[MUSIC] What I want to do today is tell you about
an area I've been working on research-wise for the last year or two. I'm a labor economist, I've studied things
like why firms use stock options and how graduating during a recession
affects the rest of your career. If you're an MBA, Class of 87,
you guys are rich. The guys a year or two later,
they're out of luck. >> [LAUGH]
>> Still to this day, but that's another story. What I want to talk to you today about is
the gig economy and as a labor economist, I'm very interested in this. I've been doing research using the sorts
of data sets labor economists use all the time from the Census Bureau and
places like that. But I've also been very lucky
to have some gig economy companies that handed over data and
either asked me to do some work with it or have opened themselves up as laboratories
that we can study for research projects. So I'll tell you a little bit about
some of that as we go along, but mostly, or at least, a good portion of what I want
to talk about is you guys are managers, you're business people. I want to think about what does
this mean to you as managers? What's the gig economy all about? I teach strategy classes here and
I'm going to at least spend a little time thinking about what does this have to
do with the strategy of your business? Anybody who reads the newspaper has
heard a lot about the gig economy, Uber, all these other companies and
it probably has had a lot more influence in the press
than in the actual real world. But it is definitely a growing
part of our business and we as labor economists want to
understand it going forward. So, to inspire the discussion
of the gig economy, let me tell you about three
participants in the gig economy. This is a guy named Alexey, I love giving
this talk because Alexey is in the middle of the Ukraine right now and
he had no idea that 100 people or however many are here in Stanford are
looking at a picture and discussing him. But this is just a guy who does
computer software engineering. He lives in a place in the Ukraine that
I certainly wouldn't try to pronounce. This is his profile on
a website called Upwork. Upwork is the largest online
freelancing platform in the world. This guy, you can hire him now to
do some web development for you, or other things like that and he will do
it for you, charge you $25 an hour. He has great ratings, he's done
a lot of work, he's very successful. He's selling his work to people
here in the United States, it's opened up an opportunity for
him to make money beyond his parents' wildest dreams because they could
only sell their labor in Ukraine. They couldn't sell Americans with
a lot more money to spend on it. This is a different guy, a very different
perspective on the gig economy. I don't know his name. He's in a newspaper article in Bloomberg. This guy lives up in Sacramento. He drives for Uber. At the beginning of each week, he drives
down from Sacramento to the Bay Area, spends four or five days in the Bay Area
driving 14 hours a day for Uber, spends the night sleeping in the San Francisco
Marina Safeway parking lot in his car. Now, I don't know if you guys are like me,
when you're reading a newspaper article, you feel like they leave
out the important parts. They never explain what he does about
showering, I'm dying to know that. >> [LAUGH]
>> But on the more substantive of issues, he's making more money because he comes
to the Bay Area to do his Uber driving instead of doing it up in Sacramento and
it's much more lucrative here. He stays busier, the surge rates
are higher, all sorts of stuff like that. So both of these guys are gig
economy success stories, and what's interesting about them and
this isn't true of the entire gig economy, is from a broader labor economics'
perspective, they're immigration stories. The gig economy is enhancing immigration. How? What are both of these people doing? They're both doing exactly what people who have moved to the United States
have been doing for hundreds of years. They're taking their services,
selling them in the United States and then taking at least some of the money and
sending it back home. Now Alexey doesn't even have
to move here to do that. Upwork is immigration platform
just as much as it is an actual workplace platform. Uber is less of an immigration platform
but it's exactly the same story, the guy comes down from Sacramento,
works in a higher wage area, brings the money home and his family
is better off as a result of it. We're going to talk about other stories
but those are two perspectives. Let me tell you about a third
perspective on the gig economy. When I do a research project,
I like to really get imbedded in it. So I've been doing some driving for
Uber on the side. >> [LAUGH]
>> It doesn't pay very well, so I'm probably going to stick
with the whole Stanford thing. >> [LAUGH]
>> But I have learned an incredible
amount in the process of it. It's been very helpful for
the research project that I'm doing. It's been very interesting in many ways,
there on the side you can see, I have a really good rating,
I'm very proud of that. >> [APPLAUSE]
>> Someday, I'm going to find that guy who gave
me four stars and he's in trouble. >> [LAUGH]
>> And then the other thing to notice is you don't see this as a Uber rider on
the right, that's from the app for the driver and that tells me
those red areas are the surge. So that tells you where you
can go to make more money. Sometimes 'we'll be sitting around at
dinner and it drives my fiance crazy, we'll just be sitting there and she'll go,
what are we doing after dinner? I'll go, look at the surge, gotta go. >> [LAUGH]
>> What are we going to talk about, about the gig economy? She's actually in the room but
that's neither here nor there. >> [LAUGH]
>> Anyway, these are the things I want to
cover pretty quickly here. I want to talk about some facts from the
gig economy, segmenting the gig economy. I want to think about why it's grown? And then I want to tell you briefly
about the study I'm doing at Uber, not about my own earnings at Uber. And then I want to save some
time to talk about as managers what does all this matter to you? So I did a study for Upwork. Upwork asked me to use a survey they
conducted and their own data to look at the gig economy and
talk about the state of the gig economy. In that paper, I also looked at many
other studies of the gig economy and what's interesting to note is the size of
the gig economy depends very much on how you define it. When we say the gig economy, if you just
mean people on gig platforms like Uber and TaskRabbit, that's a very small
part of the overall economy. In fact, by one estimate, one out of every 200 US workers have their
primary job on some sort of gig platform. Ten percent have their
primary job as some sort of job that I would describe
