When you think of the Mafia, you think of thugs, weapons and a good dose of violence.
When we talk about The Paypal Mafia, there is none of this. It is a term that has been coined and established over time to indicate the strategies of the founders of Paypal and the companies that have created after the sale in eBay.
Who are the actors of The Paypal Mafia
In particular, members who have become billionaires and serial investors are Peter Thiel, Elon Musk, Reid Hoffman, Luke Nosek, Ken Howery, and Keith Rabois.
They are mighty people in Silicon Valley and considered individuals capable of changing the fate of the companies they create or decide to finance.
According to Robert McNamee (longtime Silicon Valley investor) after the explosion of the Internet bubble in 2000, the Paypal boys had two brilliant insights: the first is that the web passed from a network of pages to a network of people (web 2.0), the second is that the technological limitations that had fragmented the Internet (bandwidth, processors, memory) were collapsing.
The union of these two concepts led to an obvious consequence for them: the ability to grow on a global scale at speed never seen before (Blitzscaling). They subscribed to a new form of liberalism, one that you could create any disruptive technology without paying the price.
This growth was so rapid that people didn't have time to adapt, only to follow the trend.
One of the principles was to eliminate any "friction" with the customer, primarily using a free model supported by advertising.
However, to be successful in the new concept of ads they also had to build systems of creating habits to increase attention, such as Facebook likes, notifications to get you back on the platform. For many, these habits have turned into a real addiction.
They also sensed the power of emotions, such as fear and anger that drove people to re-share content and make it viral.
The introduction of predictive behavior
In 2003 Google patented the concept of "predictive behavior," in practice they realized that accumulating all kinds of data about the user could begin to guess what he would do next, and the scheme was also valid for other people who had not given data but who could have similar behavior.
This technology is now common to all major platforms such as Facebook and Amazon.
To give a practical example, if a user, before a purchase, has made 200 steps, some concerning the object or the service and others that seem disconnected, companies can make sense of these steps and apply them on a large scale in order to understand (and thus influence) the behavior of those interested in that purchase.
Filter bubbles to strengthen your own beliefs
Combining these concepts with recommendation and filter bubbles (reinforcing pre-existing beliefs in people) creates a powerful weapon that they can sell to advertisers to push the product.
The problem is that no one has set any real limits either to the type of data collection or ever wondered if these practices have a legal basis.
Until the arrival of Lina Khan, author of an article published by Yale University called "Amazon's Antitrust Paradox," which became read and appreciated worldwide in a very short time.
In practice, her thesis overturns the concept that has dominated antitrust for decades, which was only to look at the price for the end customer: if the price were not artificially inflated, no antitrust action would be taken.
Khan, on the other hand, starts from another point of view: if the company's practices are predatory and aimed at destroying competition, this is enough to open an antitrust case.
In particular, if you look at Amazon's stock market valuation, it's so high because whoever buys it expects Amazon to sooner or later become a monopolist in that sector, and thus make huge profits.
What is the Silicon Valley Death Zone?
In Silicon Valley this behavior is known as the SV death zone, i.e., all companies that may be useful or potential competitors of Amazon, Facebook, Google, Apple are bought before they can become too big or go on the stock exchange.
The recent announcement of Facebook to join the platform Whatsapp, Instagram, and Messenger in reality according to some people would not be a technological maneuver, but a preventive defense to a possible antitrust action to dismember the colossus of Social Networks. Once this unified platform starts, the separation of businesses will become more difficult.
What would have accelerated these predatory behaviors?
The turning point would come from Facebook in 2007 when for fear of not reaching an adequate size compared to competitors (such as MySpace) decided to form a Growth Team, led by a physicist also experienced in marketing.
This team had only one task, only one obsession: to increase the community and in particular the metrics of the "monthly active users," which became the polar star of the company and an entire sector.
Everything else, such as privacy, indiscriminate use of user data, but especially the abuse of their psychological weaknesses, was overshadowed. It was just not the priority of Zuckerberg and his team.
The introduction of the "like" concept
At that time, functions such as people you probably know, the automatic invitation of friends in the address book, the tag in the photos and the famous "like" button were born.
Infinite scrolling, auto-play videos and opening to third-party apps, like the games that are at the heart of the Cambridge Analytics scandal.
In practice, Facebook became so dependent on its business model that it was unthinkable to think of changing it without affecting profits.
Will the end of mega platforms come from antitrust law?
Here we conclude that now in the U.S. is getting stronger: all mega platforms, including Facebook, Amazon, and Alphabet (Google) should be subject to antitrust and dismembered.
Facebook separated by Whatsapp and Instagram. Amazon by AWS and Whole Food. Google from Nest and Wymo.
Is Platform Neutrality the answer?
The logic should be that of "platform neutrality," advocated by Elizabeth Warren to allow all other companies to develop and grow while maintaining healthy competition.
America has set the course in the past for creating the first antitrust laws and fighting monopolies and oligopolies. It is now time to understand that the new trusts are digital and that they too must adapt and change, for the benefit of consumers but also of future innovators.