electronic voting systems already existed, they did not meet the requirements and risks outweighed benefits. Core problems included, for example, the reliability of the system and guaranteeing verification and election secrecy at the same time.

New technologies, such as blockchain, may however help solve the issues mentioned above. Blockchain could be used to fight electoral fraud and vote buying while ensuring integrity and inclusiveness. Service development with blockchain-based voting platforms is vibrant, and pilots are showing great promise.

Selected articles and websites

Greenspon Edward and Owen Taylor (2018). Democracy Divided: Countering Disinformation and Hate in the Digital Public Sphere
Hunt Allcott and Gentzkow Matthew (2017). Social Media and Fake News in the 2016 Election. Journal of Economic Perspectives, 31 (2): 211-36
Ministry of Justice. 2017. Online voting in Finland, A feasibility study
Ministry of Justice. Electronic voting in Finland
Palermo Frank, Forbes. Is Blockchain The Answer To Election Tampering?
Palmisano Tonino, The Cryptonomist: Voting in the days of Blockchain technology
Vaalivahti
Who Targets Me
Wikipedia. Voting advice application

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd
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Turning common pessimistic beliefs of platforms into positive narratives

In this signal post we tackle four commonly stated beliefs that suggest the platform economy is but a game of global giants and Finland has very little chance to benefit or take part. These critical messages heard over and over again are: 

  • “We cannot compete with giants.” 
  • “It is already too late.” 
  • “Finland is too small.” 
  • “The US or China is going to take it all.” 

While all the above four statements are valid concerns, we will explore them one by one with the aim to extend the discussion from pessimistic caution towards narratives of encouragement. In fact, we’d rather suggest using these statements to challenge practitioners to think of ways to get involved in the value creation networks that indeed are characterised by giant platform companies steering fast-paced developments in a global context. Positive messages have also been emphasised in the national strategy work and ministerial future reviews. Our recommendations for surviving and excelling in this game include the following:  

  1. Join and contribute in an ecosystem. 
  2. Use your unique strengths and find your niche. 
  3. Think digital and global but do not forget about tangible and local. 

“We cannot compete with giants” 

When looking at the successful platform giants, such as AmazonAlibabaSpotifyYouTubeBaiduAppleUber or Airbnb, you may wonder whether there is any room for new entrants. These giants have grown relatively fast and assumed leading or even monopolistic standing in regional and global markets. They are not only dominating the digitally powered business but often disrupting the traditional trade and industries too. 

The point is, however, not to pick a fight and compete with one of these forerunner giants enjoying their monopoly position. Although you could do that too, if you come up with a more efficient, attractive or innovative service than what they offer. In fact, the monopoly status of many of these platforms could start to crumble as soon as strong new competitors with fresh ideas get their act together. An alternative newcomer strategy would be to explore interconnected business openings complementary to those of the giants. After all, the platform economy is the perfect environment to make use of business models based on multi-stakeholder value networks and ecosystems, layered services and synergetic alliances. 

One should also acknowledge the longer-term fluctuations in economic success. Even giants fall, and monopolies may need to make room for a more diverse market situation. Social media platforms are a good example of an “industry”, where we have already seen pioneers and former market leaders such as MySpace and IRC-Galleria to lose their standing to a multitude of new, specialised platforms for private, professional and other purposes. 

“It is already too late” 

Again, if focusing on the incumbent giants, one might think it’s all been done already, and that it is too late to start from scratch. But the fact is that many business sectors are only beginning to warm up to the idea of the platform economy. Futures enabled by digitalisation remain in many business areas just visionary talk, as companies and other practitioners still rely on traditional business models, pipe-like supply chains and one-sided market logics. Innovative thinking and openness to apply the principles of the platform economy will provide countless new business opportunities in sectors like real estate, construction, waste management, manufacturing and agriculture.  