as a gig economy job. What do I mean by that? I mean not just being on Uber,
I mean being an independent contractor, or being some sort of freelancer and
something like that. However, that's a small
part of the overall Ggig economy because most people who work
in the gig economy have another job. They have a regular job and
they drive for Uber on the side. Even when I'm not driving for Uber, I'm
a member of the gig economy because once in a while,
I'll take on a consulting project. So I have a main job, and
then I have an independent contractor job. So when you include those people, you're talking about 30% of the US
workforce has some sort of job. Now this has been growing And
because of technology making it easier for people to be free agents, and
other trends that I'll talk about, the size of the independent
workforce has grown substantially. In fact,
in a paper by some other economists, they estimated that between 2005 and
2015, all of the growth in the US labor force was in something
you might call the gig economy. Okay, all of the growth. So the regular employment stayed
steady in terms of numbers and the growth was all on
the gig economy side. This is from the paper I did for
Up Work and I don't want you to look at all the
numbers carefully, don't worry about that. I just want to make the point that I, in
that paper, compared people who worked in the independent workforce
to all other employees. And the thing to notice if you did
have time to look through this slide, is that the independent workforce, those
who work in some way in the gig economy are surprisingly representative
of the economy as a whole. We think of independent workers as
sort of Uber drivers and temps and low skilled workers going from gig to gig. Actually a lot of people
at all skill levels are members of the gig economy
in one form or another. So for example the guy who mic'd
me up I was talking to him. He's an employee for Stanford half time
and then he's also in the gig economy. Because he does gigs for various other
places around here where people need to be mic'd up, and other things that
have that same set of skills. So he's a relatively skilled person a lot
of us who work in the gig economy are. There are unskilled people as well, so the distribution turns out
to be surprisingly similar. Whether you're looking for people in the gig economy to
people in the broader economy. The other thing is, I get a little
bit annoyed by news accounts that equate working in the gig
economy with exploitation. There's kind of a feeling that we're just
exploiting all these people who have nothing to do but work on Uber. We have lots of problems in the United
States, with regards to low level or low skilled workers. And, you know, there's a lot
we need to do to address that. I don't think the gig economy
is really the issue there. It might be a little bit of an effect
of that, I'll talk about that, a result of that but it's not driving it. People that work in the gig economy
make less on a per year basis but that's because they're
working fewer hours. On a per hour basis,
they actually make more by my best estimates it's hard to say
exactly for various reasons. My best estimates are that per hour
they make 15% more than those who have regular jobs. Now they have to more just break even
because they have to pay their own social security tax they don't get benefits and
things like that. But at least their not being exploited
in a way that their pay is much lower. And in fact if you're working in the gig
economy by choice rather than because you can't find a job that you
want in a regular employer. You have an even higher premium
to working independently. And most of the gig economy are people
who work there because they want to, not because they can't get a real job or
something like that. And that's especially true now. If you ask people in
the gig economy in 2009, are you working this gig job because
you want to, or because you have to? In 2009 when unemployment is 10, 12%,
the answer is because I have to. If you ask them, anybody who wants
a job right now can have one and so the people working in the gig economy
want to be working in the gig economy. And they are making a premium relative
to what they would be earning, people with similar skills
in the rest of the economy. So this is just some distributions you can
see the gig economy workers are in green. This is the distribution I know it's been
a long time since you've took data and decisions here at the GSB. This is a distribution of hours per
week by people in the gig economy and the green line and people in the regular
traditional jobs in the red line. You can see that the distribution's much
more spread out for people in the gig economy whereas they tend to be more 40
hours or something close to that, but so that there's more flexibility and
value in that. But the pay turns out to
be very similar overall. Their lumpiness in this is a little
because of the way the survey's set up I won't get into the details. But the point is that the pay is
pretty similar across the two groups. Okay, I've looked at a lot of surveys
of the gig economy of various people being asked who work in the gig economy
why do you work in the gig economy. And I've taken all the answers to
these surveys thousands of answers. And I I've done a really detailed
text analysis of this and I've got like this fancy algorithm and
big data algorithm to figure it out. And I took all my computing resources
available and I created the following word cloud that really technically gets
at what people are looking for. >> [LAUGH]
>> Okay, that's it. If you ask somebody why do
you work in the gig economy? Occasionally it's because I have to,
I can't find the job I'm looking for. But in the majority of cases
they say I want the flexibility. Flexibility comes in many dimensions,
it can be I want to take this week off, I want to get my kids to school,
I want to be able to do this and that, but flexibility really drives it. And so technology's enabled a lot
of people to become free agents, to live much more flexible work lives. And so that's the very positive
side of the gig economy. Now by the same token I could
do the same word cloud thing and say well,
what don't you like about the gig economy? And again there,
there's just one answer instability. If I work in the gig economy, next week
I might not get the guy in the back who's doing my mic, I have to say nice
things about him or he will shut me off. He, if he suddenly next week
those venues he's working at have a slow week that's
going to hit his earnings, more than other people and
you know, that can be problematic. So I don't know about him in particular,
but for a lot of gig workers, this is a bit
of an issue for a lot it's not. Either they have a spouse who
