Decoding the new economy

One of the paradoxes of the modern tech industry is that while its leaders preach openness and collaboration, their own businesses are mysterious unaccountable black boxes.

This website has often looked at how the Silicon Valley business model leaves users and partners exposed to arbitrary enforcement of vague policies and indifferent customer service.

A good example of the black box business model is eBay’s major security breach where it appears millions of users have had their personal and banking details compromised. Instead of informing customers immediately, the company’s management hid the problem and hoped stonewalling inquiries would make the problem go away.

Lacking accountability

In the black box business model, not being accountable is the key – we see it with Amazon’s bullying of book publishers, Google’s high handed identity policies and Facebook’s puritan censorship.

Those high handed attitudes to customers’ and users’ rights is born out of arrogance; all of these company’s managements, and the corporate bureaucrats who enforce the policies, believe their hundred billion dollar businesses are untouchable.

Such arrogance might though be ill-founded as each of these businesses is less than twenty years old and, while they themselves have deeply disrupted existing industry models, there is no reason why their own market dominance and huge cash flows can’t be usurped by new technologies or challengers.

In age where trust is the greatest currency, hiding beyond a block box of algorithms and impassive customer support may not turn out to be a successful management strategy.

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There’s a fundamental flaw in the way the tech industry does business, that weakness could be what ultimately kills many of today’s new media, web and social media services.

AirBnB, an online home share service, is one of the darlings of the booming Silicon Valley start up sector, having recently being valued at $1.2 billion after a successful capital raising.

Like most Web 2.0 and social media businesses, AirBnB’s advantage is in the low operating costs where customer support is left to the service’s peer review and social media communities while AirBnB pockets a commission for simply making the connection between the landlord and tenant.

The flaws in this “all care, no responsibility” model became apparent last month when a lady posted a description of her house being ransacked by an errant housesitter she found through AirBnB.

AirBnB’s management responded to the article with assurances they were helping and working with their affected customer, claims which were promptly contradicted by the original victim.

To make matters worse, certain prominent members of the Silicon Valley investment and blogging communities alluded she was lying or was “batshit crazy.” Now that other stories of bad AirBnB tenants are appearing, the view this is simply the untrustworthy word of a deranged customer affected by their first such incident is looking hollow.

Failing to deal with customer problems is not unique to AirBnB, hiding behind impenetrable layers of “support” backed up by user hostile terms and conditions is familiar to anyone who has had to deal with an online service gone wrong.

Last month Thomas Monopoly found he was locked out of his Google account and had it not been for the intervention of a senior Google employee, Thomas’ problem would probably still be stuck in an endless feedback loop.

Exactly the same problem has been encountered thousands of times by other users of web mail, social media, online auction and matchmaking sites.

Many of the people running these services retort their products are free so users get the support the support they pay for – an argument conveniently overlooking that most “free” web services are based around selling customer data – but even this does not justify delivering the basic services users have been lead to expect, regardless of what a 5,000 word user agreement states.

Today’s tech startups, and many of their big established cousins in the IT industry, have the idea that customer support is an optional extra and an expense to minimised or outsourced.

In this respect they are not too far removed from dinosaur car manufacturers or some of today’s less dynamic retailers offering little in the way of customer service or after sales support.

That way of working has died as consumers have been able to go online to vent their dissatisfaction, strangely today’s hot tech start ups seem to have missed this aspect of the revolution they have helped start.

Ignoring consumer problems is exactly what’s bringing traditional businesses unstuck in the online world. The funny thing is it might bring many of the online business undone as well.