Easy to join, hard to advance.
What’s lost and gained with labor commodification in the sharing economy.
It’s central to our belief system that if you work hard, you’ll get better at what you do and people will pay you more for it.
This model doesn’t work if you’re a commodity.
If you’re a contractor for a successful local peer-to-peer (P2p) marketplace like an Uber or Lyft driver, then you’re very much a commodity. And the marketplace’s ability to commoditize you is central to their business model. When they’ve successfully commoditized their contractors, customers get reliability and all transactions are confined to the marketplace.
When they fail to commoditize, they lose money in two directions: terrible contractors turn away customers and amazing contractors encourage customers to form relationships outside of the marketplace.
Lyft and Uber in control
The Lyft/Uber experience is extremely controlled and uniform. A map shows all the cars around you, you request a car, the driver comes to you and takes you where you want to go (ideally without molesting you).
The driver doesn’t need to be a city expert or a particularly good driver, he just follows the instructions of the navigation app.
You don’t really care who the driver is. You probably barely glance at their profile.
“There’s a Lyft 5 minutes away.”
No matter the how cool, fast, clever she is, or how nice her vehicle or treats may be, there’s no incentive to form a business relationship outside the app. The only thing you care about is how quickly the driver can pick you up.
TaskRabbit not so much
TaskRabbit’s fatal flaw is they haven’t found a way to commoditize their contractors. The varied nature and complexity of the tasks makes this more challenging. Mounting a TV takes skill. Once you find a reliable person, it’s pretty easy to get their phone number and make an agreement on a future job.
The irony of local P2P marketplaces if someone is exceptional they become more valuable to the consumer than the platform.
Short game vs long game
It’s useful to compare contractors working in local P2P marketplaces to classic contractors, like a plumber or handyman.
In the local P2P model, the marketplace finds the customers, covers training costs, and provides their own brand of certification (basically, the new contractor watches some videos and passes a background check).
That’s great when you’re in need of some fast cash, but bad for long-term earning.
In exchange for the assurance of at least some business, local P2P contractors give up the possibility of increasing earnings over time that successful independent contractors typically enjoy. The contractor doesn’t own the relationship with the customer.
Traditional values
In the traditional contractor model, the longer you’re in business the larger your reputation (good or bad) grows. If you treat your customers well and do an outstanding job, you’ll get regular customers and referrals. Over time your business will grow and be more profitable. You’ll be building something valuable.
The local P2P contractor, however, is easily trained and replaceable. The veteran is just as valuable as the driver taking his first passenger. You don’t make more money from your reputation. You earn more by working more hours.
Companies like Uber and Lyft market themselves to would-be drivers as a way to make some side money, but if you talk to drivers, you’ll find many driving 40+ hours a week. I’ve found these people to be the best drivers. It’s their livelihood and they’re the ones who’re more likely to invest in the experience they’re offering passengers. They’re the ones that trick out their cars and bake cookies.
Vanessa Nelson exemplifies this. She’s turned her minivan into a karaoke party. That’s the kind of experience people would pay more for, but she’s limited to the rate Lyft mandates. Yes, people give her tips more often than other drivers, but she has no control over that.
“Nelson drives for Lyft seven days a week, from after dinner until 3 a.m.”
The paradox is that these are the people most disadvantaged by the local p2p model, because it doesn’t really matter how amazing they are. No one will (or even can) go out of their way to use that driver again. It only matters that the driver is the closest when a customer needs a ride.
Compare this to the (rare) awesome taxi driver. He’s got an incentive to give you his card, and you have an incentive to take it. It’s an opportunity to have a relationship with the person who takes you around the city—and there’s value in that beyond mere reliability.
My recommendation to the P2P industry: de-commoditize your stars
Say you have an awesome ride on Lyft or Uber. The driver (let’s call him Jim) tells jokes like you were old friends, his cookies taste like heaven, he’s playing all the right tunes and navigates city traffic like a street whisperer.
You would love to ride with Jim again. After the ride, you give 5 stars, and another window appears asking you if you’d like to add Jim to your favorites list. The app tells you that by favoriting Jim, you’ll be more likely to get him again. The trade-off is that if Jim has to drive a bit farther to pick you up, you’ll pay a percentage of that time while he’s en route to pick you up.
The next weekend, you open the app to hail a driver and see a special car on the map. It’s your buddy. You send the request. Jim accepts. You pay a bit more, but you’re happy to do so because Jim’s worth it.