earns a more steady income, or they have enough in savings that they can
buffer those things over a period of time. And in fact, I was very careful to use
the word instability and not risk. I'm not convinced that it's higher
risk to work in the gig economy. It's more unstable month to month,
week to week, but the beauty of the gig economy
is the downsides are small. If you have a bad week or two,
you know you can bounce back. If the economy deeps for a while,
you lose 25% of your business. If you're in a regular job and
the economy dips there's a low probability that you get hit with a very bad shock,
which is to lose your job entirely. So, on the total risk, I'm not that
worried about the gig economy workers. But from the variation it's
definitely a cost, as it were, of working in the gig economy. I teach a class here at the GSB,
with a guy some of you may know, everybody in the Bay Area knows and since
you're GSB alums, you probably know him. You may know him a guy
named Lenny Mendoza, he and I teach a class here on inequality
in the United States for MBAs. And in that,
when you talk about inequality, a lot of people want to
talk about the gig economy, as I mention because I feel like
it's people who are exploited. And it's not immediately obvious that
the gig economy is making inequality worse I think it might be a little
bit of an outcome of inequality. But here, I can give you just
a little sense for that. So, I already gave you a sense for
it with the Uber driver. The Uber driver is smoothing
out inequality to some degree, because he's taking money from a rich
area, which is the Bay Area, and moving it back to Sacramento. That's going a very small
way to undoing some of the. Some of the forces that are leading to
greater inequality in the United States. But on Upwork, you see what's going on
there is it's also lowering inequality, but in a different way,
not quite in the same way. So these numbers are, again,
a little hard to see, maybe, but let me just tell you what they say. If I go on the Upwork site, so the buyers
on the Upwork site are companies or small businesses that are looking for
someone to do search engine optimization work, web development work,
translation, things like that. If I look at the zip code where those
people who are buying services are, they're very rich zip codes. So, to be a little more specific, the average income in the zip code
of a buyer on the Upwork site is 36% greater than the average income for
the United States as a whole. So these are rich zip codes. They're also even more outliers
on things like education. The sellers, on the other hand,
are very middle class incomes. So, for example, on the income side, the average income in a zip code of
somebody who is selling their services on Upwork is 15% above
the average in the United States. So it's a little above the middle. And so the point is, what is a site like
Upwork doing for inequality in the US? It's helping a little, it's taking
money from rich neighborhoods and pushing it to middle class neighborhoods. It's not doing anything for
poor neighborhoods. Nobody, not nobody, but
relatively few people from poor neighborhoods are offering
their services on Upwork. However, we're a global school. We were happy to take
a global perspective on this. Upwork is actually doing,
as immigration, and more broadly, global trade does, Upwork is doing
a fair amount to equalize or to undo some inequality across the world,
why? Because guys like Alexei who come from
poor countries earn a lot more than they otherwise would. And they're getting their
money from rich countries. In Upwork, there's just a ton of people
doing work in the Philippines and India. That's really having, at least on
a one-by-one level, if not countrywide level, helping a lot with bringing
up lower-class countries like that. So the gig economy, and in particular,
globalizing it through sites like Upwork, has the potential to help undo
inequality on a small scale. We're not going to solve
the problems that way, by any means. But on a small scale, it can contribute. When I think of inequality and
the gig economy, here's the thing where I
think we have a real problem. These people aren't even
gig economy workers, but they get sort of treated like them. They get bunched in with them. People who have on-demand jobs, this,
to me, is a much bigger problem. So the Uber driver may
not make a lot of money, the one on the left,
she's she's an Uber driver. She may not make a ton of money,
but she makes a decent living. She has total flexibility, she works when
she wants to, everything is her choice. So in terms of whether she's contributing
to inequality, I don't know. But at least she's earning money, and we don't have to think about
the conditions of her life. One of the problems with technology, technology has enabled that
flexibility for Uber drivers. It's also enabled inflexibility. How's it done that? Starbucks has gotten better about this. So it's a little unfair for
me to show you a Starbucks picture, because they've tried to undo this. But a lot of employers are getting much
better at figuring out their demand for workers on a very short-term basis. So they'll call people
the night before and say, you have to be here at 9 o'clock tomorrow. That's very costly to a worker, right? So the Uber driver has total flexibility. The person working at Starbucks or
whatever companies are still doing this, on-demand workers,
we see a low wage in that job. But if you sort of thought of it in
terms of overall happiness of their job, it's even worse, because the cost to
them of these jobs are very high. They have to find babysitters
at the last minute. They have to do all sorts of other,
they have to do other things. So this, I think,
is more of a problem than the other thing. So let me talk about one more
thing related to inequality, and then I'll move on to
more managerial topics. This is a graph from a paper
written by a bunch of people. One of the authors is Nick Bloom, who's my colleague here in
the Stanford Economics Department. So let me ask you,
before I show you the graph, if anybody figured it out from that
graph already, congratulations. You were an RJ Miller scholar, probably. And so what I want you to
think about is the following. Do you think that the increase in
inequality we've seen in the United States over the last 30 years is more because
inequality has grown within firms? That is,
CEOs are making more than line workers, that difference has grown within firms? Or do you think it's more because across
firms, so the CEO or the middle managers of one company compared to the CEOs and
the middle managers of the other company? Well, it turns out it's
entirely across firms. So that's what this graph was showing you. So if you look, the top, let's just
focus on the yellow line at the top. That shows you the percentage
