Side Hustles and the Gig Economy

Part of the reason that the sharing economy is working and here to stay is that employment patterns are changing. Much has been made of the relative lack off opportunities for the millenial generation. (Now dating the millenial generation is a post on its own, so I won’t go into it!) But as life expectency continues to rise most employees not yet nearing retirement will have to face the prospect of working longer, regularly retraining and most crucially working flexibly.

First, let’s get defnitions out of the way. The side hustle is a part-time job, typically performed on a short-term contract or freelancing basis or as running a mini-business. This could be running a weekend party cupcake business, writing a blog, offering one’s services on fiverr, offering online consultancy, driving an uber cab. The gig economy is a service economy based on the idea that services are provided by self-employed people, coordinated but not employed by a central company. The classic example is Uber, the controversial example are self-employed package delivery people using their own vans or cars.

This incisive article in Quartz convincingly argues that the reason millenials are so fixated on the ‘side hustle’ is not that they are indulging in earning money from their passion in their free time, but because they need the extra money to pay the bills. This is of course partly because lifestyle expectations have grown and things which were luxuries in the past are now hard necessities for younger workers, whether that’s having the latest iPhone or going on exotic holidays numerous times a year. Paying the rent and bills is now not only the only compulsory expense.

While it can bring in extra income, the gig economy also has a darker side as recently recognised by politicians in the UK. There is very little or any employee protection for side hustlers. While this may be fine for those who use this as an opportunity to capitalise on a hobby, for the large number of workers relying on a mix of gigs to stay afloat, this position can be highly precarious.

Yet let’s not pretend that the side hustle is somehow a completely new phenomenon. A large number of low income earners have had to combine jobs in the past, sometimes a “proper” full-time job with driving a taxi just while you get your dream together. I have known a policewoman (albeit not in the UK) who went out to clean offices on weekend evenings to pay for childcare costs. These workers have always been in a marginalised position. Of course recognising this and trying to find a solution to the issue is a positive thing.

What has changed is the easy availability of mix and match employment through the interconnectedness the internet offers and through apps and websites that can give us short bursts of employment. New York’s casual taxi drivers usually simultaneously monitor a couple ride-sharing apps they could pick up fares for: not just uber but Juno, Via and Lyft as well.

Secondly, it should not come as a surprise that the side hustle is not necessarily exciting, but probably boring. Following one’s passion to earn extra money sounds too good to be true. And it is. Most part-time jobs will be more hustle than passion.

But let’s have a look at positives. There is flexibility – these kind of part-time jobs are not tied to a location like an office job. There are no set times when one clocks on and off, rather employment can frequently be fitted against other obligations and social life. Secondly, they can be an entrance to future employment by providing useful work experience in a different industry. Something we will increasingly need as we won’t be able to work a single career over a very long (50 years or longer) working life span.

If you don’t yet have a side hustle, check out this useful infographic guide on starting a side hustle on the Guardian website. Forbes has a list of 30 side hustles you can start this weekend.

Combating negative press

ride sharing 2

Active engagement

The sharing economy continues to expand rapidly.  And not just Uber and Airbnb.  Although generally US initiated, these businesses now have global reach and many next gen firms are launching outside of the US.  Which may be helpful if the US decides to “build a wall”!  Uber is active in over 60 countries.  Which is nothing compared to Airbnb which operates in 200+!

However fast growth of a new sector inevitably leads to issues with disrupted incumbents (e.g. taxi protests) and governments / regulators.  This creates societal and legal disputes, and it has caused many of these business to start thinking about their approach to third party publicity and engagement.  While unfortunate, if the industry doesn’t get policy and government engagement right there will be inevitable clampdowns on the room for innovation.  The sharing economy needs to do more than combat negative publicity, it needs to go on the front foot to positively make its case and shape the regulatory, policy and legal debate.

The challenges

The sharing economy is a hard to define beast (see my post on “What is the sharing economy“).  However business models generally:

  • dis-intermediate incumbent middlemen
  • reduce barriers to entry for service provision
  • increase productivity of service providers
  • better utilise excess capacity

While seemingly simple concepts, these principles have allowed Uber to achieve a valuation of more than $50 billion.  However there has been a lot of push-back from the incumbents.  Airbnb has been challenged on the impact of it’s business model on small hotels and communities (including the impact of rising rents and the risk of poor guest behaviour), and there have been crackdowns in France and other locations.  Courts in many European and Asian countries have imposed significant restrictions on Uber’s operations.

