Have you ever opened an app you used to love, only to find it cluttered with ads, slower, more expensive, and somehow just… worse? It’s frustrating, right? That nagging feeling that something fundamental has shifted for the worse isn’t just in your head. It’s part of a much bigger pattern that’s quietly undermining the very system many of us rely on for innovation and progress.
In recent years, this phenomenon has earned a rather blunt but fitting name: enshittification. It’s the process where digital platforms—and increasingly other businesses—start strong, hook everyone in, then systematically degrade to squeeze out more profit at everyone’s expense. And here’s the kicker: it’s not just annoying for users. In the long run, it poses a real threat to the moral foundation of capitalism itself.
Understanding the Enshittification Cycle
The pattern usually follows three predictable stages. First, the company pours resources into making the product genuinely great for users. Think generous free tiers, seamless experiences, and real value that draws crowds and crushes competitors. This phase feels magical—it’s why so many of us got hooked in the first place.
Once users are locked in and alternatives fade away, the focus shifts. The platform starts favoring business partners or advertisers over those original users. Features get tweaked to boost revenue streams, even if it means slightly annoying the people who built the network in the first place. Margins improve, everyone high-fives in boardrooms, and the share price climbs.
Then comes the final, ugliest stage. With nowhere else to go, both users and partners become fair game. Fees rise, quality drops, ads invade every corner, and the entire experience turns hostile. The company extracts maximum short-term value until the whole thing collapses under its own weight. I’ve watched this play out more times than I’d like, and each time it leaves me wondering: how did we let it get this bad?
Platforms don’t decay by accident—they choose it when the easy money runs dry and extraction looks simpler than innovation.
That’s the core insight. It’s not inevitable economics; it’s a series of deliberate choices enabled by weak competition and high switching costs.
Real-World Examples That Hit Close to Home
Take online marketplaces. Early on, they revolutionized how we buy and sell by offering vast selection and low prices. Sellers flocked there because buyers were already showing up. But dominance breeds complacency. Search results fill with paid promotions, fees climb, and the platform starts charging for basic visibility. Customers waste time scrolling past junk, sellers pay more for less traffic, and the original promise—finding the best deal quickly—evaporates.
Streaming services tell a similar story. They launched with huge libraries at bargain prices to wipe out old video rental models. Once subscribers were committed and competitors gone, prices crept up while features like ad-free viewing became premium add-ons. The content you once enjoyed without interruption now comes with commercials unless you pay extra. It’s the same service, just more expensive and less pleasant.
- Initial hook: Massive value to attract and retain users
- Middle shift: Monetization ramps up at users’ expense
- Endgame: Everyone gets squeezed until loyalty breaks
Even traditional businesses aren’t immune. Iconic brands with decades of goodwill sometimes fall into the same trap when new owners prioritize quick returns over long-term stewardship. Production moves offshore, quality slips, prices rise, and loyal customers feel betrayed. The reputation that took generations to build gets harvested in a few short years.
Why This Matters for Investors
Short-term, the extraction phase can look brilliant. Profit margins swell, earnings beat expectations, and stock prices soar. Traders love it. But long-term investors should see the red flags waving. When growth comes from squeezing rather than creating, the foundation weakens. Trust erodes, churn rises, regulation looms, and eventually, the moat becomes a cage that traps the company too.
In my view, the smartest money flows toward businesses that resist this temptation. Companies that stubbornly protect customer value—even when it means leaving some profit on the table—tend to compound better over decades. They understand that trust is the scarcest resource in business.
Contrast that with platforms sitting on massive margins while innovating less and extracting more. High profitability today often masks tomorrow’s trouble. When the pie stops growing and only slicing gets finer, eventually there’s nothing left worth eating.
The Broader Threat to Free Markets
Here’s where it gets serious. Capitalism thrives when competition forces companies to deliver better value. But enshittification flips that script. Instead of earning loyalty through excellence, dominant players rely on lock-in, network effects, and barriers to exit. Real competition dies, and with it, the self-correcting mechanism that makes markets morally defensible.
Critics of capitalism often point to corporate greed as proof the system is broken. Usually, those claims can be brushed off as rhetoric. But when platforms act like digital toll booths—inserting themselves between buyers and sellers to skim without adding meaningful value—it’s harder to dismiss. The rot becomes visible, and public trust in markets erodes.
If businesses reward extraction over creation, they hand ammunition to those who argue the whole system needs replacing.
That’s not hyperbole. Persistent enshittification invites heavier regulation, antitrust action, and political backlash. The irony? The same forces that decry government overreach often enable the monopolies that make intervention seem necessary.
Spotting the Warning Signs Early
As investors or consumers, learning to recognize the early stages can save a lot of pain. Look for companies where user experience starts declining just as profits surge. Watch for rising fees without corresponding improvements, or features locked behind paywalls that used to be standard.
- Sudden focus on advertising revenue over core product quality
- Customer complaints dismissed as “edge cases” while margins expand
- Executive compensation tied heavily to short-term earnings growth
- Declining innovation paired with increasing lock-in tactics
- Competitors struggling not because of better offerings, but because of barriers to entry
When several of these appear together, the extraction phase has likely begun. The business might still look healthy on paper, but the underlying health is failing.
Hope Lies in the Builders, Not the Extractors
Fortunately, not every company follows this path. Some leaders understand that sustainable success comes from relentlessly adding value rather than harvesting it. They keep prices fair, maintain quality, and invest in improvements even when short-term profits suffer. These are the businesses worth betting on.
Perhaps the most encouraging part is that enshittification isn’t inevitable. Competition, smart regulation, user empowerment through better portability, and investor pressure can reverse the trend. When enough people—consumers, workers, shareholders—demand better, companies adapt or disappear.
I’ve always believed capitalism works best when it rewards genuine creation over clever extraction. The moment we start funding the extractors instead of the builders, we risk losing the moral high ground that makes the system worth defending.
So next time an app or service you rely on starts feeling worse, ask yourself: is this just a glitch, or the beginning of something bigger? Recognizing the pattern is the first step toward pushing back. And if enough of us do, maybe we can keep the rot from spreading further.
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