increase in the top 1% of all workers in the United States
in the top left. Up there, it shows you the same thing,
but done at a firm average level. So I take the average pay
at the top 1% paying firms. And the growth in those firms has
been exactly the same as the top for all workers individually. So another way of thinking about this is,
the inequality that you've seen over the last 30 years is because at Stanford,
Stanford professors have had administrative
assistants for that whole time. The multiplier between our pay has
been steady the whole 30 years, okay? But if you compare my pay to an economist
at Foothill College, where the pay rates are lower, my salary has gone up
quite a bit relative to that other person. Why does that matter? Well, why does that matter
to the gig economy? What's happening is, you see a lot of big
firms that are very successful, Apple, Google, Stanford,
probably, to some degree. They're very successful. And they say, okay,
we have a lot more money. We're sharing it with
everybody at the firm. Why are we sharing it with people who, why are we paying a lot more to our food
service workers and to our janitors? And those people get shunted
out of these companies. So you see a lot more outsourcing
as we go over time and as pay disparities
between firms have grown. And firms don't want to take
the bottom level with them as the salaries within those firms grow. So a lot of those workers
end up in the gig economy. Now, that doesn't mean, they then
become free agents, and they do okay. But the point is that part of
what's made the gig economy grow is this extension of inequality,
and therefore, wanting to make free agents out of
people who aren't core to the business. All right, let me change gears and
talk about, so I'm giving a talk at the Stanford GSB. And nothing's changed since you guys
graduated, looking out at you, what, ten years ago, something like that. And so
not much has changed here at the GSB. I am still contractually obligated to
show you a two by two matrix in every talk that I give. >> [LAUGH]
>> So I've followed through on that. So I like to segment the market for
independent work along two dimensions. Along the vertical axis,
I have online versus offline. The online part is actually
still a very small part of it. Uber is huge, Upwork's pretty big. You've heard of these companies, but there's still a ton of stuff
that's just done offline. And this is where the microphone guy,
Andy, I think his name is, comes in. He's doing this work for these other
venues where he puts on mics, and does other sound work at those places. He gets those gigs by contacts
that call him at those places. He doesn't go on some website. That's all going to move
from right to left. That stuff will all get
done online over time. That's just a matter of slowness and
technology taking over, and old networks working the way they are. So we know where that's going. The Ubers are taking, and
that sort of thing is taking over. To me the more important
issue is the horizontal axis. So I want to ask you to consider
the following thought experiment. Put yourself back in the year 2005. So I want you to forget everything
you've learned in the last 12 years. Now I know a lot GSB students,
and I know it's not hard for them to forget things
they've learned very quickly. So I want you to go ahead and do that. So go back to 2005, and suppose somebody came to you
with the following two options. Would you like to invest
in a company that we want to build out into a big online
freelancing platform for software developers, and
translators, and things like that? Or would you like to invest in a company
that's going to enter the ride-sharing business, where people are going to drive
each other around in their own cars? And I think if you're honest
with yourself, you would say, I'd go with the online labor platform,
or Upwork. I wouldn't have invested in Uber. Well, obviously you would've been, in hindsight we all would've been
wrong had we made that decision. And if you stop and think about why, it actually becomes apparent that it's
just simple economics or labor economics. And why would I say that? Well, what's going on in Uber turns
out to be what I call commoditized matching in the gig economy. What does that mean? It means an Uber is an Uber. Uber sets you up with somebody. They tell you, here's your match. The person shows up and
they drive you away. And sure, when I described it a minute
ago, and if you were a venture capitalist, it sounded funny,
their own cars and all that. But when people realize that you were
taking a product they knew really well, which was the taxi, and
you were doing it better and cheaper, it wasn't very hard for
them to say, okay, sign me up for that. And we all started driving around in
other people's cars very quickly. So that commoditized matching
has very low friction. Somebody in the middle just assigned you,
you show up with the car, and off you go. The key is the intermediary,
the platform, assigns your car, your driver, and it all works very well. Why have the likes of Upwork and
Catalant, which is a place to match MBAs to gig-type consulting projects,
why have those been slower to catch on. Because there's a lot more friction in the
labor market if all I do is introduce you. These sites introduce
you to a set of people. And then you have to go through
all the trouble of vetting them, negotiating with them,
figuring out who's who, and what-not. So what you've done is instead of
taking something we all understand, which is the taxi, and
making it better and cheaper. You've taken something we all understand,
which is hiring people, and you've made it difficult, and weird, and different
than it used to be, and it's not worse. Over time we're going to get there,
we're going to learn how to hire online. And we're going to get
better at distance hiring. But it's going to be slower, and
may not take over the market for employees in the same way that Lyft and Uber have completely taken
over the market for taxis. So why would you ever employ
somebody from the gig economy? Well, the big advantages are,
one is what I call labor arbitrage. If you're going to have somebody
in the Ukraine do a job instead of somebody in Silicon Valley,
that saves you a lot of money. So obviously you want to do that. Choice I'm going to come
back to in a minute. Faster onboarding. But the bottom two, a lot of you
have small companies out there. And I'm going to tell you that you guys
should be more on the forefront than the big companies in hiring gig workers. Why? Because the fact that hiring
gig workers makes it easier for you to downsize or change the workers,
the work force skill you have. And the fact that you can