Hoping that the community will realise the huge benefits of the sharing-economy before they try and stamp it out is a dangerous strategy.  On a related note, ask David Cameron about Brexit.

Making the positive case

On the parallel with Brexit, a key failing of the Remain campaign was that they didn’t actively make the positive case for EU membership.

The economic and societal benefits of the sharing-economy are substantial.  These include:

  • significant contributions to employment and breaking down barriers to economic activity
  • environmental benefits for use of excess capacity (e.g. ride sharing impact on emissions)
  • increasing female participation in the workforce

And while we can speculate at the actual size of these benefits, the data-rich nature of these business means they actually have the analytics to support these arguments in a strong and compelling way.  To continue with our Brexit analogy, sharing-economy firms also need to robustly dispute incorrect criticism and claims.  This includes things like insurance coverage, policing abuse, intellectual property, use of services, etc.

Delivering a strong positive narrative needs to go beyond speaking at industry events or sharing deals on justlooking.

It needs to actively influence regulatory thinking and frameworks.  Established industries from telecoms to hotels to financial services recognise the need to educate and lobby policy makers, and it seems to me that the sharing economy needs to think further about more actively making its case.  For example, I struggle to think of any active trade associations in this space, and cooperation between firms on the market narrative seems limited.

In short: sharing-economy businesses need to engage in the policy debate alongside further driving market innovation.

What is the sharing economy?

Can we agree on the terminology?

There’s a lot of overlapping terms in this space, and many people use buzzwords without a clear view on what they mean.  Ask a group of 4 people what “sharing economy” means and you’ll easily get 10 definitions.

sharing economy terms

So let’s start with a list of the general terms:

  • Crowd sourcing:  Aggregating and sharing knowledge, information, skills and services from otherwise unconnected people.   TripAdvisor is great example of this: the majority of people I know now religiously check TA ratings before booking any accommodation.  And crowds are being tapped into for a huge range of use cases far beyond hotel reviews: this including healthcare, risk management, scientific research, etc. The technology behind crowd sourcing is rapidly evolving in connection with the Internet of Things: mobiles, FitBits, smart cars, fridgers, boilers, etc are providing data for cutting edge research and product design.
  • Sharing economy / peer economy:  Crowd platforms are enabling new way for people and businesses to interact and transact.  Flagship examples like Uber and AirBnB break down barriers to entry for people to provide goods and services to the market while simultaneously solving the trust problem through community reviews. Crowd sourced delivery and on-demand services are continuously iterating, to the point where mainstream retailers are now actively considering turning their customers into crowd shippers.  New models of business to business services are also evolving, disintermediating traditional management functions and agents who add little value other than being a central coordination point.  Examples of this include platforms like eLance where professionals can offer services directly to buyers without having to be part of a big firm.
  • On Demand:  This is the term generally used to refer to technology enable time-dependent requests for services.  Uber is the “classic” example: I want a car now.  This is being extended to just about every service available from massages to plumbers.
  • Crow collaboration: Collective creativity through peer production.  Open source software is a great example of this.  If you do any programming at all you’ll just have got used to the fact that there groups of people who build and maintain libraries for just about any purpose that you can freely incorporate into your software.
  • Crow funding:  Want to make a movie about Osama Bin Laden coming back as a zombie but can’t find any studio to fund it?  No problem, pitch your idea directly to the public and promise a free copy of the DVD to anyone who contributes.
  • Peer to peer:  Many of the above applications include peer-to-peer service provision and interactions through online marketplaces.  It again is about disintermediating middle men who get paid to pool funds and resources and provide “service liquidity”.  Nowhere is there more excitement about this than in the lending market and the prospect of cutting out bankers from the equation.  Possibly the most successful in this space has been eBay.
  • Collaborative consumption: Mutual or shared access to goods, sometimes as fractional ownership.  The peer-to-peer rental is an excellent example of this, but it extends far more widely and includes things like car sharing.

The picky people at the Harvard Business Review actually don’t like the term sharing economy because there is generally still a business facilitating it.  They refer to it as the access economy.  But we’re not them!

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