A new wave of startups that rewards the individuals generating value
nytimes.com
nytimes.com
These aren't people waiting in line for another person's sushi or drycleaning. The article's title is a bit misleading. This is a niche in the world of professional photographers that doesn't really generalize to the scale of an "economy".
I don't see how that's relevant. Eventually, all the "gig economy" startups will also need to be selective of their applicants. Uber also screens their drivers, for example.
As for not generalizing to the scale of an "economy"... as someone who's done a fair share of hiring, screening 90% of applicants is par for the course for any business in this economy. And profit distribution, democratic workplaces, and flat hierarchies are totally normal in tech.
I don't see how a worker cooperative model wouldn't scale. In fact, as technology democratizes many of the functions we've historically relied on C-levels for -- decision-making, organization, contract negotiations, partnerships, hiring, firing, etc. -- I see this as an inevitability.
Let me put it another way: Why would Joe Developer work for firm A, where a significant percentage of revenue goes to compensating an unaccountable mob of MBAs when I could join firm B and increase my share?
At this point, the only remaining valid function of most executives is to cozy up to capital. But as capital continues to trickle up, I feel competition here will get fierce and people will find more creative ways of funding businesses. Either way, downward economic pressure is going to force executive suites to slim down -- in numbers and pay -- or face elimination entirely.
Manual pre-screening is an interesting model, but one which is not really modern.
The assumption is that the pre-screening personnel are able to second-guess the market's wants.
A more modern approach would allow the individuals seeking reward to try different strategies to address the market directly, thereby removing the artificial middle-man of manual pre-screening.
1. How does it reach travelers from around the world?
2. Why would someone in the neighborhood not advertise their property on AirBnB, VRBO, etc?
3. Where is the advantage for renters and landlords?
Suppose a taxi union starts a local Uber:
1. Why would the union open up their platform to casual drivers?
2. How will the taxi union compete with Uber against people with Uber's app already on their phone?
Both of the examples illustrate the problems of local delivery and personal services. One more driver or one more night costs /x/ to provide and can be sold for /y/ and only in market /z/. What Uber and AirBnB provide is a way for customers to access local markets for personal services that have a linear cost structure. The notion of the gig economy is that individuals move in and out of the workforce providing those personal services and individuals in the workforce are local to the point of service delivery. When the individual is providing the service, the individual is not available elsewhere in the workforce.
In contrast, images can be sold anywhere over the internet. Image creators can sell in multiple channels. Images can be sold while the image creator is working to create other images. The nominal cost of an additional image and its delivery is approximately zero.
The reason that the stock photo site isn't part of the gig economy is because the photographers selling photos are engaged in an entrepreneurial activity. Uber drivers are engaged in a free lance activity: entrepreneurs can make money while they sleep, freelancers only make money while they are providing a service.
Research in the early 1990s on software agents/bots/multi-agent systems went from the assumption that the Internet would lead to a decentralized marketplace with many vendors and independent markets, and your agent/bot would go out and find/place bids on products and services for you. Capital investment and economies of scale have instead lead to near-monopolies (Amazon, Paypal, eBay, Craigslist, now Uber and AirBnB).
It seems like the decentralized marketplace idea cannot work because of trust issues - a lot of capital is needed to deal with vetting, fraud and disputes on e-commerce platforms. A good example of what happens when that is not handled properly is Aliexpress.
That's not an enormous margin, but it's large. Uber is still expanding rapidly in driver count, in geographic range, and in product range. That takes quite a bit of money, especially the geographic range - Uber runs pretty vigorous ad and lobbying campaigns to influence regulators and oppose taxi agencies.
Fasten is a startup whose entire business model is "Uber but better for drivers". They advertise to consumers that they take a smaller cut, and hope to attract more drivers with their better rates. My guess is that Uber will crush or acquire them after dropping prices (or raising driver share) in the relevant markets.
So I think the answer is: Uber could do this, but it would slow their growth. Once they're an entrenched player in most markets, I would expect to see driver share (and possibly rates) rise a bit to maintain supply, but right now they're funneling everything they can into expansion.
(And, I'm sure, panting at the thought of using self-driving cars to turn that 80% into profit.)
FICA alone for a self employed person is 15% (although it's a bit lower in effect b/c of deductions). Add in state and federal income tax, fuel, maintenance, and vehicle depreciation, and you're talking way more than 20%.
They reported 10% on tax and 10% on fuel/maintenance. If you live somewhere with cheap gas, and don't count depreciation, then that 10% is plausible (obviously depreciation matters, but I think they didn't count it).
The 10% on tax is odd. Possibly it's about the self-employment premium (i.e. "How much of my earnings do I lose for driving Uber instead of working McDonalds?") Or possibly it's after EITC and other balancing factors - if Uber driving is your only career you aren't likely to be in a high tax bracket.
The other possibility that I didn't think of is that it's 10% of their total paycheck because they spend half of their paycheck on deductible expenses, but that doesn't mesh with the 10% expenses section.
I think the most likely explanation is that the drivers you're talking about are underestimating taxes due. They have to pay themselves since there's no withholding, and it usually takes years before underpaying taxes catches up with you.
And yeah vehicle depreciation is a big expense. It's probably more than 1/3 of total pay if a driver is actually making a small enough income to have a 10% tax rate.
I've heard many Uber drivers who say they are making almost nothing after expenses including vehicle depreciation.
It's worth remembering that a lot of Uber drivers are making relatively little money. Some are students, some are part-timers, but no matter what Uber ROI drops off more aggressively than most jobs (you work surge times, then constant-demand times, then your rates collapse).