New opportunities are also to be discovered with applying emerging technologies, such as artificial intelligence, blockchain, robotics and virtual reality. It is definitely not too late to contribute to the development of these technologies and the yet undiscovered potential they have when applied into digital platforms. New services, business models and delivery channels in sight! 

“Finland is too small” 

As a small, remote country it is easy to think we cannot make a big difference in the global game. Our domestic market is not big enough and we are but a population of some five million. The platform economy, however, is the perfect arena for even a small actor to grow and achieve international success. The European Single Market is our extended home ground, and there are no barriers that couldn’t be overcome in terms of global growth either. And again, platform strategies are all about alliances and partnerships, and the Finnish can surely find their niche as a part of these platform ecosystems. 

The high level of education, expertise and skills in Finland is an important asset in the platform economy. ICT skills, databanks as well as knowledgeable citizens are a key resource in developing platforms as well as in introducing them in the consumer market. The compact domestic market can also be taken as an advantage, if used as a test-bed and proof-of-case to explore and market forerunner services. Well-connected stakeholder ecosystems can collaborate on domestic applications and then expand internationally, as we have seen with the example of mobility as a service business. 

“The US or China is going to take it all” 

The US and Chinese platform ecosystems are undoubtedly dominating the platform business for now, and for the time being Europe is largely dependent on the US-driven ecosystem. Finland and Europe among other countries and regions can nevertheless contribute to the development of these agglomerates. For example, it has been suggested that European public values could be employed to bring important value-centric platform policies into the big picture. The EU General Data Protection Regulation (GDPR) is already one major step forward, and besides privacy, values such as accountability, fairness and democratic control could be similarly promoted. The European strength in the traditional markets to balance power relationships and support stakeholder collaboration among (1) the market, (2) state and (3) civil society makes a strong case in the platform economy too. It could indeed provide a more acceptable alternative to the current focus of the US ecosystem on the market or that of the Chinese ecosystem on the state. 

Another counter-argument to the dominance of the US, China or any other superpower is that even if the platform economy strives on digital solutions on the global level, many practical applications have roots in the tangible, physical world too. These types of local aspects are manifested in e.g. services and products being produced and consumed, which means business opportunities can be found both near and far. 

Selected articles and websites 

Valtioneuvoston kanslia, Työ- ja elinkeinoministeriö, Innovaatiorahoituskeskus Tekes: Digitaalisen alustatalouden tiekartasto 
Finnish Government, Ministry of Economic Affairs and Employment: From transformation to new growth, Futures Review of the Ministry of Economic Affairs and Employment 
Ailisto, et al. 2016: Onko Suomi jäämässä alustatalouden junasta? Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja 19/2016 
van Dijck (2018): European public values in a global online society, Keynote at the workshop: “Platform Economy: Innovation, Entrepreneurship and Public Policy Perspectives”  

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd
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Tackling fake news and misinformation in platforms

The online world is increasingly struggling with misinformation, such as fake news, that is spreading in digital platforms. Intentionally as well as unintentionally created and spread false content travels fast in platforms and may reach global audiences instantaneously. To pre-screen, monitor, correct or control the spreading is extremely difficult, and often the remedial response comes only in time to deal with the consequences.

In this signal post we study the problem of misinformation in the platform economy but also list potential solutions to it, with forerunner examples. Defining and establishing clear responsibilities through agreements and regulation is one part of the cure, and technological means such as blockchain, reputation systems, algorithms and AI will also be important. Another essential is to support and empower the users to be aware of the issue and practice source criticism, and this can be done for example by embedding critical thinking skills into educational curricula.

Misinformation − the size of the problem

Fake news or misinformation, in general, is not a new phenomenon, but the online world has provided the means to spread it faster and wider with ease. Individuals, organisations and governments alike can be the source or target audience of misinformation, and fake contents can be created and spread with malicious intentions, by accident or even with the objective of entertaining (for example the news satire organization The Onion).