hire partial workers, you only need a half of an SEO specialist. You can do that through the gig economy. Hiring regular workers you don't
have these same sorts of advantages. And so the ability to be much more nimble,
a lot of you have startups. Every one of you has done four pivots in
the process of running your business. And therefore,
you need a different set of skills. Having more flexible gig workers for a lot
of those jobs, not for all of them, but for a lot of those jobs,
makes those pivots a lot easier. You can get rid of people you don't
need anymore, bring on people you do and you can hire people for partial jobs. If you happen to be a gig platform, this means that small companies
are a big growth opportunity for you. Because if you get into current startups, the thing that's keeping big companies
from figuring out how to solve those frictions I was talking about is
just they're stuck in their old ways. But smaller companies, as they scale, are going to be much better at
breaking down that friction, hiring remotely, and doing all the things
that will make the gig economy bigger. So if you have a gig platform,
this is a big growth opportunity. Get in on the startups now, and
as they scale and need more people, they will remain able to take advantage
of the advantages you have to offer. I mentioned that I would
tell you about choice. What's another really good
thing about the gig economy is it just opens up the possibilities to you. So Alexi, and other people like him,
not only are they cheaper, but they deepen the pool of potential
software developers dramatically. Here in Silicon Valley,
that's not such a big deal. The cost savings are a big deal. We have plenty of software
engineers around. But in a lot of places,
suppose you were in Chicago, or a better thing would be,
suppose you were in Lawrence, Kansas, a town of 25,000 people with
a few hundred software developers. Well, you're kind of hiring
off that boardwalk over there. So there's all these software engineers. If you think of all the potential people
you could hire as spreading out along a boardwalk and the people right
in the middle are perfect for you. And at one end are those who don't have
quite the right skills for one reason. At the other end are those who don't
have quite the right skills for another. Where do you want to be hiring from? You want to be hiring from
a very crowded boardwalk. And if you live in Silicon Valley,
you just walk out the door and there's a ton of software engineers. And there's plenty who will
fit the exact need you need. Getting them to come work for
you is a difficult problem, but at least there will be plenty available. But if you're in Lawrence, Kansas,
there is nothing out there. So what do you do? Well, this is a picture from Upwork. If you only want to hire in your area, of course, you just have
the people who are in your area. But if you are in Chicago or
Lawrence, Kansas or wherever you are, you suddenly
have 20,000 additional software developers available to you who
are thousands and thousands of miles away. So if you are in a smaller area or
even in Chicago, which doesn't quite have as big
a market for software engineers, these online platforms provide
a much more crowded boardwalk for you, and there's a lot of value in that. You have to change the way you hire people
and the way you work people into your company, but it's something that at
least creates a lot of value for you. I want to change gears slightly for
about five minutes, and then spend my last five minutes before I
take questions talking about strategies. Claudia Golden is a Harvard economist,
probably the leading authority in economics on
male-female pay differentials. And she said The converging roles of
men and women are among the grandest advances in society and
the economy in the last century. Women have really caught up in
the workplace is what that means. I'm going to translate once in a while. And so what she says is that, the gender
gap in pay would be considerably reduced and might vanish altogether. If firms did not have an incentive to
disproportionately reward individuals who labored long hours, and
worked particular hours. And so, there's another word in there she
mentions, that jobs are structured and enumerated to enhance
temporal flexibility. If you make the job more flexible,
women will do better. Was the underlying hypothesis of this and many other predictions
about the gig economy. So that's what we're studying at Uber. We went into Uber and we said okay well,
there's no discrimination here, the algorithm is gender blind. And so women and men are going to
make the same here, right? Well, it doesn't turn
out to be that simple. This is pay on Uber per hour, these are hourly earnings for Uber
drivers over the last couple of years. And what you can see is there's a pretty
steady 5% pay gap between them. Men driving for
Uber make about a dollar an hour or about 5% more than women driving for
Uber, okay?. Now, I'm not going to cold call anybody,
because it's reunions, you're just here to have fun. But, anybody want to
take a guess as to why? Why do men make more? >> Bathroom breaks. >> [LAUGH]
>> I do not have a good direct
test of that hypothesis. She said, for
those of you who are out there, I'm supposed to be using microphones,
but these will be quick answers. She said bathroom breaks. To my knowledge, that is not the answer. >> [LAUGH]
>> By the way, as an Uber driver and a man, I can say if that's true, I'm not
contributing to the male differential, but that's another story. >> Men driver faster. >> Men drive faster was the next guess,
that's one of them. Got another one? >> Men drive to the surge areas. >> Okay, men are more responsive
to making more money. It's not that they drive
word of the surge areas, it's that they work more
when there is surge on. Whereas women want to work when their kids
are in school, when whatever it is, okay? One more reason,
anybody know one more reason? >> [INAUDIBLE]
>> Exactly, right yeah but there's a third reason. >> [INAUDIBLE]
>> I'll come back to that in a second let me
show you the answer. Its not tip, somebody said tips,
this is all before Uber had tips. And I have not yet gotten a tip, so as far
as I can tell, that's not that relevant. >> [LAUGH]
>> So it's a little bit, we wrote this paper, we started writing
this paper, purely expecting it to be the thing about men drive,
are willing to drive when it's less safe. They'll drive on the weekends. When people are more likely to puke in
your car, I have some graphics for that, I took them out. >> [LAUGH]
>> And we thought it was going to be more about this work while your
kids are in school thing, that's a very small part of it. This is the entire 168 hours of the week,
from midnight on Sunday, to the next Sunday at midnight. And this says what fraction
