What Andressen Horowitz gets wrong about marketplaces.

A16z released a number of blogposts and a video 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 autonomy 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 mention this and Andressen Horowitz recently wrote articles with lists about “marketplaces” and articles trying to define their terminology.

But a lot of this information is simply not true.

Workers who work for apps like Uber, Lyft, Doordash, Instacart & Postmatesare not in an open marketplace. They 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. These companies try to contort themselves into a “marketplace” because it it less expensive for them. They do this to 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 which gives workers labor protections.

If you speak to labor lawyers who understand these app companies they will tell you a simple fact. “Uber is an employer.” Just because they have an app and use this to manage their workforce doesn’t mean they get a free pass to ignore hundreds of years of labor law. Economists like James Parrot have studied companies like Uber and have found that they were paying 96% of their drivers in NYC below minimum wage. Sad to see this level of exploitation from this company. Workers are simply not respected.

If Uber/Lyft/Doordash and others would like to 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 and that isn’t how these companies operate. These companies are currently employers and exert heavy and granular control over the work done.

Coal mining company in 1914 misclassify their “independent” workers

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 probably can imagine, coal mine isn’t a “coal marketplace” for miners. And so too 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, and companies like 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 where vendors have full automy over their pricing and who they choose to work with. These app companies are employers who control human labor and they unilaterally control prices. Their drivers and delivery people 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 have experience in 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, Lyft, Doordash, Instacart & Postmates. These are transportation and delivery companies. They aren’t open marketplaces.
• Consider using the term “employer” in writing. It would bring a great deal of clarity to this issue to properly label and discuss the differences between employers and open marketplaces.

Additional Notes & Reading

Feel free to follow up on Twitter if you have any feedback or additional 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.

Uber relies on the misclassification of their workers. Their entire model is build on this misclassification.

As law professor Veena Dubal states, Uber and Etsy/Ebay are radically different. Do not fall for the comparisons that try to label them as the same.

“Flight sharing” from Ashley Bischoff

A truly alarming stat. 96% of the ridehailing drivers in NYC were being paid below min wage. This population is predominately immigrants and it is incredibly disappointing to see them treated this way.

“Marketplace garbage rhetoric is the only way Uber can attempt to skirt AB5”

Chipotle isn’t a “burrito markeplace.” That would be ridiculous.

Uber is a transportation service that employs drivers.

About Me

My name is Dave Craige, I am a two time startup CEO and investor. And also a former Uber/Lyft driver who drove for over two and a half years in Denver, Colorado starting Nov 10th of 2013. I have seen first hand how these companies manipulate and try to distort reality for the many workers that use them. It disappoints me to see the lack of clarity around these issues in the tech industry; an industry I care about deeply.

A few of my additional research articles on this industry: www.NotCoolUber.com / www.NotCoolUber.com/2 / www.NotCoolUber.com/min