Home' Trinidad and Tobago Guardian : January 8th 2015 Contents JANUARY 2015 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
THE ECONOMIST BG23
In the early 20th century, Henry
Ford combined moving assembly
lines with mass labour to make
building cars much cheaper and
quicker, and in doing so changed
the automobile from a rich man s
toy into transportation for the
Today a growing group of entrepreneurs
is striving to do the same to services, bringing
together computer power with freelance
workers to supply luxuries that once were
reserved for the wealthy. Uber provides
chauffeurs. Handy supplies cleaners. Spoon-
rocket delivers restaurant meals to your door,
while Instacart keeps your refrigerator
stocked. In San Francisco a young computer
programmer already can live like a princess.
This on-demand economy goes much
wider than the occasional luxury, however.
Click on Medicast s app, and a doctor will
knock on your door within two hours. Want
a lawyer or a consultant? Axiom will supply
the former, Eden McCallum the latter. Other
companies offer prizes to freelancers to solve
research-and-development problems or to
come up with advertising ideas. A growing
number of agencies are delivering freelancers
of all sorts, such as Freelancer.com and
Elance-odesk, which links 9.3 million work-
ers for hire with 3.7 million companies.
The on-demand economy is small, but
it is growing quickly. Uber, founded in San
Francisco in 2009, now operates in 53 coun-
tries, had sales exceeding US$1 billion in
2014 and is valued at US$40 billion. Like
the moving assembly line, the idea of con-
necting people with freelancers to solve their
problems sounds simple -- but, like mass production,
it has profound implications for everything from the
organisation of work to the nature of the social
contract in a capitalist society.
Some of the forces behind the on-demand economy
have been around for decades. Since the 1970s the
economy that Henry Ford helped create, with big
firms and big trade unions, has withered. Manufac-
turing jobs have been automated out of existence or
outsourced abroad, while big companies have aban-
doned lifetime employment. Some 53 million American
workers already work as freelancers.
Two powerful forces are speeding this up, however,
and pushing it into ever more parts of the econo-
my.The first is technology. Cheap computing power
means that a lone auteur with an Apple Mac can
create videos that rival those of Hollywood studios.
Complex tasks, such as programming a computer or
writing a legal brief, now can be divided into their
component parts and subcontracted to specialists
around the world. The on-demand economy allows
society to tap into its underused resources: Uber gets
people to rent their own cars and Innocentive lets
them rent their spare brain capacity.
The other great force is changing social habits.
Karl Marx said that the world would be divided into
people who owned the means of production, the idle
rich, and people who worked for them. In fact it is
increasingly being divided between people who have
money but no time and people who have time but
no money. The on-demand economy provides a way
for these two groups to trade with each other.
This will push service companies to follow man-
ufacturers and focus on their core competencies. The
"transaction cost" of using an outsider to fix some-
thing, as opposed to keeping that function within
your company, is falling. Rather than controlling fixed
resources, on-demand companies are middlemen,
arranging connections and overseeing quality. They
don t employ full-time lawyers and accountants with
guaranteed pay and benefits. Uber drivers get paid
only when they work and are responsible for their
own pensions and health care. Risks borne by com-
panies are being pushed back on to individuals; and
that has consequences for everybody.
The on-demand economy already is provoking
political debate, with Uber at the center of much of
it. Many cities, states and countries have banned the
ride-sharing company on safety or regulatory grounds.
Taxi drivers have staged protests against it, while
Uber drivers have gone on strike, demanding better
Techno-optimists dismiss all this as teething trouble:
The on-demand economy gives consumers greater
choice, they argue, while letting people work whenever
they want. Society gains because idle resources are
put to use. Most of Uber s cars otherwise would be
parked in garages.
The truth is more nuanced. Consumers are clear
winners, and so are Western workers who value flex-
ibility over security, such as women who want to
combine work with child-rearing. Taxpayers stand
to gain if on-demand labour is used to improve effi-
ciency in the provision of public services.
However, workers who value security over flexibility,
including many middle-aged lawyers, doctors and
taxi drivers, justifiably feel threatened. The on-demand
economy certainly produces unfairnesses: Taxpayers
will end up supporting many contract workers who
never built up pensions.
This sense of nuance should inform policy-making.
Governments that outlaw on-demand firms are simply
handicapping the rest of their economies. That does
not mean, however, that they should sit on their
@2014 The Economist Newspaper Ltd. Distrib-
uted by the New York Times Syndicate
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