The 1099 Economy’s Shift from Feasibility to Sustainability
Over the last few months, names like Uber and Airbnb have become a billion-dollar symbol for the continued rise of the 1099 economy.
These platforms have changed the way we consume, but also offer a way for providers to make money from their time, assets, or skills that wasn’t previously possible (or at least efficient). And until now, these providers have taken second stage to the latest financings and Valley gossip.
But as these companies continue to grow, a new story is emerging: one that asks, “what about the providers?”
Over the past year, a support economy for them has started — companies like AirEnvy, who provides property management services for Airbnb hosts. At Zen99, we’re helping those with 1099 income with their taxes and insurance.
But the rise of these support services is indicative of a larger underlying shift that’s occurring: the 1099 economy is moving from the era of feasibility to the era of sustainability.
Before 2014: The Era of Feasibility
In 2008, a platform called RunMyErrand (now TaskRabbit) appeared after a couple needed help getting dog food. Their goal? Connect neighbors with time or skills to other neighbors. Fast forward a couple years, and I remember frequently standing at the corner of 2nd and Brannan in San Francisco, hopelessly trying to catch a rogue cab. It was 2010, and a company called UberCab (now just Uber) was about to change the game.
“Uber for X” was going to be big. So intrigued by the idea, I left a cushy job at Deloitte to become an early employee at Exec — essentially an Uber for errands. We were a little too ambitious with our goal of “anything you want done for $25/hour”, and ended up pivoting into a more scaleable cleaning service before selling to Handy. But while there, I learned the potential of these new marketplaces.
Since then, we’ve seen everything from Uber for security, massage, and valet. The evolution of these companies confirms our learnings at Exec — verticalized is the way to go, as it’s far easier to scale one type of product than many. (TaskRabbit’s recent change is proof.) And the sheer number of companies starting “Uber/Airbnb for X” shows that the answer to “are these platforms feasible” is yes…at least from a technical and user perspective.
But — What About the Providers?
As a company operating one of these platforms, it’s important to remember that you have two major touchpoints with your customers: your technology, and your providers.
Companies have a lot of control over the first. Need a fresh new landing page? No problem — just put it into the next sprint. Website too slow? Refactor some code, or spin up some more servers. The hardest problem is learning to scale demand and supply at the same rate — too little of one side and the other will push back.
The second touchpoint with users is much harder to get right. Humans aren’t like code — they have emotions and can be less predictable. And although they’re technically running their own business on these platforms, they still have an innate human desire to feel like they’re part of something bigger.
The sooner companies operating these platforms realize that they aren’t actually tech companies, the better. Yes, technology makes them more efficient. But ultimately, they are a service that connects people. And when you’re selling a service, you’re selling a relationship — including with your providers. The easiest way to build this relationship? Treat them like humans instead of a product.
After 2014: The Shift Towards Sustainability
The first step: give them the tools needed to be successful. An increasing number of Americans work independently, either part-time or full-time. In step with this growth, support mechanisms are also changing — benefits are no longer tied to traditional employer relationships. New questions have emerged as a result. For example, what type of health insurance is best for these workers, and how do they get it? (The Affordable Care Act has significantly helped with this, and industry leaders agree.)
It’s possible for companies to maintain an independent contractor relationship with their providers while still making them feel like they are supported. Airbnb recently invited their hosts to an event to foster community. TaskRabbit and Uber have started consolidating essential tools for their providers via their Perks and Momentum programs. The market leaders are indicating how important these support services are, and other companies will follow.
The second step: help change outdated laws to support the growth of these platforms. Right now, more liquid marketplaces and getting individuals to participate on the supply side will drive the most growth. But as we move forward, existing laws will need to change.
We’re already starting to see this change, such as through the introduction of rideshare specific legislation in California, or cities like San Francisco legalizing short term rentals. Consumers want these platforms, and laws will change to address this demand. But legislation can also ensure the providers on the platforms are properly protected — for example, preventing insurance companies from dropping their policyholders or denying claims if they drive on a ridesharing platform.
Where Do We Go From Here?
The majority of the workforce has grown up expecting an HR department to help them manage their work — but now many find themselves without one. As these platforms grow, the providers need a new suite of support services.
Property management services and finance software may seem like the picks and shovels of this new gold rush, but they’re the tools needed to make the 1099 economy sustainable and usher it into its next phase of growth.
The era of sustainability has come. Companies who begin strategizing for sustainability over feasibility will ultimately be the ones who remain — maybe even one day seeing Uber-level valuations themselves.
Know someone who uses or works in the 1099 economy? Share this post with them, or share your thoughts with @Zen99 on Twitter using the hashtag #SustainableSharing
Tristan Zier is the co-founder and CEO of Zen99, a company that helps simplify life for independent workers, starting with tax and insurance tools to get organized and stay covered. Prior to founding Zen99, Tristan was Director of Operations at Exec (acquired by Handy) and a CPA with Deloitte. Click to follow them on Twitter @Zen99