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Associate Professor at Harvard Business School
Hi everyone!

My current research focuses on marketplace business models and specifically on the “enabling vs. employing” question, i.e. whether marketplaces should rely on independent contractors or employees. Here’s two recent blog entries I wrote about this to give you a sense of my views:

hbr.org/2015/08/companies...ployee

hbr.org/2015/09/the-age-o...s-here

Looking forward to your questions!

Andrei.
This Q&A took place between 9/8/15 and 9/15/15. Unanswered questions have been hidden
9 questions
Given the growth and money being raised, Uber and its investors must believe there is a first-mover advantage in their market. However, as we learned in your class, multi-homing severely diminishes first-mover advantages. I've seen passengers and drivers using more than one app. What am I missing?
Associate Professor at Harvard Business School
Hi Ozzie,
Always great to have a chance to continue conversations beyond class!
You're probably not missing much with this observation, which is a key reason I'd worry about the $50 billion valuation. Easy multihoming on both sides + the fact that network effects are inherently local to every city make it look less and less likely that Uber will tip & dominate this market to the extent that many investors were expecting.
Nevertheless, let me try to make the best case for the other side. If I'm a current investor, one hope is that there are significant economies of scale due to data science (optimizing routes and driver assignments). If true, this means that even if many drivers and users multihome, Uber still provides the best service so at any given moment, most users on both sides would prefer to use it over other competitors.
The other hope is that Lyft and other smaller competitors will not be able to sustain the current price wars in which they are engaged vs. Uber, so they will eventually exit, leaving Uber with a big number of cities in which it would be dominant.
Founder, 10 TRAITS Leadership Institute; UN Virtual Mentor
When the the cross point comes, when Apple and Google self-drive cars serve more customers than Uber who will the independent contractors (i.e. drivers) serve?
Associate Professor at Harvard Business School
Hi Alexia,
That crossing point seems very far in the future so a lot of things will have changed (hopefully for the better!) for independent contractors by then. Given the proliferation of marketplaces for all kinds of services, by that time there will likely be many other services that independent contractors can perform (other than driving). Some are already emerging today: e.g. TaskRabbit, Wonolo, Shyp, Postmates, etc. There will surely be other services and marketplaces that I can't even think about today.
And of course, I also hope that by then this outdated distinction between independent contractors and employees will be gone. Instead, I would hope there will be other intermediate options, so workers can mix and match "jobs" from different companies and/or marketplaces. That should be true for jobs/services ranging from those that don't really require specialized skills (e.g. driving) to those that do require some specialized skills (e.g. programming, coaching).
Researcher @ Harvard | Parlio community manager
Hi Professor Hagiu,

Given that there is more of a push for people to take on part time jobs mainly due to changing social values and the help of technology, do you think that there will fewer specialists and experts in different fields? If everyone is dexterously and efficiently pivoting from job to job, perhaps this is one pitfall in this larger push for more part time jobs?
Associate Professor at Harvard Business School
Hi Jieun,
This is a very nice point you are making, which I have not heard discussed - the impact of marketplaces for all kinds of services on workers' incentives for training and acquiring expertise.
I see your point but to my mind it seems more likely/natural that the proliferation of marketplaces for services will actually lead to higher returns on specialization. This is closely related to the idea that Rob (co-founder of Hourly Nerd) and I were hinting at in the HBR piece. If you're really good at some specialized skill (say, marketing consumer products at launch) then why should you restrict your talent to one corporation, who will also force you to spend a significant percentage of your time doing stuff that does not leverage your skill at all? It's much more productive to offer that skill as a service to several companies through marketplaces. This creates incentives to invest in highly specialized skills that can then be offered non-exclusively!
Now, of course the scenario I have just described applies to "higher-end" jobs, not the commodity ones that are currently the focus of most sharing-economy companies (e.g. driving and running errands). So one concern might be that someone who currently does this type of commodity jobs will spend time switching from skill-less job to skill-less job and never really acquire a real skill that can lift them to the "next level". That's a real concern but I think marketplaces are the solution to that as well: doing commodity jobs on a marketplace is still better than doing them within a company because you have the flexibility to schedule your work around other priorities, for instance learning a new skill. And there are many education marketplaces that make it easier and easier to learn skills online.
Andrei, thanks for taking the time to answer our questions.

