The Future Of Work — The Troubling Future Investors Are Betting On.
As the new year rolls around the corner, and as notable IPOs like AirBNB and DoorDash occur, it becomes especially salient, the robustness of the digital technology sector, and its function as one of the increasingly important kingpins of the future economy. I’ve had the luxury of time to deep-dive into what “star investors” at top Venture Capitalist firms like Andreessen Horowitz (a16z), Sequoia, Bessemer, Pear (and many others) are betting on, and decided to put my insights into this short piece on the troubling future that many investments are pointing towards.
Gig, Hustle, Passion
Let’s start by acknowledge the state of affairs the economy and the job market are in right now, starting with the “Gig Economy.” The term “Gig Economy” has been around for quite a while now, and is most frequently and strongly associated with Uber, amongst other tech companies / platforms. It can be summarized as an economy characterized by on-demand jobs (gigs) that can be taken up by a service provider who is available at the time. Supply meets demand over a marketplace platform to facilitate transactions in a “flexible” manner.
The selling point of such an employment structure was that with such flexibility and such direct access to jobs without the need for a middleman or organization, you can work as and when you like, and however much you like. But the downsides also quickly became obvious. Most notably, was the realization that the gig structure was an ingenious way for companies to offload business risk onto its employees, many of which are questionably classified as contractual workers under U.S. law. This means that workers for such gig platforms lose out on a host of worker protections / benefits such as paid sick leave, paid vacation days, health insurance (some companies now offer this), termination notice, and such. There’s virtually no obligation to pay for benefits that would otherwise be reasonably expected, such as 401k matching and health insurance.
For a contractual worker, one could assert that this arrangement makes sense (a case could likewise be made against it, but that would be its own article altogether), but the reality is that many people are working full-time on these platforms due to structural, employment deficiencies in the U.S.. Official reported numbers would have the percentage of workers on gig platforms like Uber and Lyft to be somewhere around 9%. It might seem low, but keep in mind that many Americans aren’t just using one particular app for at least 40 hours per week. Many Americans are now patching together gigs from a host of different platforms to earn their monthly income.
Furthermore, there are many risks that gig workers expose themselves too that are not immediately obvious when discussing only the financial impacts of such an economic model. Scandals are rife in the tech world (depending on what you term a “scandal”) — from extortionary rating systems, to assault and cross-the-line experiences. Professor of Sociology (UNC Chapel Hill) Alexandrea Ravenelle gave a fantastic, riveting talk about her foray in to the “hustle, gig” world involving ride-sharing and other apps including TaskRabbit at The Strand in 2019.
Supposed elites in the field of labor have pushed back on this. They acknowledge these arguments about the purportedly exploitative nature of the Gig Economy, but ultimately conclude that the Gig Economy is undeniably economically favorable for both parties as data points towards the fact that gig workers and freelancers earn an average income that is in fact slightly higher than non-gig workers. Economics Professor (Stanford Graduate School of Business) Paul Oyer delivers precisely this argument, as well as an employer’s perspective on this matter in this full-length lecture.
I think there are many things to be said about the Gig Economy. On one hand, you could argue that Gig platforms are great because they forge marketplaces where people who otherwise wouldn’t be able to find jobs can now do so. On the other hand, there is much room for this economic model to be exploited such that workers have to bear the market risk related to the supply of contracts / jobs, have no workplace benefits and protections, and essentially have zero social mobility and opportunities for job advancements due to the giggy nature of their work experience. What alternatives do gig workers have outside of these gig platforms remains unclear to me, but where one might be tempted to answer with “nothing,” I would counter-argue that it’s simply because the existence of these economically viable (to companies, at least) gig jobs have snuffed out alternatives — and this will be more apparent in other industries, such as design and media.