Digital online platforms are often the place where misinformation is being released and then spread by liking, sharing, information searching, bots, etc. The online environment has not yet been able to adopt means to efficiently battle misinformation, and risks and concerns involved vary from reputation damage to global political crises. The most pessimistic views even warn us of an “infocalypse”, a reality-distorting information apocalypse. Others talk about the erosion of civility as a “negative externality”. This view points out that misinformation could, in fact, be tackled by companies in the platform economy analogously to how negative environmental externalities are tackled by manufacturing companies. It has also been suggested that misinformation is a symptom of deep-rooted systemic problems in our information ecosystem and that such an endemic condition in this complex context cannot be very easily fixed.

Solutions − truth, trust and transparency

Remedies to fake news and misinformation are being developed and implemented, even if designing control and repair measures may seem like a mission impossible. Fake accounts and materials are being removed by social media platforms, and efforts to update traditional journalism values and practices in the platform economy are being initiated. Identification and verification processes are a promising opportunity to improve trust, and blockchain among other technologies may prove pivotal in their implementation.

Example: The Council for Mass Media in Finland has recently launched a label for responsible journalism, which is intended to help the user to distinguish fake content and commercials from responsible and trustworthy journalism. The label is meant for both online and traditional media that comply with the guidelines for journalists as provided by the council.

Algorithms and technical design in general will also have an important part to play in ensuring that platforms provide the foundation and structure that repels misinformation. Taking on these responsibilities also calls for rethinking business models and strategies, as demand for transparency grows. One specific issue is the “filter bubble”, a situation where algorithms selectively isolate users to information that revolves around their viewpoint and block off differing information. Platforms such as Facebook are already adjusting and improving their algorithms and practices regarding, for example, their models for advertising.

Example: Digital media company BuzzFeed has launched an “outside your bubble” feature, which specifically gives the reader suggestions of articles providing differing perspectives compared to the piece of news they just read.

Example: YouTube is planning to address misinformation, specifically by adding “information cues” with links to third party sources when it comes to videos covering hoaxes and conspiracy theories. This way the user will automatically have suggestions to access further and possibly differing information on the topic.

Selected articles and websites

BuzzFeed: He Predicted The 2016 Fake News Crisis. Now He’s Worried About An Information Apocalypse.
BuzzFeed: Helping You See Outside Your Bubble
Engadget: Wikipedia had no idea it would become a YouTube fact checker
Financial Times:  The tech effect, Every reason to think that social media users will become less engaged with the largest platforms
Julkisen sanan neuvosto: Mistä tiedät, että uutinen on totta?
London School of Economics and Political Science: Dealing with the disinformation dilemma: a new agenda for news media
Science: The science of fake news
The Conversation: Social media companies should ditch clickbait, and compete over trustworthiness
The Onion: About The Onion
Wikipedia: Fake news
Wikipedia: Filter bubble

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd
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Public sector ambitions in the platform economy

Ecosystems in the platform economy can accommodate all and any stakeholders, and the public sector among other actors can decide on the degree of ambition in the role they want to take. The most lightweight option would be to simply follow the field and allow market driven development of platforms proceed. In a more active mode the public sector would monitor and react to upcoming challenges and, for example, adjust taxation and regulation to match with the new landscape. Further on, a genuinely proactive role would entail active support for platforms and participation as a partner in platforms. The most ambitious option would be to aim to become a forerunner and contribute to strategic steering of the platform economy development. In this role the public sector could take on responsibilities in ecosystem facilitation but also show the way by embedding public services and internal processes to platforms.

In this signal post we introduce a few examples of the public sector taking ambitious and active part in the platform economy. These cases exemplify how visions are being turned into the new normal and how implementation steps have been taken in Finland and Estonia. The three topics covered are (1) platforms of open public data (serving among others further platform development), (2) provision of public services in platforms and (3) the visionary idea of citizenship as a platform (and for sale).