of each hour of their time, are being driven by men versus women. If you look at this carefully, and I won't go in,
there's a little bit of a difference. Where men are driving
the dangerous hours and women are driving more
during school hours. But that turns out to explain
a very small part of the wage gap. You've got the third explanation,
I'll come back to speed. The second one that nobody mentioned is,
it turns out, and this is true of other labor markets. One of the innocuous non
discriminatory reasons well, you could tell a discrimination story, but one of the reasons men make more in a lot
of labor markets holds on Uber too. It's that they work more and
learn on the job and get better at it. The average man on Uber has driven,
I don't know, I'll make up a number, 1,000 trips. The average woman driver on
Uber had only driven 500. Turns out,
this is the average earnings for your first trip up to the average
earnings for your 5000th trip. And you can see there's quite
a bit of a learning curve. Among other things,
you learn where the quick in and out bathrooms are, and
other things along those lines. And then finally there's the other
answer that men just drive faster. So what does this tell you? Now, this is truly from data and
decisions, that's the bell distribution of driving speed and the blue,
which is men is out and to the right. That means, for those of you who didn't do well in D&D,
that means that they drive faster. Okay, so what does this tell us? It tells us that Uber and
the Gig Economy provide flexibility but while that can be the great
equalizer in terms of utility and in terms of making your life
easier if you're a woman. Its not going to be the great equalizer
on a per hour of work dollar basis. Flexibility doesn't necessarily get
rewarded in the labor market, and at Uber and at other places we see that. So as a result,
the women who drive on Uber and work on other gig sites are very happy for
the flexibility. But it's changing
the wage premium in a way that undoes the biases that come from
certain attributes of our labor market. So let me spend the last few minutes
talking about as managers what does any of this mean to you? Well, these are things all
of you employed people know that those are the key
components of your labor costs. So how does the Gig economy help you? Well, one way it can help you
is you can just move your money. You can move your employees from Denver to
the Ukraine if you can offshore them, and that's what we call labor arbitrage. Another thing is, if you just want to
ramp up a job quickly getting somebody in through the Gig Economy can be very very
quickly done, and very economically done. And that lowers the amount
of vacancies and it lowers your hiring costs, all of which
as you know, can be very expensive. If you're a start up, you don't want to hire somebody who
you don't have enough work for. So if you hire a part of
person through the gig economy that can pay off very well. But the problem is, you hire a group of
people who are by definition transient. These people are leaving
any time they want to. They're free agents,
that's what they value. So using them strategically can be very
beneficial, but you have to think of it in only those parts of your business
where you want to be transactional. So I've talked about data and
decisions in other classes, let me remind you of
your core strategy class. I'm going to skip this slid,
remember if your business is successful, it's because you have
a competitive advantage, right? If you want a business say to yourself,
what is my competitive advantage? What do I have in the way of a capability, resource or position, that's unusual,
that's hard for other people to get? And if you don't have a good answer
to that question, by the way, you should start looking
at a new business model. But if you do have an answer to that
question, often it can come down to I have certain capabilities that
are invested in certain people. Well, if that's true, you don't want to go too far on this
whole gig economy transactional thing. If somebody is hired in
through the gig economy, they can not by definition be a part
of your competitive advantage, okay? I'm want to skip the example of Walmart. And whether people can be
a competitive advantage. because I just want to point out, competitive advantage is
about differentiation. Independent workforce is
about undifferentiation. It's about very transactional
commoditized labor markets. You should not be hiring any worker
through any sort of gig economy type arrangement if that job involves creating
or maintaining your competitive advantage. You should be doing it
because of labor arbitrage, because you need a skill temporarily
to scale up or down quickly. But you should certainly not be doing it, you should absolutely stop before hiring
someone through a gig economy job and say is this something I need,
is this something that sets me apart. Or another way of doing it,
I like to, I usually don't like sort of five things you can do to change
your business type thing, but I do want to leave you a check list before
you go hire somebody off the gig economy. Ask yourself, can I get the same
skill cheaper and further away, in which case you do maybe want to
think about going into the gig economy. Ask yourself is it okay if the person
isn't here very long, and if the answer's no you definitely don't want to go into
free agent world of the gig economy. Is there a good chance I'm going to
want to get rid of this person? Do they have some specialized skill,
not because they're bad or something, but because my needs will change? Does this person have a specialized skill? In that case sure free agents are good,
if they come in and give you some skill you need and
that everybody else needs as well. Do I just want part of a person? That's when the gig economy
can make a lot of sense. And am I looking for
a skill that's very scarce? And that I'm like others just
need some of the time and it doesn't set me apart, then sure,
you want to go through the gig economy. So let me just wrap up and
then I'll be happy to stay and discuss questions about this or online
dating or anything you want to talk about. So far the impact to the gig
economy's actually been pretty small. If you read The New York Times or The Wall
Street Journal, or if you do what I did. I went to a conference recently for
temporary help work and spoke there. There I don't think the impact is small. But if you're looking
broadly in the economy, the impact of the gig economy
is still pretty small. But it's growing, and
it's growing pretty quickly. And the reason for that is a lot of it can
make the economy run more efficiently and technology's allowing it to be more and
more that way. A lot of people have preferences for flexibility that
are enhanced nicely by it. There's a lot of potential downsides,
