Freelancer Marketplaces Are Broken (And Why Intelligent Selection Is the Future Of Work)

Tina

Published in

Tina’s Blog

6 min readJul 22, 2016

I’m sorry…

I’m sorry to be the one to break this for you…

But all of that time that you spent posting job roles, interviewing freelancers and searching though incomplete profiles was a massive waste of time.

This is a story I hear time and time again from (almost) successful entrepreneurs:

I could have just done this myself…

In this post, I will explain:

Why this time was wasted (along with the other outsourcing solutions you have tried)
The fundamental flaw with professional service marketplaces
One other common mistake entrepreneurs make when outsourcing admin tasks
And finally, what the solution is…

Before we jump into what is wrong with current outsourcing options, let’s focus on what you’re doing right.

As we discussed in this post, the majority of entrepreneurs are not actually Entrepreneurs, which is the reason why their business will likely fail.

But you’re not like that…

You have read The E-Myth, you have a basic understanding about systems and know that to be an effective Entrepreneur you must work above or ON the system and not within it.

You also understand the real reason that you/anyone should start a business…

TO SERVE YOUR OWN NEEDS (AND THOSE OF YOUR CUSTOMERS)

It isn’t to enslave yourself in day to day menial tasks that don’t directly add value to your/your customers life.

You know that the more quality time you can spend with your family/friends/girlfriend/boyfriend/dog, the richer your life will become…

And the more your business will thrive.

You know that if you nurture yourself and your life with the activities that excite and challenge you…

Everyone wins.

That’s why I like you, that is why you’re reading this post AND that is why your business will have a far greater chance of succeeding.

That said…

A number of you so called Entrepreneurs can still fall into certain traps laid down by the aptly named: time vampires.

A time vampire is a person or a thing that sucks your valuable time for their own benefit.

And I’m going to jump in right now and expose one of the biggest culprits:

The freelancer marketplace.

Veiled behind their glossy slogan’s and promises of a brighter future, these slightly faster “horses” provide little value over employing someone directly.

It seems kind of crazy to me that…

If you wanted to take certain tasks of your hands, you have to assign yourself more tasks to do this?

Create job description
Review potential candidates
Scroll through 12 million freelancer profiles
Negotiate costs/salaries
Review deliverables and provide feedback

I mean, you may as well just employ someone?

But then of course that introduces a whole new host of administrative tasks.

But to truly understand the problem here, we must look to Game Theory and the famed: Prisoner’s Dilemma:

Two members of a criminal gang have been arrested. They’re being held in individual confinement, and are unable to communicate with each other. They are both offered the same deal — a reduced sentence if they rat on the other. The possible outcomes are as follows:

Neither rat: 1 year sentence each
1 rat: 0 years for the rat, 3 years for the other
Both rat: 2 years each

What would you do?

The best overall outcome — the one in which you both serve the least time — is for you both to stay quiet.

But what if you know that the other person will do that?

If you have an opportunity to rat, and get off with no jail time, are you going to pass on that opportunity?

And if the other person is thinking the same, you need to rat on them too, to make sure you don’t get the full 3 years!

However you spin it, you both end up with a 2 year sentence, even though you could have just got 1 each.

What does this mean for marketplaces?

The prisoner’s dilemma has two sides to the game:

Prisoner A: Freelancer
Prisoner B: Entrepreneur

The rewards are more complex than simple prison sentences, but are rewards that I suspect you’re already very familiar with.

The freelancers want to win as many jobs as possible, make sure that they are paid a fair price for their work, and want to spend as little time as possible pitching to clients, negotiating with clients, and proving that they can do what they know they can do.

Meanwhile, the clients want to find the very best freelancer for the job, they want to pay the best price possible for the service, and they don’t want to waste time negotiating with and comparing the different workers.

As a freelancer, or a client, how do you maximise your reward?

Easy, you apply to as many jobs as possible, or you request applications from as many workers as possible that seem suitable.

That way you’ve got the biggest selection to choose or be chosen from.

The problem is, that’s the equivalent of prisoner option 3.

If you’re a freelancer on a marketplace, you know that every other freelancer will be applying to every job that they consider themselves capable of doing.

Sure, after hours of comparison, pitching, negotiation, and often lots of free speculative work by a freelancer, you may find a good pairing.

But all that wasted time has to be paid for — the freelancer’s rates have to accommodate the time spent pitching, and the client has to absorb the cost of their time too.

What if we were more considered when making these decisions?

What if, as a freelancer, you applied to only one in every 100 jobs that you applied to before, and spent a little more time deciding which ones you’d truly be really good at?

What if, as a client, you only requested pitches from 1% of the freelancers from before, but the ones that you thought looked absolutely perfect?

Wouldn’t we all end up with the exact same amount of work, but have all saved each other hours and hours of wasted time?

Well, unfortunately, that’s the same as prisoner option 1.

It’s definitely the best option for everyone, but as soon as you know that’s how everyone else is going to play the game, your chances of winning are multiplied when you go back to applying for 100 jobs instead of just 1.

This is all well and good when marketplaces are relatively small, but gets exponentially worse as the marketplace expands:

Let’s say that it takes 5 minutes for a client to request a freelancer, and 5 minutes for a freelancer to pitch to a client — including all the negotiation trial work, and conversations.

In a small marketplace where there are 5 freelancers and 5 clients, for all 5 clients to post a job, and find the best freelancer for it, it takes 25 minutes for each client, and 25 minutes for each freelancer — 25 minutes x 10 people = over 4 hours of time, wasted.

That’s not so bad, 4 hours amongst 10 people is only 24 minutes each — an acceptable amount of time to find work. What happens when the marketplace grows?

With 10 clients, and 10 freelancers, that number increases to over 16 hours.

100 clients and 100 freelancers? 1,600 wasted hours!

The bigger the marketplace, the more time is wasted by those using them.

What is the implication?

You, as the Entrepreneur spend too much time doing admin… just to outsource your admin.

And you enter this self destructive feedback loop of activity, not productivity, as your business starts to fail.

What if we fixed this problem?

What would it be worth to remove yourself and your key resources from the “activity death spiral” and started becoming productive again?

Freelancer Marketplaces Are Broken (And Why Intelligent Selection Is the Future Of Work)

What does this mean for marketplaces?

What is the implication?

Written by Tina