Open public data

Open public data means information produced or administered by a public organisation, and it is made available free of charge for private and commercial purposes alike, very much in line with the platform economy thinking. In Finland, metadata of public open data is collated in the Avoindata.fi service and then the European Data Portal. Although ‘work in progress’, many forerunner examples of novel open data initiatives are already running or under preparation. Often regulatory changes are needed to proceed towards open data effectively yet safely and securely.

Example: The Finnish Transport Agency maintains the NAP service (National Access Point), where since the beginning of 2018 all passenger transport service providers are obliged to open up their data on their services. The foundation for the system was laid in the innovative regulatory update, the Act on Transport Services, and accessing this data in the service, maintained by the transport authority, is expected to accelerate development of, for example, more comprehensive journey planners and advanced transport services.

Example: The government is proposing in Finland a new act on the secondary use of health and social data, intended to enter into force in July 2018.  It would pave the way for a centralised electronic licence service and a licensing authority for the secondary use of health and social data. Finland already has extensive high quality data resources that could be put to more flexible and secure use instead of the current situation of dispersed datasets in different information systems by different authorities. The new act aims to streamline data requests and access as well as improve data security and thus benefit research, innovation and business but also teaching, monitoring, statistics, official planning, etc.

Public services in platforms

Digitalisation, in general, has been widely adopted as a target in public service provision, but the platform economy provides an even wider opportunity to more efficient, more accessible and less bureaucratic services. Education and social services among others are already making first steps in employing platforms, and a platform of platforms could also be envisioned, enabling seamless information exchange and navigation between services. For example, imagine managing your academic milestones, entitlement to study grants or other social assistance as well as medical records or unemployment situation not using separate manual processes but interlinked platforms with one-stop-shop principle. For a first implementation step, platform synergies could be built along administrative branches, such as education, or along specific fields of activity, such as administrative processes linked to building, construction and environmental permits.

Example: Suomi.fi is an online service in Finland that functions as a portal to public services and information. Although not a fully developed platform of platforms, this online service already demonstrates the single point of access principle in action. Suomi.fi empowers the user to find and then access a multitude of public services as well as their information and authorisations. For example, you could use the service to check your vehicle registry information and, if necessary, communicate electronically with the authorities to update it.

Citizenship as a platform

One imaginative or even utopian idea is to bring not only public sector data or services into platforms but to provide and exercise citizenship as a platform. Ultimately this would mean that an individual could choose their preferred digital citizenship platform and thus be, for example, entitled to public services and subject to taxation according to this choice. Citizenship as a digital platform would allow individual value-based decisions on citizenship rather than based on criteria such as country of birth. While the full concept remains theoretical, the first partial applications are running.

Example: E-Residency is a government issued digital identity launched by the Republic of Estonia in late 2014. It allows entrepreneurs from anywhere around the world to set up and run a location independent business but does not entail, for example, tax residency or citizenship rights to reside in Estonia. This legal and technical platform is the first of its kind, and the digitally accessible user benefits include company registrations, document signing, online banking, etc. The system also contributes to more transparent financial footprint through monitoring of digital trails. Between the launch and February 2018, over 33 000 applicants from 154 countries have established over 5 000 companies as e-Residents.

Selected articles and websites

Avoindata.fi − Open Data and interoperabilty tools
European Data Portal
Finnish Transport Agency: Service providers of passenger transport can now store data in the NAP service
Ministry of Finance: Open data: Opening up access to data for innovative use of information
Ministry of Social Affairs and Health: Secondary use of health and social data
Republic of Estonia: eResidency – Become an e-resident
Suomi.fi – information and services for your life events
Wikipedia: e-Residency of Estonia

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd
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Finland’s master plan for platform economy

A couple of weeks ago (October 2017) the Prime Minister’s Office, Ministry of Economic Affairs and Employment and Finnish Funding Agency for Innovation Tekes published the national roadmap for digital platform economy for Finland. The first half of the report paints the present picture of the platform economy as a global phenomenon and Finland’s position in it.  The second half drills into the national future aspirations for success and growth and introduces a vision and roadmap for Finland. Furthermore, an atlas of ten sector-specific roadmaps is presented and an action plan to fulfil the vision is outlined.

