Archive to PDF: This thread can be removed from Twitter at anytime.
Archive this thread to PDF, save and print. It is a premium feature and costs $5 per month.
Serious question I’m thinking about / doing research on: what circumstances cause consensus views about the nature of Aggregation Theory to fail?
It appears to me that people accept a uniform economic process is occurring in many industries, and sort of throw a blanket statement of “oh this is another aggregation theory example.” But it’s not clear to me that the process is uniform aside from the consumer UI commonality.
In several (possibly all) of the industries where people cite success, there are very specific positive factors driving the underlying businesses which are negatively impacted by an aggregator attempt.
So you basically have a distribution and sales network coming in with huge market power and large rakes, but generally the industry that is being skimmed from either (a) has had a secular tailwind that made that economically sustainable or (b) industry is a deficit spending model
But as some have pointed out on here, in many other industries, the capital base and margins do not *and cannot* exist to support the high rakes of an aggregator, yet investors have become comfortable basically assuming the entire supply chain will just suck it up and deal.
If the underlying industry is a scale oligopoly where services within the class are effectively commoditized (flights, hotels, cabs), that’s one thing. But there seems to be an assumption that nearly any industry can be forced into a similar commoditized product offering.
Is there really no breaking point when the costs leveraged by the aggregator on the suppliers is too great, resulting in worse offerings on the platform and the loss of scale captive consumers? People seem to think so.
I’m trying to keep this deliberately abstract as a thought exercise on Ag Theory, though obviously I am coming from bottoms up research Q of ok, are ticketing models, carvana type models, Zillow, delivery, etc all actually substantially similar?
Or are we suffering from a sort of availability and recency bias because these form factors seem new and more importantly I think, the returns in the travel, etc stuff have been epic and everyone wants to own “the next one”?
I’m going through each industry and frankly I think there are clearly some major differences in underlying value chains that will end very differently industry to industry through a cycle or two.
Also appears there is a heavy psychological anchoring to certain form factors where I don’t think it’s as robust as people thing to make certain assumptions.
For example, imagine 20 years ago you tell someone what the iPhone will be capable of now, and then tell them “but people really don’t like switching which app they’re using.” It would have sounded insane. There’s no real friction.
You know what the single largest friction in the modern digital ecosystem is? The 3-4 minutes it takes to set up a new account on and app and input your credit card info. People HATE doing it (that’s what their behavioral data shows, not what people will necessarily say)
But do we really think that friction won’t get ironed out by one of the bajillion fintech cos, Apple Pay, etc.? I think it needs to be seriously considered what happens to platforms if that friction gets eliminated. Consumers are not loyal, they’re lazy.
Anyway, would appreciate thoughts. I don’t have any fixed opinions here but think it’s an under analyzed subject despite proliferation of stratechery stuff Bc people judge concepts based on trailing ~5yr equity returns, a recurring source of markets risk historically cc @jfc_3_
There are multiple ways to embed @SuperMugatu's unrolled
1. Direct link
2. Use iframe
Sharing is caring 😍
Like this thread of @SuperMugatu?
it with your friends & followers.
Love Thread Readers? Upgrade to premium to unlock all features
A whole new way to explore your interests. Convert your Thread to PDF,
save and print. Subscribe to interesting authors and be notified when new unroll is
available. Auto publish your threads on Medium and WordPress websites.