Don't Confuse Driving for Uber With the Freelancer Economy Powering America's Entrepreneurial Boom The travails of workers employed by ride-hailing and delivery platforms are real but often mask the success of freelance workers in the knowledge economy.
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Recently, an MIT study revealing how little Lyft and Uber drivers earn reignited the backlash against the exploitative nature of independent work. The ride-hailing industry and its many demons may make up a large portion of the "gig economy," but to make it the poster child of all independent workers distorts a major economic and social trend with big implications for how Americans work and small businesses grow.
Knowledge-based work, as distinct from more labor-focused jobs like driving or delivery services, provides the skills in demand at growing businesses. Almost everyone building a business today either already does, or eventually will, rely heavily on independent freelancers to realize their goals. And that's a good thing. The more sustainable and healthy knowledge-based independent work is, the more successful the entrepreneurs looking for help will be.
Freelance work as a path to sustained success.
Ride-hailing is notorious for a lot of things, including failure to provide long-term jobs. According to The Information, only 4 percent of drivers remained on the platform after a year. Knowledge-based independent employment is significantly more sticky because of the continued demand and evolution of services.
Freelance writers, developers and designers can develop a variety of revenue streams, and the more connected the business ecosystem is, the more consistent that demand will be. According to a study Fiverr commissioned last year, three out of four entrepreneurs have hired freelancers since starting their businesses. Entrepreneurs noted the flexibility and, most important, the expertise freelancers provide as major selling points. Nearly half cited "referrals" or "word of mouth" as their means of finding talent.
As the economy has become more global and the offline world has moved online, freelancers are increasingly able to seek out new clients and fill their books of business. According to MBO Partners, 20 percent of independents used an online platform to find work in the past year, up from just 3 percent in 2012. One in four workers will use an online platform in the next year. This shift spreads opportunity across the U.S. instead of concentrating it in urban centers while making it ever easier for entrepreneurs to find the right talent for the right opportunity.
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A skill is a long-term investment.
The MIT study highlighted the steep costs borne by drivers for ride-hailing platforms. Car insurance, maintenance, gas and depreciation are all major expenses for the average driver. Just owning a suitable car is a big-ticket investment they make considering the long-term strategy of ride-hailing platforms is to put a robot in the driver seat.
While education is a major cost for knowledge-based freelancers -- in 2016 the average graduate owed $37,172, and cumulative student debt is nearly $1.5 trillion -- there is much less fear of being automated out of work and much more confidence in adapting to evolving technology. Robots and algorithms will not soon have the profound human touch creative and technical skills require. People who can execute on complex, high-level projects will remain in demand by entrepreneurs and businesses everywhere. A recent McKinsey report noted that 60 percent of all occupations could see 30 percent or more of their constituent activities automated. While that number is substantial, keep in mind how many tasks freelancers must do that don't directly earn them money. From invoicing to time tracking and payment processes, automation can help knowledge-based freelancers without stripping the humanity out of their work.
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The "gig economy" as represented by ride-hailing platforms has resulted in some bloated company valuations, jolting PR gaffes and angry drivers, but it's a small part of a much larger shift to independence that comes with a variety of complications. Skilled independent work, when supported correctly, provides an inviting future for knowledge workers.
It's important to recognize what driving forces allow for more businesses and entrepreneurship success stories to come to life. A major component of that is having a broad, strong and diverse ecosystem of skilled independents responding to the needs of businesses everywhere.