5 ms·

this article is a bit better at considering the economic impacts than the one i commented about here: https://news.ycombinator.com/item?id=8187487 https://news.

this article is a bit better at considering the economic impacts than the one i commented about here: https://news.ycombinator.com/item?id=8187487 https://news.ycombinator.com/item?id=8187487 my concern is that the value "created" by startups like uber and taskrabbit come not from displacing large and slow incumbents (e.g., taxi dispatchers & courier services) but from shifting economic risk onto disempowered individuals. the people who pay (largely the top 20%) see value in at least two ways: (1) greater certainty of commodity products & services and (2) lower prices. the startups themselves are shielded from market risk, particularly on the supply side (labor), because they have disproportionate power over labor, which then smooths out profit by automatically matching costs to revenues. taskers bear all the market risk while also giving up traditional employment benefits. the value of this shift is passed on to the consumer and to the startups themselves (capital), leaving taskers in even more volatile economic circumstances. by the way, i'm distinctly not condemning the startups here, because they're only part of larger economic trends that they have little control over. now that the structure is in place, they can't do much individually (e.g., if one tried to raise prices to raise wages, they would be competed out of the market).

rayiner 12y ago
Not only are they shifting risk onto workers, but they are replacing small, local, owner-operated businesses with Wall Street funded national corporations. They're seeking to put people like my cleaning lady (who runs a small business with a couple of employees) or the local Chinese laundromat out of business. I'm not saying that's a bad thing (frankly, big Wall Street funded corporations are much more efficient than small local businesses), but I do detect some cognitive dissonance in people who rail against big corporations but also support companies like Uber.
- larrys 12y ago
  A really good point. Of course I think it's still possible for a small owner operator to use one of these services to gain a consistent customer base (and even get referrals from that customer base) and then cut out the big corporation that gave them the contacts in the first place. And operate on their own. Work like this is done on relationships. I'm still using the same painter for projects that was referred to me by a realtor that sold me a property. Although there are tons of other painters I can get bids from (cheaper) I'd rather go with someone that I've used that I know can get the job done with little aggravation.
  - ende 12y ago
    Right, small local businesses and the microgig/sharing economy are not mutually exclusive. In fact the later can empower the former.
  - clairity 12y ago
    that's certainly true, but there are no economies of scale to that model, so those small, disaggregated market players will have little to no effect overall. at best, collectively they may have a minor bounding effect on wages but that's unlikely to change the overall market dynamics (even the US, as the largest oil consuming country in the world by far, cannot dictate the price of a barrel of oil).
- sfk 12y ago
  Efficient for whom? Starbucks and Mc Donalds sell worse and more expensive products than local places. Amazon is cheap, but I'm constantly getting damaged books (bent pages, water damage, single pages that are printed in light gray instead of black ...) and scratched DVDs. I've never seen any of this in a physical bookstore.
  - deleted 12y ago
    [deleted]
  - sliverstorm 12y ago
    You could argue that the regression in quality is efficient. If Item X is comically flimsy yet 99% of consumers never use it more than once or twice, it could be seen as an economic win to avoid wasting the resources to make the good high-quality. How do you get scratched DVDs from Amazon? I didn't think it was possible to scratch a DVD inside its case, without literally crushing it to splinters.
    - sfk 12y ago
      In Europe customers have the right to return online purchases within one or two weeks. It is possible that a previous "customer" damaged the DVDs and returned them. In that case, excellent online stores would sell the items in a separate category at a reduced price.
      - sliverstorm 12y ago
        Wait, they can return it, opened? And it is resold as new?
  - raverbashing 12y ago
