Does a “hub firm” need to be a firm?

Back in the first week of this course, we talked about the hub economy. A recent article about one of Tesla’s embranchments, namely in solar energy, got me re-thinking about this topic. If you want to know why, feel free to read along 🙂

A quick refresher: Iansiti and Lakhani (2017) talked about digital superpowers that capture a disproportionate and growing share of the value being created in the global economy. They refer to these superpowers as “hub firms”. Examples are Alibaba, Alphabet/Google, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent. These firms occupy central positions within industries that allow them to create and control focal points in the networks of our economies. Once a firm becomes a “hub”, there is (almost) no going back – it is essentially a vicious circle. The bigger such firms get (in terms of revenue, workforce, connections, you name it), the more established their position in the hub economy becomes. This vicious circle is also the one of three roots for the emergence of economic hubs. Note that Iansiti and Lakhani use the word “positive feedback loops” to describe the same phenomenon, which is originally posited by the physicist Albert-László Barabási. The other two roots are Moore’s Law (check Dennis’s post if you are interested in a different perspective here on, I’ll put the link at the end of the article) and connectivity (i.e. network effects).

So far, so clear. Then I stumbled on a recent article discussing Tesla solar power (up until then I didn’t even know they were in the solar power business as well but I guess I shouldn’t be shocked). In the article, Elon Musk explains how Tesla can afford to offer its solar power way below average market prices. With “way below” I’m not exaggerating; Tesla charges $1.49/watt for their solar energy across the USA, whereas competitors’ offer is $2.19 on average. Meaning that Tesla’s price is not even 70% of that of their adversaries. How can Tesla do this? Quite simple actually. They don’t have to invest heavily in marketing/promotions, or hardly any at all. And the reason behind this is Musk himself. With casually mentioning Tesla’s solar program in a tweet every now and then, sales are more or less secured. It may sound absurd but it’s the reality.

When I read this, I immediately thought: Hmm okay.. so basically Elon Musk is a ‘human hub’? Of course, Moore’s Law doesn’t hold for Musk as nobody is constantly trying to put more transistors in every cell of his body to improve performance (as least not that we know of). However, the sole fact that he is active on social media lets him reap the fruits of network effects. Moreover, every follower Musk gets strengthens his already powerful position and that of the companies he owns. This causes Musk to indirectly capture a humongous market share in different sectors since he owns various businesses not only in electric power (SpaceX for example).

Maybe not entirely fitting the original definition of Iansiti and Lakhani, I would say that Elon Musk is a hub, in human form at least – one that can’t easily be stopped if that’s possible at all. Do you agree that Musk is a sort of human hub? If so, is there a need to restate the original definition, and are there more differences between a hub firm and a human hub that I didn’t discuss? If not, let me know why not and how you view Musk’s influential position. Bonus: If you agree, who would you consider a human hub besides Musk?

Let me know in the comments below!

Links/sources:

• Dennis’s post on Moore’s Law – https://digitalstrategy.rsm.nl//2020/09/13/moores-law-from-a-different-perspective/;
• Iansiti and Lakhani (2017) – https://hbr.org/2017/09/managing-our-hub-economy (use your browser in incognito mode or clear your cache to avoid the ‘you have zero articles left’ issue on the HBR website);
• Tesla solar power article (2020) – https://cleantechnica.com/2020/09/12/elon-musk-explains-why-tesla-solar-power-is-so-cheap-cleantechnica-exclusive/

Hope you enjoyed the read 🙂

Youri