Has the world irrevocably been changed by the on-demand and gig economy?
Wednesday night at Work Market’s headquarters in New York, venture capitalist Fred Wilson, co-founder of Union Square Ventures, Bradley Tusk, founder of Tusk Holdings, and André Dua, director at McKinsey & Co., discussed how the workforce, business models, and drivers of the economy have shifted in the post-Uber world.
Lately a considerable chunk of money has been poured into on-demand startups, whose customers pay for services or assets as needed, and businesses that retain workers just for specific jobs. Work Market’s CEO Stephen DeWitt, the panel moderator, said more than $4 billion was invested in 2014 in U.S. on-demand companies, with another $4 billion already invested so far this year.
Whether that flood of capital was flushed down the toilet or well-spent remains to be seen. Wilson said it comes down to how disruptive these startups are and if they have more than one trick they can do. “It really depends on how pervasive their model is, how many markets they get into, and how many businesses migrate to their platform,” he said.
It should be noted that some of the panelists have dogs in this fight. Wilson is an investor in Work Market, the event host, which developed a system that connects freelancers with businesses, and manages and pays them for their work. Tusk has invested in Uber.
Other companies may want to copy Uber, Tusk said, but its meteoric growth partly stems from the demand it meets. “Most of the time Uber’s type of success only works when you have a product that replaces something that is so fundamentally bad and disliked that people will flock to it,” he said.
There are broad ramifications posed by the on-demand economy—such as what constitutes an employee versus a contract worker—which lawmakers are still trying to get their arms around. “There’s a massive shift happening,” Tusk said. “We’ve had unions dictating a lot of politics . . . for a long time. That’s changing slowly.”
He knows a bit about the gears that turn in the political world. Tusk was a campaign manager for Mayor Michael Bloomberg, a communications director for U.S. Sen. Charles Schumer, and was deputy governor of Illinois. He not so subtly hinted at the protracted differences Uber has had with current New York Mayor Bill de Blasio about operating within the city.
Despite such resistance to change, it may be too late to go back to the way things were as the on-demand market grows—and more friction could be ahead. “There’s a level of economic anxiety around people’s prospects for the future, and that’s playing out in this debate,” Dua said.
Furthermore, there may be some confusion about what financial returns should look like in an on-demand, technology-driven world that reduces costs. “If you think of a person’s [profit and loss statement], they’re seeing their revenue line go down but they don’t realize their cost line is going to go down too,” said Wilson. “If you go forward 50 years, it’s just going to cost less to live.”
The way the workforce develops is also changing in this on-demand world, Dua said, as more people seek training throughout their professional lives to remain competitive. “In their 20s and 30s, there is more of a norm that people will keep learning all of the time,” he said.
That education may even be found online and on-demand for free as more and more people share their knowledge, including technical skills, through videos. “You can go on YouTube and learn this stuff and it doesn’t cost a dime,” Wilson said.
The way people are hired is also taking on a more on-demand flavor, thanks to the Internet and technology for remote video interviews. That could have repercussions far beyond even the reach of Uber and its imitators.
Wilson said that while recruiting analysts based on their skills, he found—and hired—a prospect who was 21 years old and did not graduate from college. “We thought he was 27 and had a graduate degree,” he said, calling it one of the best hires he ever made. “Hiring someone who didn’t go to college and proved themselves by their work is in some ways more valuable.”