Top-down meets bottom-up

Finland is a pioneer in launching such a comprehensive national vision, roadmap and implementation plan for digital platform economy. Germany, Japan, Singapore and even the EU have touched upon the topic in their industrial or STI (science, technology and innovation) policies, but not with such focused dedication as Finland. The Finnish strategy is to harness platform economy as an enabling tool that has potential to generate growth for businesses as well as enhance productivity of the entire society. A key element of the vision is to develop national competitive edge out of the platform economy.

But why the choice of national and collective approach, when the leading platforms (from the US) have typically emerged as market-based business innovations? The Finnish initiative seems to embrace the platform economy as a wider phenomenon that covers the potential for value creation and capture not just for companies but for citizens and the state alike. Platform ecosystems therefore extend to all actors in the society, and governmental institutions can step up to take active part. According to the report, the foreseen role of public sector includes for example:

  • facilitating society-wide dialogue and aligned national vision
  • implementing a competitiveness partnership between public and private sectors
  • strengthening the development and business environment for platforms
  • developing the knowledge base, resources and tools
  • showing example by open public data and platforms launched by the public sector
  • other enabling support such as regulative measures.

In short, the Finnish hypothesis for how to accelerate and benefit from the platform economy is to activate both the bottom-up (innovators, businesses, individuals, etc.) and top-down (governments, authorities, regulators, etc.) stakeholders. No getting stuck in the chicken-and-egg dilemma, but getting started on all levels and in a nationwide public-private-partnership.

Other interesting messages

Strengthening of the knowledge base and education to support skills in the platform economy has received a lot of attention in the Finnish roadmap report. This covers both formal education as well as further training along the career path. What is especially highlighted is software design skills, but what about entrepreneurial mindset, data-driven innovativeness and cross-sectoral service thinking?

The value of data and the vast potential for its usage is also emphasized in the report. Data economy as a concept is being mentioned, and especially the role of the public sector is explored in terms of developing rules, providing common technical specifications as well as showing the way with public data resources.

Selected articles and websites

National roadmap report: Digitaalisen alustatalouden tiekartasto
Videos from the launching event (October 23, 2017): Suomi ja tekoäly alustatalouden aikakaudella
Further information: Suomi ja tekoäly alustatalouden aikakaudella

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd
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Platforms and blockchain to bring on beneficial disruption to taxation

Digitalisation and platform economy are usually perceived as a challenge to taxation as it is difficult to monitor and enforce taxation in the digital and global economy. New rules are needed for deciding which activities are taxable and which are not in the in sharing, collaborative and platform economies. A recent US study points out that platform businesses such as Uber and Airbnb have an impact on all three of the major categories of revenue sources: consumption taxes, income taxes and property taxes. The situation is especially relevant for Nordic countries, where the tradition of a strong tax base has been the precondition for an affluent society. The main goal is to develop taxation so that the platform economy can strive while ensuring sufficient tax revenue without compromising innovativeness.

The platform economy could, however, be the solution to these new challenges. If we have a more comprehensive look at taxation, expanding from acute challenges to long-term system-level opportunities, platforms together with blockchain and artificial intelligence technologies could help reform and improve taxation systems.

Why is this important?

Tax authorities around the world are urgently trying to find short-term and long-term fixes to the challenges linked to digitalisation and platforms. The sharing economy is one of the areas, where heated debates have accompanied the introduction of new tax measures (see e.g. Finland, France, Sweden, the US or Australia). Approaches vary from exempting small-scale peer-to-peer activities from taxes to treating gig workers as business owners or considering ride-sourcing equal to taxi travel. The importance of the issue is put into the scale in a study by PwC, estimating the value of transactions in Finland’s collaborative market in 2016 to over 100 million euros.