volatility, I shouldn't have said risk I told you
I wouldn't say that, but volatility. People feel like they're second
class status and, whether or not there's inequality issues
is a different question. But I think as managers you should think,
especially if you're a small company, about the sort of ways you
can use this strategically. And if you're small and growing,
you might think about building in a comparative advantage relative
to some of your big competitors. A comparative advantage around being able
to be very flexible and to quickly up and down scale and bring on skills
that other companies can't. So with that, I'm going to leave you,
that's my Twitter handle where, with this room I could easily improve
my followers by about 17 times. So go sign up. And thank you very much. I'd be happy to take some questions. >> [APPLAUSE]
>> I am told that it's very important that you
wait for a microphone before you speak because our audience at home
wants to be able to hear you. Does somebody have-
>> So my question is as follows. When you put up that
slide originally showing that I think it's 15% of
the economy is going so to speak. The first thing that ran through my head
was, what's going to happen in 20 years, 30 years, when all these
people don't have healthcare? >> Yeah, so that's a really good question. So as the gig economy grows, there have
to be some public policy reactions to it. I would argue, as an economist, that on the list of
issues we have to deal with in healthcare, the role of the gig economy
is about 38th on that list. So I'm not that worried about that
just because I think we have to do so many things with regards to healthcare
over the next ten years that its effect on the gig economy is just
another of the many issues that it has. The exchanges and whatnot would obviously,
that's how people are dealing with it. The other way they're dealing with it
is a lot of gig workers have spouses with health insurance. So those are the two ways
we're dealing with it now. As this grows you're absolutely right but there are so many other, I don't want to talk about healthcare because
we'll get sort of depressed and whatnot. Next, who's got the mic? Nobody out there, I love the people who,
they come back, and they're like, I'm at reunion. I've got to sit in the sky deck,
no matter what. But we don't have any mics up there. Sorry.
>> So one question, will this at some point have repercussions also for
what I would call very skilled workers? So let's say a head of growth,
a senior director in project management, a chief marketing officer
who says you know what? I actually just want to do two or
three at the same time? But at scale. And as sort of the lateral
question to that, would we then see something that goes even beyond this
individual engagement and assignment? Where these people will start bringing
mini teams, depending on what they need, with them, and sort of we will have a
little bit typolification of work, right? Where you have these micro masses of
enterprises, or small enterprises playing? >> Everything you just described already
exists in at least experimental form. So let me tell you two company names,
I don't mean to shill for anybody here, but two companies that I happen to have
been introduced to recently that are going down this line exactly. One is just called Top Towel. You can figure out the derivation
of that name, hopefully, and they're just looking at free agents,
people who want to earn the kinds of money that you would work,
make as a software engineer at a company. But they just want to work independently
either from home or whatever. And they want either one temporary gig or
a bunch at one time. And they're making more money than
they can make as employees, and they really like it. Now, they can't work on the most
exciting thing happening, it can't quite be topped out. If what I said was right about competitive
advantage, it can't quite be topped out. It has to be really high but
not quite top. And the reason for that is the top guys
have to be your competitive advantage. If they're not, if the guy on the web at
Toptel is your competitive advantage, it's not going to work. But business models very close to
what you're talking about exist. Another company out there is called
Business Talent Group, I believe. And their claim is that they're
going to disrupt McKenzie. So they're trying to put together
virtual teams from around the world that will work on projects where they are. And, they'll just grow over the Internet. So those things are happening. I wouldn't say anybody's really
nailed that business model yet but they're trying and it'll happen. Does anybody have a mic? So what's the difference
between outsourcing and the second category of your gig economy? >> Which was the second
category of my gig economy? >> I don't know,
you had the upper one and the lower one. It's the guy in Europe? >> What's the difference
between outsourcing and that? It is, that's outsourcing. You're outsourcing your
[CROSSTALK] software development. >> Right, and
outsourcing has been around for 30 years. >> Agreed, so
the difference is it's growing. The gig economy is about
growing outsourcing. Like I said, people have been doing
independent work for time in memoriam. This is just a matter of, technology is
making it easier than it ever was and it's just growing a part of the business. The other big difference is,
here's one other big difference. In the old days you
outsourced to a company. You still do that a lot. We outsource to a food service company,
but now we also outsource to individuals
like Alexei for individual projects. That you didn't do in the old days
because it just wasn't as easy to find those people. You did some of it, of course, but the
ease with which it's done has grown and will grow more. That matching process will get better and
better, who's? >> Yes, thank you, part of the reason
people go to work is not only for the salary, to accelerate it a bit,
is what you call the benefits on the side, which can be very substantial,
unemployment benefit, health cover, and so on, and so on, and so on. The gig economy takes that
away from people, right? I suspect. >> It does, for the most part. >> So you are basically creating, or
you're talking about creating a society where everybody is at risk, every day,
for the rest of their life, no social safety net
protection whatsoever. >> Wow, that was kind of
a downer way of putting it, but- >> [LAUGH] >> But it's totally fair question. I agree, so this comes back to
your question about healthcare. From a public policy perspective, so there's two ways to look
at the gig economy. I would argue actually,
you use the word safety net, I love that term, the gig economy is
in many ways an alternative safety net. If you lose your job and you don't have
