Serving workers in the gig economy – by Nick Grossman (my detailed notes)

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Nick Grossman works in the investment team of Union Square Ventures. USV are known to be heavily investment thesis driven and quite open as to what that thesis is.

In addition to his investing efforts, Nick leads USV’s efforts on public policy and regulatory issues that impact open innovation and the health of the web.

Previously, he led an incubator for technology & media businesses at OpenPlans, which, among other things, pioneered the open311 web standard, founded the largest open source project in the public transit space, and built NYC’s real-time bus data API.

He’s clearly a capable human. His internet brain is also worth following.

My notes
The gig economy is a lot more than commodity-based low skilled services such as assembling Ikea furniture or transportation. It also includes high-end, specialised services such as graphic design, business consulting and medical services. It encompasses both work that looks more like a job (delivering food) and work that looks more like a micro-business (such as producing and selling craft goods). Think of a gig worker as a tiny, one-person company, responsible for creating his or her own personal HR department.

The size of this gig economy is much bigger than you would think. According to a recent study by Freelancers Union and Upwork, in 2015, nearly 54m Americans (34% of the population) participated in some form of freelance work. I think it’s safe to assume that it is also growing fast.

The size and growth of the gig economy has been driven by two macro forces. Firstly, web connectivity (particularly mobile) that enables more direct person to person transactions. Secondly, corporations trying to lessen reliance on full time workers and increase utilisation of contract workers (cost reasons).

Online work platforms have emerged as a result of these macro forces that have made work more accessible than ever, but in a different form. Many jobs from many sources, instead of one job from one long-term source. These online work platforms provide two primary services. That is, making markets, cultivating and sustaining both supply and demand. In addition to, establishing ‘trust and safety’ systems (such as escrow, reputation, insurance, and acceptable use policies) that ensure the smooth operation of the marketplace.

The natural extension of many jobs available from many services is an unbundling of the benefits and protections of full time employment.

Most public attention has been focused on the income potential of this new workforce rather than the true component parts of full time employment. At this point, it is up to the gig economy worker to take care of all the component parts of their previous full time employment existence. Most are unaware of all the component parts. Startups are beginning to emerge to service the unbundling of these component parts – clearly there are future investment/startup opportunities here. Below is a breakdown of each component part and examples of startups beginning to tackle the space.

Job discovery and scheduling
This is how one finds work and manages his or her time. The number of platforms that offer job-discovery is increasing, we are starting to see job-discovery platforms that sit across multiple platforms and take an active role in managing gig workers’ time and optimising for their experience and earnings. Examples includes Dispatcher and Opus for Work. Others, such as BlueCrew and WorkGenius, go so far as to act like full time employers (offering all the benefits and protections) and then surfacing on-demand jobs for their employees. This allows them to train and control their employees, something work platforms can’t do as they risk being reclassified as employees. I’m not sure I understand how they make this work given the thin unit economics on most platforms. I assume they can increase supply utilisation by being across multiples platforms.

Thinking this through, each vertical should really have its own horizontal platform like this. Design, is one vertical that is obvious for this type of service that could aggregate multiple platforms such as DesignCrowd, 99Designs, maybe Canva eventually, Freelancer, Envato, etc.

Startups in this area describe themselves as supply side platforms – optimising for yield. Supply side platforms seek to also bring price transparency across marketplaces. Scheduling is also an important component that can benefit from better management, particularly for higher skilled, less on-demand type work.

Finance and administration
This component covers managing money and administration tasks such as paying taxes and setting aside retirement savings. There’s a lot in this. Imagine moving from a predictable weekly income to a highly variable one. One company which sounds really cool is Even – the financial stability app. It seeks to learn your earning pattern and then sweeps excess earnings in busy weeks to a savings account and then offers you a small interest-free loan in the slower weeks. Users pay a flat $3/week for the service. This removes the excessive overdraft fees of banks and fees of payday loans.

There are also a number of administrative services emerging to help track income and work-related expenses (like tracking miles on a car). These include Hurdlr and SherpaShare.

Benefits and insurance
This component covers everything from healthcare to worker’s comp to retirement. How can a gig economy worker take sick leave? This is the major area of disconnect between labor laws and the structure of the gig economy. New (insurance perhaps) products/startups need to enter this space.

Identity and reputation
Every worker in the gig economy is a mini enterprise. They need a way to market their reputation and identity to prospective customers. But this is actually not just for the purposes of attracting new customers. The data stream of their work history and performance that is being created could be used elsewhere. For example, applying for a home loan.

At the moment, most data generated by gig economy workers is treated by default as property of the online work platform rather than property of the worker. This is a problem. For example, a seller who has built up a reputation on eBay can’t port that over to start selling on Etsy.

Thankfully, there are some worker-oriented startups exploring ways to draw data into the hands of workers. These include Karma, Traity, Opus.Me and Checkr.

Regulation could require this data to be opened up. Similar to the SEC-mandated disclosures for the stock market.

Community and organising
This is the modern version of the water cooler and the union hall. The open question here is will gig workers be able to build community and organise despite the fact that they rarely share the same physical location. It will be interesting to see how this area plays out.

Education and training
The issue for online work platforms is that if they provide detailed training and work guidance it can expose them to having to reclassify their workers. The key issue for worker classification is the extent of control exerted over them.

This presents an opportunity to offer training (or peer-to-peer learning environments) in ways that online work platforms cannot.

Facilities and equipment
This component is about rethinking what it means to be ‘in the office’. There are a number of exciting developments here. From obvious ones such as micro-leasing of cars (Breeze) to less obvious ones such as serving the need for physical space or the traditional ‘break’ room (ReCharge). ReCharge’s tagline is ’24/7 on-demand breaks within 30 seconds. Finally, a place in the city to get back to 100%’.

As can be seen, there is a large growing population of gig workers (at least 54m in the US alone) that need help as a result of the unbundling of full time employment. New services are emerging to support these workers in the gig economy, providing many of the benefits and protections previously attached to employment. But there is a long way to go. And therein lies the opportunity for startups and investment to enter this new worker support ecosystem.

I hope you enjoyed my detailed notes on Serving workers in the gig economy – by Nick Grossman and Elizabeth Woyke. It’s well worth a read.

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