    I have a theory about the success of McD and Starbucks You're absolutely right it's worse than a local place. But it's predictable. It makes the process of choice easier: I can go to McD and I know what I'm getting or I'm trying this new place, with unpredictable results.
- coldtea 12y ago
  >(frankly, big Wall Street funded corporations are much more efficient than small local businesses) Efficient in money making, maybe (then again, it was those Wall Street financiers that need a trillion dollar bailout). But not necessarily more efficient at doing what you pay them to do (i.e competent) than a local business.
dnautics 12y ago
can you explictly define "disempowered" here? Because I drive for lyft and uber and I know I can quit any time (although it's become precarious of late, I now have substantial savings and investments underneath me that can help keep me afloat if TSHTF). Moreover, the work has enabled me to launch a nonprofit research effort (details in profile). On the other hand, I used to work in academia which came with accoutrements such as 'traditional employment benefits' but is incredibly exploitative because there's an absolute lock on the labor market. A PhD in biochemistry with years of experience can expect a ~35,000 salary in an expensive city. But you know, health benefits. Of course, economic risk has always found a way to be foisted onto disempowered individuals. A history of corporate bailouts and crony deals that stretch back to the 19th century are examples of this; socialism is not really that much better, although the disempowerment is typically 'political' instead of 'economic'. You'll have to explain to me how exactly does, say, uber, have 'disproportionate power' over labor? As a driver, I can log out whenever the heck I want and go to a job interview, and they'll never even know that they were competing for my unit of labor. Heck, I can even work for a direct competitor and seek rides from both simultaneously.
- physcab 12y ago
  I drive for Uber too, or used to anyway. I applied because I heard stories of drivers earning $2k in a weekend during a conference which seemed like the perfect side income source. After a number of drives I jokingly told my coworkers that I'd quit because the money seemed easy. But then uber dropped their rates and I went from earning $35 / hr to $20. And now all of a sudden I had to work twice as long to make the same income. It wasn't worth it for me to continue as I value my free time from my normal job more than $20 /hr. But there are many more people who don't have that luxury. There are drivers who sunk in a lot of money to become drivers - bought cars, dropped jobs, moved cities, etc. When a company has that power to cut your wage so easily with the sending of an email or text message, that's disproportionate power.
  - dnautics 12y ago
    It's actually the opposite of disproportionate... It's proportionate. Firstly, these aren't wage jobs, so you're not entitled to a definite hourly yield. Secondly, if they lower their prices then they lower their returns too because it's a fixed commission. Thirdly, it's possible that a lowered price results in improved profits, if the frequency of rides go up. I've seen nearly no change in hourly profits despite lowered prices. And I do think Uber is very sketchily overestimating their driver performance in their recruitment efforts. And I think the extended line of credit for car purchases was dumb, but I didn't take it. Also your analysis has this problem -- by your argument, drivers who are more willing to accept a slimmer margin are "more powerful" although those are exactly the "economically disenfranchised" drivers.
arjunnarayan 12y ago
Yes, this is a recurring trend over the last few decades. Sharing economy companies are only one more piece in an accelerating trend. Yale Political Science professor Jacob Hacker wrote a book about this, called "The Great Risk Shift", you might find that an interesting read to help work through the ideas you've expressed in this piece (which, in my crude opinion, are on point).
- clairity 12y ago
  thanks, will check it out!
prostoalex 12y ago
> the startups themselves are shielded from market risk, particularly on the supply side (labor), because they have disproportionate power over labor In weak employment environment yes, but during the boom stage of an economic cycle people will trade up for better-paying jobs.
- clairity 12y ago
  i'm afraid that with the ever greater concentration of wealth in the US that there will never be a strong enough economic cycle to deplete the fractional labor supply. i'd love to be proven wrong though.