What's your sense on the preferences of the contractors on these marketplaces? Based on my informal conversations with Uber drivers, it is clear that most of them very much like the flexibility that comes with being an independent contractor. They like to choose their own hours, scale their hours up and down as necessary and work for multiple services (for instance, Uber and Instacart may have different peak times)

Should the contractors be given the choice? If not, which model is the best for them?
Associate Professor at Harvard Business School
Hi Gaurav,
Through informal conversations with Uber & Lyft drivers, I got the same sense - for most of them, flexibility is key. Many have other jobs and choose to drive to supplement income.
And yes, I definitely think they should have the choice. A driver who has another job or his own small business and only wants to put, say, 10 hours into driving on Uber/Lyft would definitely not want to be an employee, even if that comes with benefits!
And as you point out, there is an emerging number of start-ups offering contractors services that help them "arbitrage" work across multiple marketplaces (e.g. Uber, Instacart, TaskRabbit, Postmates).
Hi Andrei,

Are there any up and coming marketplaces that have great potential?
Associate Professor at Harvard Business School
Hi Wayne,
Yes, there are - and I am most likely not aware of many of them!
Please do not read this as investment advice (insert disclaimer here!), but if you're asking what are my favorite marketplaces today, I'm happy to answer. Just note that this is NOT based on any meaningful survey of marketplaces and their financial prospects.

1) CoachUp - I like to joke with the founder that the two of us represent the Venn diagram intersection of people passionate about marketplaces with people passionate about basketball. I just love this marketplace and what it enables: getting better at any sport through private coaching.
2) Hourly Nerd - brilliant marketplace that should disrupt traditional consulting firms. And great team.
3) Airpnp. Just kidding about this one.
Software engineer at stealth mode California startup.
Do you think sharing-economy workers should join or form a union? If yes, how would that be different than the traditional forms of unions?
Associate Professor at Harvard Business School
Hi Youssef,
That's very good question, but it goes beyond my knowledge/expertise. I am not a lawyer or labor expert, so I do not have a sufficiently informed perspective on unions. Based on what I do know, I think having some sort of loose organization would be helpful for sharing economy workers - probably not organized as traditional unions or pursuing the same goals, but at least providing information about various marketplace work arrangements and best practices. Also, there are definitely cases of marketplaces (which I will not name) that try to exploit legal loopholes and take advantage of their workers, so some form of "sharing economy union" might help with that too.
We're witnessing a transition period similar to the internet revolution of the mid-90s. This time, regulation distortions play a key role. Don't you think Uber & co are bound to nosedive if they keep rejecting regulations altogether instead of accompanying their necessary evolution?
Associate Professor at Harvard Business School
Hi Stephane,
Absolutely agreed. The biggest flaw in Uber's strategy has been its disregard (contempt?) for regulators. I attended a marketplace conference organized by Greylock Partners back in July and one of the speakers was the head of government relations at Airbnb. Among the many insightful points he made was that, as a marketplace, it is a terrible approach to just say "no" to regulations. Instead, one should have an explicitly formulated concept of what good regulation is and work with regulators to implement it. Airbnb has been much better and more successful in their relationship with regulators than Uber. Other marketplaces should learn from Airbnb.
I agree that the distinction is largely artificial, and this can be seen from from the labor perspective too: an employee receives wages and benefits, while a contractor just receives a payment, though in reality one can buy benefits with money. (The "old" way of looking at it seems to be the motivation of the judge.) I wonder if, as programs like the ACA and state 401k schemes take root (i.e., the link between employment and benefits is (correctly) ruptured), you see the distinction fading? Or is the opposition to Uber et al really about the *level* rather than the structure of the payments?
Associate Professor at Harvard Business School
Hi Paras,
Great point - the ACA and other new schemes that allow workers to obtain benefits independently of their employers are facilitating a much more fluid notion of work, which is entirely aligned to the move towards work marketplaces. Regulators surely recognize this and my hope is that they will see the benefit of updating the relevant laws so as to eliminate the traditional binary distinction. There is also space for start-ups to fill the gaps by providing benefits to 1099 workers that used to be provided by employers.
Unfortunately, my sense is that the current Uber case (as well as the similar ones against Lyft, Postmates, etc.) are not as far-sighted - they are predicated on the current binary distinction and trying to apply the employment law as it stands today. Which is what lawyers should be doing. But that's where regulators and law-makers should realize this is not a very productive exercise (yes, I think it is about the level, not the structure of payments) and put an end to them by updating the legislation.
How do you define "enabling" participation, and what other forms can "enabling" participation take outside of labor economics or the market system?
Associate Professor at Harvard Business School
Hi Victor,
Not sure what you mean by "enabling participation"? In my definition of multi-sided platforms, I talk about "enabling interactions". Assuming that's what you meant, there are many forms of interactions enabled by marketplaces other than services/labor. Examples: dating on Match.com, OKCupid, etc.; Q&A interactions on Parlio and Reddit; online education on Coursera, Lynda.com.