Friday, September 05, 2014

Fungible Work Will Always Become Low-Paid Work

Many advocates of the sharing economy love to extoll its ability to enable a new kind of work.  The dream is that rather than slaving away at 9-to-5 jobs, people can earn a living by driving for Uber fares, completing TaskRabbit gigs, making Diner Dash deliveries, and who knows what else.

There's no doubt that the rise of the sharing economy has been a boon for people looking for micro-gigs.  But the fundamental issue is that the same characteristics that allow collaborative consumption services to scale are the very ones that make that work into a low-value commodity.

In a recent blog post, venture capitalist (and old friend) Josh Breinlinger of SigmaWest described the most valuable types of marketplaces as "Supplier Picks":
"A typical workflow: Buyer posts job.  Approved suppliers see available jobs.  Supplier claims job.

These marketplaces require the highest degree of job standardization and quality control by the marketplace.

The key emphasis here is on maintaining an active and curated pool of suppliers so all jobs are done quickly and effectively.

I think whenever possible, you should try to be a supplier-picks marketplace.  They have the highest potential growth rates and can have the best overall user experience (highly correlated with low effort and high quality)."
The power of the Supplier Picks model is that it uses job standardization to make it easy for suppliers and buyers to transact.  In other words, it maximizes fungibility.

Yet once work is fungible, a marketplace tends to remorselessly funnel demand to the lowest-cost suppliers.  Once CRM and automation made call centers and customer service fungible, companies moved these functions offshore to lower-cost countries.  Increasing market efficiency is a wonderful thing, unless you're a redundant worker, or an unemployed lawyer with crushing law school debt.

I'm no Barbara Ehrenreich; I have no illusions that it's possible to put the genie back in the bottle.  Making work fungible creates value--the losses incurred by the laid off workers are far exceeded by the smaller benefits that accrue to a vastly larger number of consumers.

It hurts to see a small-town widget factory shut down, costing that town hundreds of jobs.  But moving that manufacturing to China allowed orders of magnitude more consumers to save 20% on their widgets.  If I lose a $100,000 job, but 1 million consumers each save $1 per year, value has been created, though it will be little comfort to me and my family.

Instead, the warning I'm sounding is for suppliers to understand the Faustian bargain they make when they turn to the Sharing Economy to make a living.  If you can do it, so can the other 1,000 people like you in your town.  Over time, being a perfectly replaceable cog in a machine isn't a good bet, no matter how shiny the machine.

Rather than relying on the collaborative economy to let anyone make a living, develop the unique skills that allow you to attract buyers that will pay for you, rather believing that any cog will do.

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