About Modern Job Trade — Freelance Platforms
So far, we’ve sketched out how freelancers and blockchain might mean true love for society. By love, we of course mean the reduction of expensive middlemen in the job trade.
Our freelancer 2.0s (or Nomads, if you will) conduct skin-in-the-game recruitment and collaborate in a decentralized peer-to-peer network — great, but how do they actually get client engagements?
We want to answer that question directly, but we also want to keep the tension — let’s detour into the world of freelancer 1.0s — how do they go about getting food on the table?
We also want to answer that question directly, but we seriously need to make another detour — why do people freelance? Among many reasons, money and autonomy stands out. Because of current inefficiencies in the market, freelancers can charge a pretty neat per-hour price. Add volume to that, and an ex-consultant can double, even triple his annual salary. Autonomy plays to the dream of any employee — work wherever you want, whenever you want, with whoever you want, and with whatever you want. Yeah, we know. Take a deep breath, close your eyes and let dreams of white beaches and cold drinks appear.
Back up one level in the inception (we purposely use that reference wrong) — people freelance because of money and because of autonomy. Now, how do they put food on the table? About 25% get their engagements from their private network, the rest depend on third-parties to pay their bills.
What do we mean by private network? Let’s just use the business relations of a consultant as an example to keep things simple (believe it or not, this blog is all about keeping it simple). Let’s say the consultant made three business relations throughout his time in consulting, relation A, B, and C, and that every relation wants him to freelance a project for them after the consultant quits consulting — this constitutes his private network.
By third-parties we mean freelance platforms, staffing agencies, and sometimes even consulting firms, but focus on the platforms (ho-ha, keeping it simple). Freelance platforms like Fiverr and Toptal connect freelancers with companies in a common marketplace. Companies can post projects and freelancers can look them up. Freelancers must go through a recruitment process to access the marketplace — once accepted, they’re swimming in projects, ready to make money at every stroke. Then they realize they have to pay up to 50% commission fee to the platform. Then the real stroke appears.
Wait a minute — Freelance platforms are just recruiters with search engines that connect ‘verified’ talent to clients? No, of course not. There’s more. They often offer a community and services that simplify life as an independent worker, but is this really worth giving up 10%-50% of your income for?
No, that’s why the 25% private network, 75% third-party distribution requires further investigation. And with this investigation we will answer our initial question — how do freelancers actually get client engagements? Well, it’s a journey. It begins when you’re still a full time employee. You build your private network until you’re confident your relations are strong enough to support the everyday life of a freelancer. You quit your job and reincarnate as an independent worker. What a rebirth! Suddenly, you’re working with people you know, doing stuff you like, doubling or tripling your salary in the process — Nirvana. But every good rock band breaks up at some point — your private network can’t support you forever. Suddenly, you’re on your own. It’s dark and the platforms are getting closer. You see their ads on Linkedin. A friend recommends them — ‘they’re not that bad’. Suddenly, you’re working with strangers, doing stuff you don’t know or don’t like, giving away big portions of your salary in the process — Nataraja (Shiva, the destroyer of worlds, dancing a doomsday like dance).
In short, freelancing is great as long as your private network provides new engagements. Once the wishing well is empty, third-parties remove the two great benefits of freelancing: high salaries and high autonomy. Therefore, many freelancers return to full time employment once they run out of private engagements.
What if there was another way?
Let’s return to our ex-consultant with relation A, B, and C constituting his private network. Let’s say A has $50k worth of projects for him, B $20k and C $100k. Our friend free solos this network. He begins with A, but while serving A, B asks him for his service. He declines — there’s no time. B has to wait. When he’s finished, C comes into play — they need him now. He breaks his promise to B and serves C instead, but C is too demanding — they need more resources. He breaks with C after billing them $10k and returns to B, but B has found a replacement in the meantime. Our friend is out of private relations to serve. He rejects the value proposition of third-parties, bites the dust, and returns to the safe realm of full time employment.
Now, let’s put him in a decentralized peer-to-peer network of freelancers and see if we get the same result. Again, our friend begins with A, and again, B requests his services. He forwards the request to the network and finds a replacement willing to serve B for $19k — earning A a net profit of $1000. When he realizes that C is too demanding, he requests more resources from the network and finds two. They split the contract in three and serve C as a team. After finishing the engagement at C, one of his team members has a similar project for a client in his private network, let’s call the client D. The team serves D for a period of time until the engagement is completed. Our friend is again approached by B — they have a new project that requires his services — and the merry goes round.
What are we describing here? The infinite Nirvana — Grohl and Kobain rocking it out forever. The melody is the aggregation of multiple private sets of business relations into one giant set of business relations. But not just demand, supply as well. A global decentralized network of freelancers ready to serve anyone that may need their service. Together, they keep the relations warm. Together, they build new relations. Together, they are stronger than on their own. They don’t have to rely on third-parties anymore, they have each other. What magic glue sticks them together? Economic incentives. If I make money, you make money. Hurrah, we’re one big happy family.
Decentralized freelance networks allow freelancers to collaborate? At any scale. The economic game ensures fair ownership and aligned incentives no matter the size of the network. You’re 10 members? Cool (you could probably do without blockchain, but still cool). You’re 10 million members across the globe? No problem, we’ve got you covered.
Imagine the possibilities (we’ll cover this topic in detail, but imagine) — the network could offer its members financial services, social security services, incubation, funding, office locations, access to markets across borders — anything the network wants. It’s like a well with infinite wishes. Hello Genie, goodbye Toptal.
Safety comes in numbers, don’t travel alone — Nomad.
References
Upwork, Future Workforce
GlobeNewswire, Global Freelance Platform Market Size
Financesonline, Freelance Statistics
Korn Ferry, New Era of Humanity