rayiner 12y ago

Not only are they shifting risk onto workers, but they are replacing small, local, owner-operated businesses with Wall Street funded national corporations. They're seeking to put people like my cleaning lady (who runs a small business with a couple of employees) or the local Chinese laundromat out of business. I'm not saying that's a bad thing (frankly, big Wall Street funded corporations are much more efficient than small local businesses), but I do detect some cognitive dissonance in people who rail against big corporations but also support companies like Uber.

larrys 12y ago
A really good point. Of course I think it's still possible for a small owner operator to use one of these services to gain a consistent customer base (and even get referrals from that customer base) and then cut out the big corporation that gave them the contacts in the first place. And operate on their own. Work like this is done on relationships. I'm still using the same painter for projects that was referred to me by a realtor that sold me a property. Although there are tons of other painters I can get bids from (cheaper) I'd rather go with someone that I've used that I know can get the job done with little aggravation.
- ende 12y ago
  Right, small local businesses and the microgig/sharing economy are not mutually exclusive. In fact the later can empower the former.
- clairity 12y ago
  that's certainly true, but there are no economies of scale to that model, so those small, disaggregated market players will have little to no effect overall. at best, collectively they may have a minor bounding effect on wages but that's unlikely to change the overall market dynamics (even the US, as the largest oil consuming country in the world by far, cannot dictate the price of a barrel of oil).
sfk 12y ago
Efficient for whom? Starbucks and Mc Donalds sell worse and more expensive products than local places. Amazon is cheap, but I'm constantly getting damaged books (bent pages, water damage, single pages that are printed in light gray instead of black ...) and scratched DVDs. I've never seen any of this in a physical bookstore.
- deleted 12y ago
  [deleted]
- sliverstorm 12y ago
  You could argue that the regression in quality is efficient. If Item X is comically flimsy yet 99% of consumers never use it more than once or twice, it could be seen as an economic win to avoid wasting the resources to make the good high-quality. How do you get scratched DVDs from Amazon? I didn't think it was possible to scratch a DVD inside its case, without literally crushing it to splinters.
  - sfk 12y ago
    In Europe customers have the right to return online purchases within one or two weeks. It is possible that a previous "customer" damaged the DVDs and returned them. In that case, excellent online stores would sell the items in a separate category at a reduced price.
    - sliverstorm 12y ago
      Wait, they can return it, opened? And it is resold as new?
- raverbashing 12y ago
  I have a theory about the success of McD and Starbucks You're absolutely right it's worse than a local place. But it's predictable. It makes the process of choice easier: I can go to McD and I know what I'm getting or I'm trying this new place, with unpredictable results.
coldtea 12y ago
>(frankly, big Wall Street funded corporations are much more efficient than small local businesses) Efficient in money making, maybe (then again, it was those Wall Street financiers that need a trillion dollar bailout). But not necessarily more efficient at doing what you pay them to do (i.e competent) than a local business.

dnautics 12y ago

can you explictly define "disempowered" here? Because I drive for lyft and uber and I know I can quit any time (although it's become precarious of late, I now have substantial savings and investments underneath me that can help keep me afloat if TSHTF). Moreover, the work has enabled me to launch a nonprofit research effort (details in profile). On the other hand, I used to work in academia which came with accoutrements such as 'traditional employment benefits' but is incredibly exploitative because there's an absolute lock on the labor market. A PhD in biochemistry with years of experience can expect a ~35,000 salary in an expensive city. But you know, health benefits. Of course, economic risk has always found a way to be foisted onto disempowered individuals. A history of corporate bailouts and crony deals that stretch back to the 19th century are examples of this; socialism is not really that much better, although the disempowerment is typically 'political' instead of 'economic'. You'll have to explain to me how exactly does, say, uber, have 'disproportionate power' over labor? As a driver, I can log out whenever the heck I want and go to a job interview, and they'll never even know that they were competing for my unit of labor. Heck, I can even work for a direct competitor and seek rides from both simultaneously.

physcab 12y ago
I drive for Uber too, or used to anyway. I applied because I heard stories of drivers earning $2k in a weekend during a conference which seemed like the perfect side income source. After a number of drives I jokingly told my coworkers that I'd quit because the money seemed easy. But then uber dropped their rates and I went from earning $35 / hr to $20. And now all of a sudden I had to work twice as long to make the same income. It wasn't worth it for me to continue as I value my free time from my normal job more than $20 /hr. But there are many more people who don't have that luxury. There are drivers who sunk in a lot of money to become drivers - bought cars, dropped jobs, moved cities, etc. When a company has that power to cut your wage so easily with the sending of an email or text message, that's disproportionate power.
- dnautics 12y ago
  It's actually the opposite of disproportionate... It's proportionate. Firstly, these aren't wage jobs, so you're not entitled to a definite hourly yield. Secondly, if they lower their prices then they lower their returns too because it's a fixed commission. Thirdly, it's possible that a lowered price results in improved profits, if the frequency of rides go up. I've seen nearly no change in hourly profits despite lowered prices. And I do think Uber is very sketchily overestimating their driver performance in their recruitment efforts. And I think the extended line of credit for car purchases was dumb, but I didn't take it. Also your analysis has this problem -- by your argument, drivers who are more willing to accept a slimmer margin are "more powerful" although those are exactly the "economically disenfranchised" drivers.

arjunnarayan 12y ago

Yes, this is a recurring trend over the last few decades. Sharing economy companies are only one more piece in an accelerating trend. Yale Political Science professor Jacob Hacker wrote a book about this, called "The Great Risk Shift", you might find that an interesting read to help work through the ideas you've expressed in this piece (which, in my crude opinion, are on point).

clairity 12y ago
thanks, will check it out!

prostoalex 12y ago

> the startups themselves are shielded from market risk, particularly on the supply side (labor), because they have disproportionate power over labor In weak employment environment yes, but during the boom stage of an economic cycle people will trade up for better-paying jobs.

clairity 12y ago
i'm afraid that with the ever greater concentration of wealth in the US that there will never be a strong enough economic cycle to deplete the fractional labor supply. i'd love to be proven wrong though.