The European Union (EU) has been active in surveying tax challenges in the digital economy and collaborative economy. Counter measures are being designed and implemented by the Member States respectively, but joint actions and strategies on a European level and globally are also needed to ensure fair operating environment. The EU agenda stresses that all economic operators, including those in collaborative economy, are subject to taxation either according to personal income, corporate income or value added tax rules.

While the authorities are baffled, so are the individual users and producers of platforms. We are currently in a paradoxical situation, where online platforms rely on digitalisation and automation, yet the related tax procedures, deductions and declarations are largely a manual and messy burden.

Things to keep an eye on

The responses from tax authorities do not, and should not, limit to quick fixes within current tax schemes but also explore long-term considerations on principles of taxation and novel means to implement them. Examples of progressive ideas include the suggestion of a specific tax on digital economy and taxation of platforms based on bandwidth or other activity measures such as number of users, flow of data, computational capacity, electricity use or number of advertisers. It has also been proposed that tax rates should differentiate according to the origin of revenues to better steer platform-based business: a different tax burden for revenues generated by one-time access and another tax rate for revenues generated by data exploitation.

Curiously enough, the challenge could be turned into the solution, as the platform economy especially together with blockchain and artificial intelligence technologies could provide the means to more efficient future schemes of taxation. One key problem is that information of and data from platforms does not reach tax authorities. By employing blockchain and distributed ledger it would be possible to remove the need for any intermediary and improve transparency and confidentiality. For example, blockchain applied to payroll would enable removal of businesses as a middle man and allow automatic tax collection using smart contracts. And having data in distributed ledgers would enable analysis of that data for monitoring of tax compliance and horizontal communication between authorities among other things. In fact, blockchain has been argued to provide solutions from digitalisation challenges ranging from anonymity and lack of paper trail to tax havens.

Another forward-looking idea to taxation from the world programmable economy domain involves smart contracts, cryptocurrencies and programmable money, such as Bitcoin or ether by Ethereum. These are currently perceived as a source of trouble to tax authorities, but what if they were soon to be the favoured choice and solution promoted by the state as an active party? This would mean tax authorities having access to the information on payments, on which employers would be obliged to report. Authorities could thus stay on-track in real-time even when the banking and currency system grows more and more decentralised. Furthermore, even national tax planning and writing could be transformed using artificial intelligence and machine learning in time.

Selected articles and websites

Australian Taxation office: Providing taxi travel services through ride-sourcing and your tax obligations
Australian Taxation office: The sharing economy and tax
EUobserver: Nordic tax collectors set sights on new economy
European Commission: A European agenda for the collaborative economy and supporting analysis
European Parliament: Tax Challenges in the Digital Economy
France Stratégie: Taxation and the digital economy: A survey of theoretical models
IBM: Blockchain: Tackling Tax Evasion in a Digital Economy
Institute on Taxation & Economic Policy (ITEP): Taxes and the On-Demand Economy
Kathleen Delaney Thomas, University of North Carolina Law School: Taxing the Gig Economy
OECD: Addressing the Tax Challenges of the Digital Economy
PWC: How blockchain technology could improve the tax system
Sitra: Digitalisation and the future of taxation
Sky Republic: Automating & Assuring Trust Using Enterprise Blockchain in the Era of the Programmable Economy
Skatteverket: Delningsekonomi – Kartläggning och analys av delningsekonomins påverkan på skattesystemet
TEM: Jakamistalous Suomessa 2016 – Nykytila ja kasvunäkymät (Collaborative Economy in Finland –Current State and Outlook)
The Financial: Artificial Intelligence to transform tax world
Verohallinto: Jakamistalous
Wikipedia: Bitcoin
Wikipedia: Ethereum
WU & NET Team: Blockchain: Taxation and Regulatory Challenges and Opportunities, Background note

Heidi Auvinen

Senior Scientist VTT Technical Research Centre of Finland Ltd
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Digital activism

Internet, platforms and digital technologies offer new ways of spreading the message and organising action for different cause-driven movements and citizen activism. This digital activism is not limited to using platforms to support existing forms of activism, but also takes advantage of the new opportunities platforms give for distributing value and providing access for information.

