What Andressen Horowitz gets wrong about marketplaces.
A16z recently released a number of blogposts about markeplaces. However many of the companies they mention are actually employers, not marketplaces. We explore some clarity on this often confused & manipulated issue in Silicon Valley.
Everyone is familiar with online marketplaces. You probably have used them many times when you looked for an apartment on Craigslist, or sold something on Etsy or Facebook Marketplace. Online marketplaces are often used for buying & selling physical goods and the sellers have full freedom to set whatever price they desire and to turn down any number of offers they do not like. But things are different when it comes to human labor.
Companies like Uber, Lyft, Doordash, Instacart & Postmates would like to pretend they are open “marketplaces” just like Craigslist or Etsy. We have seen VC’s try to make this a reality. They have recently written articles about their general terms for “marketplaces” and their approach to trying to define their their terminology.
But a lot of this information is simply not true.
Workers who work for these app based companies do not have the freedom to set their own prices or turn down many requests. If they do turn down requests they will be fired. Uber for example tries to contort themselves into a “platform” or “marketplace” because it it less expensive for them. They do to this try to avoid paying for even the most basic of labor protections such as min wage, overtime, sick leave etc. They try to avoid the new landmark ruling of #AB5.
If you speak to labor lawyers who understand these app companies they will tell you a simple fact. “Uber is an employer.” And so to with the other Uber-like companies like Lyft/Doordash, Postmates, Instacart and many others. Yes they have an app and they use this to manage their workforce but that doesn’t mean they get to ignore labor law. In fact, economists like James Parrot have studied Uber and have found that they were paying 96% of their drivers in NYC below minimum wage. Sad to see this gross level of exploitation from this company. Uber employs their workers and have very tight standards for the work done. If a driver drops below a 4.6 stars they are fired. Note: passengers often can have 1 or 2 star ratings and are allowed to continue using the service.
If Uber/Lyft/Doordash and others would like to actually build an open marketplace where sellers freely set their own rates and can turn down any requests they don’t like that would be fine. But that doesn’t exist today. These companies are currently employers and exert heavy control over the work done.
This is not new. We have seen coal mining companies that have been doing this same sort of labor misclassification to their workers since 1914. As you probaby can imagine, coal minining isn’t a “coal marketplace” for miners. And Chipotle workers aren’t part of a “burrito marketplace.” Starbucks employees are not part of a “barista markeplace” and Merry Maids cleaners aren’t part of a “cleaning marketplace.” Coal companies, Chipotle, Starbucks and Merry Maids are employers not open marketplaces.
In closing, companies like Uber, Lyft, Doordash, Instacart & Postmates are not open marketplaces. They are radically different from real open marketplaces like Craigslist, Etsy or Facebook Marketplace. They are employers who control human labor and the prices that they pay these workers. Their workers do work for the company and do not have the freedom to set their own rates. These workers are fired from the system if they reject passengers-even if these passengers rides are below minimum wage. These companies are employers.
A few considerations for Andressen Horowitz:
- Properly take the time to distinguish between an employer and a truly open marketplace. Speak with labor lawyers who understand these distinctions.
- Read Lorena’s Gonzalez’s groundbreaking work on establishing AB5 in California and the ABC test. Watch some of her videos.
- Consider using proper terminology going forward when talking about employers like Uber. Uber is a transportation company. It isn’t an open marketplace. Consider using the term “employer” in writing.
Additional Notes & Reading
Feel free to follow up on Twitter if you have any feedback or addional questions or ideas related to this important topic. I try to respond to every DM. Below are a few additional tweets and notes that pertain to these issues.
My name is Dave Craige. I am a startup CEO and investor and former Uber/Lyft driver who drove for over two and a half years in Denver, Colorado. I have seen first hand how these companies manipulate and try to distort reality for the many workers that use them. It dissapoints me to see these low levels of professionalism in the tech industry. An industry I care about deeply.
Honor, a company that provides homegivers is a clear example of a employer.