I’m fascinated by the new sharing economy, or “digital matching companies”, as they are also called. In many ways, these start-ups are offering hope that they can generate income eventually for hundreds of thousands of workers in the future. Services like Uber and Lyft, as well as AirBnb, TaskRabbit and many others, connect those with a resource to those in need of it―and in the process money changes hands. That’s good for the people who are earning it and good for the economy in general. Imagine the impact when all forms of talent could be matched in this way, peer to peer, with money-earning gigs―especially when you consider that independent workers will represent 40 percent of the economy by 2020.
Still, it may come as a shock that Uber’s current valuation is $68 billion: larger than General Motors and Honda. One wonders how inflated that number actually is. There’s a whiff of the dot.com madness of the late 90s in all of this, because Uber has yet to make a profit. The mania for upstarts like this has infected investors, just as it did before the dot.com crash, when people began to realize that it wasn’t enough to have “first mover advantage” and growing revenue. Without a profit, no investor can win. Uber is likely to thrive, eventually, but it can go for years without getting into the black―investors seem willing to pour almost any amount of money into it.. So for now it can do whatever it wants to build market share for now―which was and is the key to that “first-mover advantage.”
Here’s the thing. With the freedom of its ample coffers, to rapidly lay claim to market share, Uber has lowered fares while reducing its driver’s fees in order to offset the hit it would otherwise take with such cheap rides. A new competitor has arisen to treat its workers more fairly and generously: Juno. It’s business model is basically to treat its drivers as employees, not contractors, take only ten percent from their’ fares and offer them ownership of the company through restricted stock. These are exactly the sort of steps most companies need to consider right now, putting employees first, so that their people will do anything possible to please customers. The New Yorker has done a fine piece on Juno, laying out the virtues and pitfalls of Juno’s business model. The article points out that Juno takes a smaller percentage of each fee: on a $30 ride, the Uber driver keeps $19.11, while the Juno drive takes home $23.61. And, even more significant, Juno offers its drivers ownership in the company through shares of restricted stock. “Half of the two billion founding shares of the company had been set aside for this purpose, although they weren’t going to be worth anything unless Juno was bought out by a larger company or had an I.P.O.” A Juno manager, Lucas Smith, put it this way : “Hearing drivers talk about the ownership piece completely changes the equation. I had one guy say—and this might sound made up—but he said he’s been in this country, I think it was, for thirty-two years, and this was the first time he felt like an American.”
The article offers an admiring, but skeptical, take on all this: you can hear it in the dismissal of the worth of that stock, though it’s hard to see why the company wouldn’t go public if it reached a critical mass of drivers and the business model gets validated. The article ends by offering little hope that Juno will last long. I found the author’s conclusion cynical at this point. Juno’s model may well take hold; I’m rooting for them. The article doesn’t take full stock of how important Juno’s philosophy is to our future as a country. Talmon Marco, Juno’s CEO, is quoted as saying:
Look, the sharing economy is fascinating on one end, but, at the same time, without the proper checks and balances, we’re going back to fifteen-year-old textile workers in Brooklyn working eighteen hours a day. The platform controls you, and there’s always going to be somebody willing to do the same work for a penny less. And that model just squeezes everything out of you, out of the lower class. At least until the point in time when they come with the pitchforks.
The pitchforks are indeed coming if the entire private sector doesn’t attempt to experiment and implement the kind of initiatives Juno is embracing. I applaud this company and I offer it as an example for everyone else who runs any sort of company. Without this kind of care for our employees, our economy isn’t going to sustain itself.
Peter Georgescu is the author of The Constant Choice. He can be found at Good Reads.