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Iran Archives - FreedomLab

Perils of the review economy

What happened?

Dutch Television show RamBam demonstrated how easy it is to fake reviews on dining platform The Fork and it revealed how this platform manipulates reviews to make all restaurants look better than they actually are. These findings highlight some of the vulnerabilities of the digital economy which relies so heavily on reviews provided by customers. Other platforms, including Airbnb, have also been accused of inflating suppliers’ ratings to boost sales and virtually review systems can be manipulated easily. That is, suppliers can write fake reviews for their own services and their competitors, incentivize consumers to write positive reviews and hire fake-review services that sell 5-star ratings.

What does this mean?

In the digital economy, to gain consumer trust, review systems tend to replace costly, high-friction, features of the old economy. Food critics, travel guides, taxi companies and hotel chains used to provide consumers with guidance and reassurance. Critics wrote (supposedly) reliable reviews of (a limited number) of restaurants and taxi companies tried to makesure their cab drivers were well behaved and knowledgeable. Today’s platforms leverage assets without owning them (e.g. restaurants and bedrooms) and command workers without actually knowing or employing them. Their review systems thus replace the expensive means of control that were used by businesses in the past (hotel managers, workers training). Yet, when their review systems fail to remain credible, their business model largely falls apart.

What’s next?

Independent and high quality review services are hard to come by. A platform like The Fork, owned by Tripadvisor, thrives on reservations made through the platform and this presents an incentive to inflate ratings. Roughly the same goes for platforms such as Booking, Airbnb and Uber; while they have good reasons to maintain reliable reviews, all too critical reviews aren’t good for their business. One solution may come in the form of truly independent review platforms whose business model is solely based on the reliability and quality of reviews (e.g. Google presents itself as such). Another option could come in the form of new brands that, similar to the old economy, build a reputation of high quality services on top of the digital economy. Such brands could represent high-quality Airbnb accommodations or collectives of, otherwise, independent restaurants.

A “tit for tat” conflict between Iran and the U.S.

What happened?

The U.S and Iran have triggered global uncertainty in recent months. Stock prices and oil prices have repeatedly been affected by violent incidents. A few months ago, an Iranian-supported drone attack on Saudi-Arabian oil facilities drove oil prices nearly 20% higher, whereas the U.S. assassiniation of Qassem Soleimani hit stock markets and oil prices too. as investors are spooked, many fear a war between the U.S. and Iran. However, this fear is based on wrongful assumptions about what drives conflict between these two countries.

What does this mean?

The U.S. and Iran are locked into a “tit for tat” conflict because both countries want to avoid a war at all costs. Most importantly, because they both know that the other does not want war, they can afford to escalate situations. Indeed, Iran cannot afford another conflict in its immediate region. The Iranian economy is weak and Iran has to focus on internal development as protests threaten the regime. In fact, Iran has been locked into conflicts since the Iranian Revolution of 1979 and a war with the largest military in the world is the last thing the Iranian regime could want. Meanwhile, the U.S is no longer dependent on energy from the Middle East and a war with one of the region’s strongest militaries is therefore a huge strategic mistake.

What’s next?

The conflict between the U.S. and Iran may spook investors, but it has created an illusion of uncertainty. Although it is likely that there will be more violent incidents, there will not be a conflict between the U.S. and Iran that destabilizes markets in the long term. Indeed, after recent violent incidents, stock and oil prices quickly bounced back every time.