all the benefits that you used to have, at least you can go drive for
Uber to make a little bit of money and it's better than just taking unemployment. Now, having said that, all those
other benefits don't get made up for. And from a public policy perspective, we're going to have to make it easier for
people to be able to get those benefits on their own
either by buying healthcare and whatever. You can already, the retirement
stuff is pretty easy now already. You can go get the equivalent of a 401K
plan, self employment 401K plan and things like that. But absolutely, I mean, especially in the United States,
we've always had sort of a free agent. The safety net hasn't been that great, and
this is not going to make it any better, I agree with that. You haven't spoken about any
form of employee rights. In the end, you can be cheated,
you can be treated unfairly, and so on. This gig economy is
completely devoid of that. In Europe, there is a huge pushback
against this right now, and I think you need to address that. because I felt your talk was very
much on one side of the argument. I don't think there was
balance in what you presented. So I'd like you to balance it now. >> [LAUGH] [APPLAUSE] >> So let me dress that in two ways. One is, again, if you ask most people
why do you work in the gig economy, they say it's because they want to. So do they feel exploited? No, if you ask an Uber driver
does Uber treat you well? No, if you ask a taxi, or somebody else
who makes that much money and works for a company. Do you feel exploited,
they're probably as likely to say, yes, as if they don't work for Uber. So keeping, minimizing exploitation in
the labor market is very, very important, I 100% agree. I haven't seen a lot of evidence yet
that the exploitation, the people who don't make much money in the United
States are getting a raw deal right now. I'm happy to say that, and in agreement with that, you'd be
hard pressed not to agree with that. I don't think it's any worse if you're
in the gig economy than if you make similar amounts of money and
work for a company. You're a little, there are, I'm not
going to say there aren't situations like that, certainly some gig companies won't
pay people or will do something wrong. But they'll be thrown off the platforms or other ways that happen just as quickly,
so. Am I sympathetic to the difficulties of
low-skilled workers in the United States, right now? Absolutely, do I think the gig economy
is any worse in that way than employers? I don't actually think so, I haven't seen
any evidence to suggest that's the case. >> Do you see any developments that could
happen that would stop the growth of the gig economy? >> Policy, certainly, policy things,
people are talking about various things. They're trying the various sort of
crackdowns on the gig economy in Europe where I think the growth
has actually been just as good. I mean in some ways in a place like
Europe where policies tend to be more pro-employee friendly, on the one hand,
there's pushback against the gig economy. On the other hand, the employers
are pushing more and more for it. Because anything they can do to take
someone on who's not an employee that they can later get rid of is going to
make the gig economy look better. So that could go either way, but policy, I am very much a, there's a guy
named Mark Warner in Virginia. He's the senator most involved in the
policy side of the gig economy, right now. And I think he's done some
interesting things and taken some interesting
steps in that direction. My view is we need to go slowly, because
there's always unintended consequences. So you want to allow the people who
thrive in the gig economy to continue to thrive there. You don't want to put the brakes on them,
but to the extent that anybody is getting
exploited, you want policy to avoid that. And so we want to balance these things and
take it somewhat slower. Mark Warner's not getting far on this. I don't know if anybody's noticed,
there's one or two other things going on
in Washington these days. So the gig economy isn't quite front and
center. But going forward, the thing that can
really stop the growth of this is if policies made it so that even people where
it's a very good idea, stop doing it. Yeah. >> Speaking of impacts on the gig economy, do you have any thoughts on
automation of the gig economy? Self driving cars, machine learning
algorithms taking over white collar labor. >> Yeah, so people seem to equate
the gig economy with robots taking over. And these are two things,
I don't equate them, but I do see why that happens because they're both driven by
technical changes easing these things. So it's a somewhat separate
question that John mentioned, that a lot of people in Stanford,
generally, are really worried about this. I spent this morning up at the Center for
the Advanced Study in the Behavioral Sciences on a big
cross campus project we're doing, trying to think about the effects of
autonomous vehicles on the economy. We haven't started worrying about the gig
economy's role in all of that, but that's a really big question. I can give you my own view really quickly,
but if you chose a different labor economist,
you get a different story. I'm less worried than everybody
else is about the robots putting us all out of work. They're going to put a lot of people,
sorry, real quickly, they're going to put a lot
of people out of work. But if you go back in history 200
years ago, we were all farmers. Nobody's a farmer anymore and
we still have jobs. Now, everybody says this
time could be different, and some day they're going to be
right when they say this. And so, I wish this wasn't on camera
because you can make me look silly in ten years, but I think I'm less worried
about that than a lot of people are. Yeah, last question. >> I'm curious if you've done any look
at the impact on organizations that are dependent on employees, for example, workers' compensation insurance
companies, 401K providers, group benefits. How fast is this going to happen? How quickly do they need
to begin responding? >> I think the answer is,
it's happening, it's not happening so fast that it's like a threat and
whatnot but those companies I've talked to a lot
of them at conferences and stuff. And they are all worried about it and
out in front of it and trying to do something about it. And I think they should be and
I think that's great. You should all be out in front
of the trends in your market. You all know that, you went to the GSB. You've gotten this far because you've been
ahead of the trends in the market, but absolutely. This is not just about gig economy, it's about the whole infrastructure behind
employee benefits and all sorts of things. Thank you so much for coming today. Enjoy your weekend and
hope to see you around. >> [APPLAUSE] >> [MUSIC]