Hustle Economy
We have developed to a point where I don’t think the phrase “Gig Economy” does justice to what is going on anymore. Parallel developments in the corporate, as well as gig / freelancing world have made it such that you’re expected to be productive during almost every waking hour you have. With the existence of platforms (revenue generating, educational, professional, etc.) left and right, what excuse would you have to not be directly or indirectly earning something, or “hustling”? American productivity has exploded, but there hasn’t been much increase in job security or wages to show for it — everybody knows that. It’s also no coincidence that majority of new jobs created between 2005 and 2015 were “temporary jobs,” according to a study by Harvard and Princeton. Should this economic model proliferate further, it wouldn’t be a stretch to think that more and more Americans would derive an increasingly significant portion of their incomes from such gig platforms.
We’re in a Hustle Economy right now, and let’s pause to reflect on what that means. For a privileged sliver of American society — those who have the opportunity to graduate from a reputable college and go on to work in Big Tech, Big Data, Big Finance, Big Pharma, Big [something], they’d have a great time hustling. Hustling takes on very different connotations for this sliver of society than it does for the less privileged middle to lower-class, who’d hustle by offering higher amounts of more competitively priced services for longer periods of time, as opposed to investing in personal development, networking, and getting better professional opportunities.
These different methods of “hustle” are often conflated and simply poorly differentiated when discussing the merits of today’s gig marketplaces. a16z’s Li Jin is incredibly insightful and clear-headed in her discussions of investments and future predictions, and she’s best known for pioneering the idea of the “Passion Economy,” frequently discussing creation-driven marketplace platforms like Patreon, Substack, YouTube, TikTok, OnlyFans, and the like, in addition to other non-creation-driven platforms such as Instacart. Sure, if you’re a writer, or video producer, or artist, or sex worker who has a decent following, and are able to keep producing good content (nevermind that 90% of YouTubers hit a burnout at some point and don’t recover from it, or that content creators are periodically “killed” without warning due to algorithm changes, for example), then these platforms would surely work at providing some semblance of a secure income source, but what about the rest of “normal people,” who have, say, lost their job as a masseur due to economic blips or circumstantial mega-blips such as COVID-19?
Marketplaces
It’s definitely not my argument that top Venture Capitalists (VCs) are the cause of such troubling economic models. I think it’s a more viable argument that the existence of gig platforms to plug employment gaps is symptomatic of a broken labor structure. However, it is these marketplaces that continue to be of great interest to investors. Li Jin’s own investment company, Atelier, recently hedged its bets on Dumpling, what I would curtly describe as a variant of Instacart, but with more focus on “empowering workers.” Nevermind that their way of doing so (allowing workers be their own “personal shopping and delivery business” by giving them the ability to customize their default tip options and price-points) seems also to entail the lack of a baseline pay for their deliverymen, the fact that bright investors see a great promise in marketplaces with an empowerment-related messaging seems mildly encouraging at best.
And as investors continue to look for the marketplaces of the future to create and capture value by bridging supply and demand, it all seems to point towards a future America where the growing middle-class will find it the norm to be either a creator-entrepreneur, or be on a host of these marketplace platforms, patching jobs together to call the aggregate income their “middle-class, professional income”.
What Next?
To put things straight, I need to clarify that from the business and finance perspective, and even perhaps the tech perspective, this is the rational answer. It’s far from optimal, but it’s the rational course of development; it is obviously a rather terrible future. When you have broken economics, it is usually policy that has to step in to fix it. Looking back in history, something similar was going on in the early Industrial Revolution, and it was met with the Trade Union Movement. Perhaps, if positive developments are to happen in the future, it would be something to that effect — but that necessitates the ability for contractual workers to unionize, which isn’t a practical possibility in the U.S. due to labor laws.
I was recently discussing this future with a friend of mine — she thinks that policy that effectively reverses the effects of such “giggifying” will have to be put in place to ensure worker welfare and sustainable workforce development, but I’m not optimistic that by the time that happens, non-gig workers would still be able to compete economically with gig-workers who are able to effectively sell their soul to offer a better deal.
The COVID-19 pandemic has only served to accelerate and exemplify some of the effects discussed in this article. There is no better time to invest in solutions that would ensure a healthier, more sustainable future labor market and economy. It’s been a time and a half of mulling over this issue, and I’d love to have discussions and be of a resource to you if you’re interested.
Contact me at ryantjj@stanford.edu!
