The example is a co-op comprised of professional photographers. According to the article, the co-op screened out over 90% of applicants. I suspect that selling stock photography on the web is not most of the accepted applicants main gig.
These aren't people waiting in line for another person's sushi or drycleaning. The article's title is a bit misleading. This is a niche in the world of professional photographers that doesn't really generalize to the scale of an "economy".
"According to the article, the co-op screened out over 90% of applicants."
I don't see how that's relevant. Eventually, all the "gig economy" startups will also need to be selective of their applicants. Uber also screens their drivers, for example.
As for not generalizing to the scale of an "economy"... as someone who's done a fair share of hiring, screening 90% of applicants is par for the course for any business in this economy. And profit distribution, democratic workplaces, and flat hierarchies are totally normal in tech.
I don't see how a worker cooperative model wouldn't scale. In fact, as technology democratizes many of the functions we've historically relied on C-levels for -- decision-making, organization, contract negotiations, partnerships, hiring, firing, etc. -- I see this as an inevitability.
Let me put it another way: Why would Joe Developer work for firm A, where a significant percentage of revenue goes to compensating an unaccountable mob of MBAs when I could join firm B and increase my share?
At this point, the only remaining valid function of most executives is to cozy up to capital. But as capital continues to trickle up, I feel competition here will get fierce and people will find more creative ways of funding businesses. Either way, downward economic pressure is going to force executive suites to slim down -- in numbers and pay -- or face elimination entirely.
Manual pre-screening is an interesting model, but one which is not really modern.
The assumption is that the pre-screening personnel are able to second-guess the market's wants.
A more modern approach would allow the individuals seeking reward to try different strategies to address the market directly, thereby removing the artificial middle-man of manual pre-screening.
the article evidences a situation that COULD becomes a pattern, and a pattern that improves the gig economy. I don't think the title is misleading, but your judgment is. The same can happen in every "gig economy" platform, like online transportation (with local taxi unions owning the app) or a neighborhood managing it's own home renting app. This would be a lot safer, wouldn't? :)
1. How does it reach travelers from around the world?
2. Why would someone in the neighborhood not advertise their property on AirBnB, VRBO, etc?
3. Where is the advantage for renters and landlords?
Suppose a taxi union starts a local Uber:
1. Why would the union open up their platform to casual drivers?
2. How will the taxi union compete with Uber against people with Uber's app already on their phone?
Both of the examples illustrate the problems of local delivery and personal services. One more driver or one more night costs /x/ to provide and can be sold for /y/ and only in market /z/. What Uber and AirBnB provide is a way for customers to access local markets for personal services that have a linear cost structure. The notion of the gig economy is that individuals move in and out of the workforce providing those personal services and individuals in the workforce are local to the point of service delivery. When the individual is providing the service, the individual is not available elsewhere in the workforce.
In contrast, images can be sold anywhere over the internet. Image creators can sell in multiple channels. Images can be sold while the image creator is working to create other images. The nominal cost of an additional image and its delivery is approximately zero.
The reason that the stock photo site isn't part of the gig economy is because the photographers selling photos are engaged in an entrepreneurial activity. Uber drivers are engaged in a free lance activity: entrepreneurs can make money while they sleep, freelancers only make money while they are providing a service.
> 1. How does it reach travelers from around the world?
Research in the early 1990s on software agents/bots/multi-agent systems went from the assumption that the Internet would lead to a decentralized marketplace with many vendors and independent markets, and your agent/bot would go out and find/place bids on products and services for you. Capital investment and economies of scale have instead lead to near-monopolies (Amazon, Paypal, eBay, Craigslist, now Uber and AirBnB).
It seems like the decentralized marketplace idea cannot work because of trust issues - a lot of capital is needed to deal with vetting, fraud and disputes on e-commerce platforms. A good example of what happens when that is not handled properly is Aliexpress.
Answering your questions, you can have unions of unions and create something bigger and with better technology than Uber or airbnb and you'll not get some freak liberaloids attached it. Sorry pal, the startup dreaming is over.
One more thing: Uber and airbnb aren't unchallangeable. They even didn't exist some years ago.
("Sorry" if I didn't answer in a way that fits your expectation)
This could be a dumb question, but is there anything stopping a large startup like Uber from being more generous with the cut its drivers get? How is it more feasible for a small company to do this?
Some numbers: Uber charges riders $0.18 per minute and $1 per mile. They take a 20% cut (plus the whole of the $1 base-fare). Drivers estimate that they spend 20% of what remains on tax and vehicle costs.
That's not an enormous margin, but it's large. Uber is still expanding rapidly in driver count, in geographic range, and in product range. That takes quite a bit of money, especially the geographic range - Uber runs pretty vigorous ad and lobbying campaigns to influence regulators and oppose taxi agencies.
