The Poisonous Underside of the Sharing Economy

August 17, 2014

It’s easy to celebrate the new (sharing, or peer) economy that’s emerging from companies like Uber, TaskRabbit, etc.

Workers appear to have all sorts of freedom. They can decide when to work, when not to, which jobs to take, and which to pass on.

Sounds brilliant, but there are thorns on that rosebush.

The most prickly of the spikes, nestled away amongst the blossoms, is the fact that these workers don’t have any benefits. They’ve lost the safety associated with having a real job.

They can be fired at will. Even worse, it’s not even called firing. They simply turn a knob and you’re not needed, so you don’t get calls anymore. And they owe you nothing. It’s beautiful in its elegance, and frightening in its implications.

Remember, companies don’t actually want to have employees. It’s bad for business. They have traditionally needed them, which is why they exist. But as soon as it’s possible to get rid of them, that’s exactly what will happen.

And it is happening.

The Peer Economy is a preview of what’s on the way, which is companies having a disassociated relationship with most of the people who do work for them. You have a few core people who work for the company, who are like mini-partners, or top managers, trusted people, etc, and then you have everyone else.

Those people will be managed through a layer of technology abstraction. Using a fictional company called Hyre as an example, Hyre will basically be a massive network like Uber or LinkedIn, with workers having skillsets and reputations and experience–all in a highly standardized format that everyone understands and honors.

And when a company needs a human worker (which will become less and less frequent, by the way), they will consult their Hyre representative who will query the system and arrange the people to do the work.

Some work will be longer contracts, and some will require being on-site. There will be business models based around housing those types of temporary workers as well.

But at the end of the job, the work is gone. It’s just a project. And for really long-term projects (permanent), the language will be highly defensive in that contract, basically saying that it’s still temporary and can be ended at any time.

The other major advantage to this model for companies is that it exposes the jobs to the world in a highly competitive way. Once a slot goes live, there will be a massive number of auto-submissions made by the technology layer.

Hyde’s algorithms will automatically match the top people according to availability and skillsets and reputation scores and experience.

Your reputation is about to become quite serious. Rating people. Giving recommendations. All of this. Those ratings and recommendations will soon transfer with the person, like a digital signature attached to a transaction.

If you recommend Chris, and he does something stupid with customer data and gets fired for it, that will be noted (transparency to the event will vary based on a number of factors) not only on Chris’s record but as a penalty against everyone who had endorsed him.

Doing good work, being recognized for it, having it associated with your digital identity, and having a series of kudos and recommendations associated with your identity will be nothing less than a new currency.

We talk already about credit being something like this, but this will be manyfold more powerful. It will become the proxy of your value.

Recommendations from stronger and stronger Rep people makes you stronger. So networking becomes even more essential. And there will be levels. There will be like a thumbs-up, which is like a casual encounter at a party where someone really powerful hears a pitch you make, and they give you one.

If you kill someone the next day it doesn’t hurt their Rep that much because they just gave you a thumbs-up. If they Recommended you, or Endorsed you, however, that would hurt their Rep–especially their reference Rep. So the weight of their other recommendations would fall as a result.

You get the idea.

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And this will be displayed everywhere. People will put it on their license plates. On their clothing. Etc. They’ll show off their Endorsement tree. Etc.

Anyway, getting back to the job thing, this Reputation system will be the backbone. It will be the system that Hyde uses to automatically select and assign jobs. It’s how they will best serve those looking to provide services, and those looking to get something done.

Now, what this means is that it’ll be extraordinarily easy to find jobs if you’re qualified, but it’ll make it harder to have a job that pays good money if there’s anyone out there willing to do it for cheaper.

And it makes it dead simple to downsize or change your business. You simply withdrawal your active searches for workers. Boom. It’s gone. In a matter of days or weeks you can go from having 20,000 people working on something for you, down to 40 people.

In order for that type of volatility to exist, a backbone of safety for workers must come from somewhere else, and it’s looking more and more like that will be a Basic Income (see my other posts on this, or just do a search on it).

In addition to the Basic Income, it’s going to have to be easy to get cheap, high-quality health insurance. The work we’re talking about must be made safe for families somehow, which means having those protections underneath you.

Here’ the simple truth of all this: The motion towards technology-abstracted and technology-optimized temporary work is the trend because companies don’t actually want employees.

Think about that. There are few things more wasteful in a business than the employee pool. Massive salaries. Tons of benefits. Lawsuits, regulations. It’s a nightmare that companies have tolerated out of necessity.

Think of Uber. They have a few people to do busdev and to work on the platform. Other than that, everyone else is a contractor who can be fired at will at any moment. That’s business perfection. That’s where we’re heading.

So get ready.

Get ready for most of business to move to this model. Get ready for the Reputation Economy. Get ready for the vacuum created by families not having a safety net. And get ready for the solution, which will be Basic Income and universal insurance models.

It’s a remarkable time to be alive.

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