Why is this important?

The clear benefit of platforms for activism is new tools for communicating, deliberating, organising and connecting. Platforms such as Enspiral support a collaborative culture, constructive deliberation and collective decision making. They pool together resources such as money, time and skills to promote a jointly agreed upon set of projects. There are also platforms aimed at explaining obscure policies or laws or doing the increasingly important fact-checking.

In addition to tools, there is a quieter form of digital activism, one aimed at changing societal structures of access of information and distribution of value. Projects building ad hoc digital networks or internet access points aim to circumvent restrictions on the access to information. Platform cooperatives aim to reshape the way value is distributed within the system. In general, the aim is to improve the possibilities of those that are respressed or silenced via digital cencorship, or left out in the winner-takes-all forms of digital economy.

Things to keep an eye on

Digital activism suffers from so called “clicktivism”, where people are eager to support a cause if it just means clicking a button. Then when nothing changes, people lose their faith also in other forms of activism. Therefore digital activism needs also “off-line” activism. At best, digital activism can support other forms of activism, at worst it can undermine them.

There are also interesting examples of what can emerge out of the interface between the physical and digital in the age of smart phones and ubiquitous connectivity. One such example is the “I’m being arrested” app, which is a panic button for demonstrators to let a preselected group of people know that they are in trouble. Using location aware and camera equipped smartphones provides new tools for ensuring transparency and fair treatment.

On the flipside, digital activism raises also questions about ethics and responsibilities. Whistleblowing and the leaking of classified information may be a necessary alarm call in some cases, and in others it may just do more harm through unintended side effects. It is worth noting where the activism rises and what are its underlying intentions. There is also the question of drawing a line between civil disobedience, mischief “for the lolz” and outright criminal activity.

A potential transformation may happen  through the adoption of the tools for collective decision making and deliberation, as they find their way increasingly to more conventional arenas of decision making. It is interesting to see if they change the forms of governance.

Selected articles and websites

How a new wave of digital activists is changing society
Digital and Online Activism
Flex your political activist muscles with these resources
Mobile Justice (Team Human podcast with Jason van Anden)
Enspiral – more people working on stuff that matters
Loomio – making decisions together

See also our signal on persuasive computing

Mikko Dufva

Research Scientist VTT Technical Research Centre of Finland Ltd
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e-Government

New technologies such as cloud computing, virtual collaboration tools, and ubiquotous smart mobile devices are enabling new forms of public debate and policy making. At the same time, more data is collected, and it is becoming more open and accessible. Active citizens, NGOs and grassroot movements catalysed by social media are challenging the existing societal structures. These developments create both opportunities and challenges for government.

Why is this important?

Governments can use platforms to foster the growth of specific industries by e.g. ensuring open access to all publicly funded data and providing crowdfunding and other platforms for companies. At the same time, platforms challenge the way governments to work by enabling new types of decision making, suited for a truly distributed and self-organising communities. Also, governments have to cope with the impacts of current big platform players, who disrupt existing industries and challenge existing regulation.

Things to keep an eye on

Estonia is the example to keep an eye on when it comes to the digitalization of different government activities; it provides e-residency and has solved the problem of Uber and taxation. Blockchain could offer interesting solutions for “hacking the society”, starting from secure healthcare records and going on to making basic income a platform. Data privacy, access and ownership are key issues to keep in mind.

Selected articles and websites

Government as Platform
These Online Platforms Make Direct Democracy Possible
Open Government Platform – OGPL To Promote Transparency And Citizen Engagement
A federated architecture – choose and combine the tools you need for your democratic process

Mikko Dufva

Research Scientist VTT Technical Research Centre of Finland Ltd
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