Platform Economics
Why platforms that connect buyers and sellers scale exponentially while traditional businesses scale linearly — and why year one always looks like failure.
A platform is where independent parties transact. Uber connects drivers and passengers. YouTube connects creators and viewers. Stripe connects merchants and customers. Platforms take a cut. Platform economics are unusual. Value isn't proportional to cost. Uber didn't hire drivers. YouTube didn't hire creators. Stripe didn't hire merchants. Value came from others' activity. Scaling defies intuition. Costs grow linearly with infrastructure. Revenue grows with the square of participants. Two drivers and two passengers create one transaction. 200 of each create 40,000. Platforms only work at critical mass. Five drivers is worthless. 5,000 becomes essential. Until critical mass, you spend without revenue.
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