Open Question: What’s the Biggest Problem That the On-Demand Economy Needs to Tackle?
Bobbie Johnson
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Providing real value to workers, as well as consumers.

The rise of the on-demand economy, previously evangelized as the “sharing economy” is obviously great for consumers. But it’s entirely not obvious that is good, in the long run, for workers. There’s a very discomfiting way in which the broad strokes of the on-demand economy replicate, and strengthen the patterns of rising economic inequality that characterize the last few decades.

Exhibit A: Uber.

The people who own whatever platform wins in a particular domain, like, say, Uber’s investors, will become unthinkably rich. But the people who provide the services that makes Uber work — a burgeoning mass of freelancers responsible for their own health care, insurance, and retirement planning, and of course, gas and automotive expenses, will be in a constant scramble to survive. There’s a reason why those workers are called the “precariat.” Job security in an on-demand economy simply doesn’t exist.

You don’t even have to take at face value Uber founder Travis Kalanick’s comments about how he would abandon human drivers in a second if it eventually becomes possible to fully automate taxi fleets. There are already plenty of well-reported stories out there about how difficult it is to make a decent living as an Uber driver. The critical thing to understand is that this is the case before Uber has come under any real market pressure to maximize profits. It’s impossible to say whether Uber is really losing a billion dollars a year, as alleged by Ben Horowitz, an investor in Uber’s competitor Lyft, but the company certainly has yet to undergo any significant market discipline.

That day will come. Keeping consumers happy with low prices while simultaneously generating real profits will mean only one thing: squeezing driver compensation. Screwing workers is the oldest law of capitalism and it will be inevitable as the “on demand” economy matures.

So it’s simple: For the on-demand economy to play a truly beneficial role in the economy, the platform owners need to figure out how to solve more than just the problem of consumer satisfaction. They need to solve the problem of job security. It’s in the long term interest of all us that they do so.