I definitely have the sense that Uber's current model isn't sustainable - the money looks good because they constantly bring on new drivers who underestimate tax and depreciation, and count their salary in weekly-paycheck terms. I suspect that either they'll become more generous once they're spending less on regulation/campaigning, or something else will fall apart.
But that does not make the basis for a sound self-driving fleet.
$1 - 20 cents for Uber - 15 cents for taxes - 50 cents for fuel/depreciation = 14 cents.
18 cents - 4 cents for Uber - 3 cents for taxes = 11 cents.
So drivers net 14 cents/mile plus 11 cents/minute.
So does that mean that the drivers gross 80%? The photographers in the article would also be responsible for their equipment, materials, and taxes, so is this the right comparison?
So yes, Uber drivers are similarly on the hook for tax, expenses, and capital depreciation.
Passing 80% of the gross receipts (less the $1/ride safe-whatever charge, which I believe is for some sort of insurance policy?) does not seem like they are screwing the drivers to me. It seems like a pretty common split between marketplace/infrastructure providers and suppliers.
Edit: Reviewed parent, and they say Uber takes 20% of the $0.18/min and the $1/mi base rate. That's even worse. So drivers only make $0.14/min, or $8.64/hr if driving every minute. Yikes.
What really surprises me is that people simultaneously claim Uber cannot possibly be profitable while lambasting it for taking too much of a cut.
Which one is it? Either they're being greedy with excessive margins or dangerously dependent on venture capital to sustain an unprofitable business model.
I think that there's two perspectives here. One, Uber is a match-making service, and charging 20% to make an automated match on a server... That could seem excessive.
However, once you tack on things like boarding, marketing, development, legal fees, etc., it's possible that 20% isn't enough.
How? How can their margin be too high and simultaneously not enough to be profitable?
The only other alternative is that you think consumers should pay higher prices.
You present two perspectives, but only one can be correct: either it takes 20% to support the service, or it doesn't.
I don't think anything in this particular matter. I don't use Uber and I don't work for Uber, so I don't really have a dog in this race. However, I don't see how Uber not charging enough isn't a valid viewpoint.
[0] http://www.nytimes.com/2016/05/04/world/europe/food-theft-in...
The issue, in the US at least, is the IRS. There's a fairly massive legal grey area in how to treat patronage (distributed profits) for members of a worker co-op. Are they dividends? If so, they should be taxed at the capital rate. Or are they bonuses? Then they're taxed at the income rate.
But the IRS doesn't want to give any guidance on this and other issues it created with co-ops. You literally only find out the day they sue you whether you've been doing it right. And, if you put up a fight, they always settle instead of pursuing the case to judgement, in fear of setting a precedent.
Oh, and good luck finding a lawyer or accountant specializing in co-op law to help you out.
The problem with worker co-ops is not that they're infeasible. It's that decades of lobbying and IRS paranoia have hobbled the model. Ironically, they work fantastically well here in the developing world. It's an extremely efficient way of pooling risk, aggregating labor, and achieving economies of scale without selling off a massive stake to VCs.
I believe another bone of contention is whether the IRS even allows worker cooperatives to exempt patronage dividends from their taxable profit, to avoid double taxation (corporate, then personal income tax).
Technically (under Subchapter T), they should be allowed to. But the IRS is pretty sue-happy about this and refuses to issue much guidance. The last clear ruling was in 1971 and only allowed dividends to be issued on the basis of hours worked, not value earned (or other metrics).
OTOH, the IRS has been accused of being reluctant (even after a court decision allowing it with specific standard) to allow weighting of work hours vs. flat work hours in determining the amount of earnings attributable to members as a whole (vs nonmembers) in determining how much of the forms revenue is eligible for inclusion in patronage distribution. This may be because actual mechanisms that came before it did not meet the standards of objectivity set on the court decision (that the problem is the application methods it's seen and not the concept entirely seems closest as they've indicated that weighting contribution of different jobs proportional to an applicable union pay scale would be acceptable.) This is an issue for coops with both member and non-member employees.
More full-time stock photographers are from places like eastern Europe, where the cost of living is lower.
Because of the ownership model of Stocksy, there's little reason to bring on photographers without an existing track record selling stock images.
Workers only get most of the money in a co-op because they're co-owners. By contrast, most "gig economy" situations involve a VC-funded middleman trying to create a dominant position in a two-sided market so they can make most of the money.
Anyway, you might do well to look at how the Mondragon Cooperatives structure their worker ownership schemes. They have a seniority model, where member-owners pay into a capital account when they join. Capital accounts accrue interest at the same rate (the percentage of profits distributed as dividends), but because older accounts have larger balances, they grab a larger share of the dividend. By the same token, workers adjudged to bring greater value to the company have larger initial capital accounts than the guy at the loading dock.
In lieu of an executive class of shares (which is sure to cause grumbling one day), why not give the individuals taking the initial risk a larger initial capital account (i.e. share of the financial pie)? That way, you retain a single class of stock, remain accountable to your peers, yet retain a portion of any future profits commensurate with the initial risk you took?
(Seems ripe for a Augmented Reality / Pokemon Go integration.)
For example, if one producer somehow managed to have only their products downloaded for the month, they would take home the entire 50% of the site's earnings.
https://themeforest.net/become-an-author https://www.pond5.com/sell-stock-footage http://www.istockphoto.com/sell-stock-photos.php
And yet, you did.