Fasten is a startup whose entire business model is "Uber but better for drivers". They advertise to consumers that they take a smaller cut, and hope to attract more drivers with their better rates. My guess is that Uber will crush or acquire them after dropping prices (or raising driver share) in the relevant markets.
So I think the answer is: Uber could do this, but it would slow their growth. Once they're an entrenched player in most markets, I would expect to see driver share (and possibly rates) rise a bit to maintain supply, but right now they're funneling everything they can into expansion.
(And, I'm sure, panting at the thought of using self-driving cars to turn that 80% into profit.)
FICA alone for a self employed person is 15% (although it's a bit lower in effect b/c of deductions). Add in state and federal income tax, fuel, maintenance, and vehicle depreciation, and you're talking way more than 20%.
Yeah... I was honestly confused by those numbers, but I'm citing self-report by Uber drivers (there are a lot of forums online discussing these issues).
They reported 10% on tax and 10% on fuel/maintenance. If you live somewhere with cheap gas, and don't count depreciation, then that 10% is plausible (obviously depreciation matters, but I think they didn't count it).
The 10% on tax is odd. Possibly it's about the self-employment premium (i.e. "How much of my earnings do I lose for driving Uber instead of working McDonalds?") Or possibly it's after EITC and other balancing factors - if Uber driving is your only career you aren't likely to be in a high tax bracket.
It's possible they really are paying 10% of their total paycheck in taxes after the EITC, but only if they are making very little money and have children.
The other possibility that I didn't think of is that it's 10% of their total paycheck because they spend half of their paycheck on deductible expenses, but that doesn't mesh with the 10% expenses section.
I think the most likely explanation is that the drivers you're talking about are underestimating taxes due. They have to pay themselves since there's no withholding, and it usually takes years before underpaying taxes catches up with you.
And yeah vehicle depreciation is a big expense. It's probably more than 1/3 of total pay if a driver is actually making a small enough income to have a 10% tax rate.
I've heard many Uber drivers who say they are making almost nothing after expenses including vehicle depreciation.
It's worth remembering that a lot of Uber drivers are making relatively little money. Some are students, some are part-timers, but no matter what Uber ROI drops off more aggressively than most jobs (you work surge times, then constant-demand times, then your rates collapse).
I definitely have the sense that Uber's current model isn't sustainable - the money looks good because they constantly bring on new drivers who underestimate tax and depreciation, and count their salary in weekly-paycheck terms. I suspect that either they'll become more generous once they're spending less on regulation/campaigning, or something else will fall apart.
It may be sound for part-time drivers. If they are people that need the cars for other activities, depreciation is a sunk cost, and should not be taken into account.
But that does not make the basis for a sound self-driving fleet.
Last I checked, most places reimburse you about 50 cents/mile for vehicle depreciation and gas. Let's assume drivers pay 15% in taxes, just to make the math easy.
$1 - 20 cents for Uber - 15 cents for taxes - 50 cents for fuel/depreciation = 14 cents.
18 cents - 4 cents for Uber - 3 cents for taxes = 11 cents.
So drivers net 14 cents/mile plus 11 cents/minute.
You don't pay taxes on your expenses, so it would b 15 % of 0.70=$0.11 for taxes, meaning they would get ~$0.18 per mile after tax based on your assumptions. But fuel is cheaper is some areas, and if you do basic maintenance on your vehicle yourself (change the oil, etc) you can save some that way.
> They take a 20% cut (plus the whole of the $1 base-fare).
So does that mean that the drivers gross 80%? The photographers in the article would also be responsible for their equipment, materials, and taxes, so is this the right comparison?
Maybe I'm misreading the other comments in this discussion, but it sounds like people are saying that the story in the article is a special case, with elite professional photographers, but this would never work with the hoi polloi 'gig economy' companies like Uber, which will only ever pillage from their workers. (I'm exaggerating a bit here, but this is the sense I get from the tone of some comments. Apologies if I have misread them)
Passing 80% of the gross receipts (less the $1/ride safe-whatever charge, which I believe is for some sort of insurance policy?) does not seem like they are screwing the drivers to me. It seems like a pretty common split between marketplace/infrastructure providers and suppliers.
I can't reply to your post further down the thread for whatever reason, but uber takes the whole $1 per ride "rider fee", not the $1 per mile distance fee. The driver gets 80% of the time + distance fees.
I'm asking about what drivers make, not what Uber charges riders. I didn't miss the distance part at all—the parent said Uber takes the whole $1/mi base rate. Unless I misunderstand or it was poorly phrased, that sounds like drivers are only paid $0.18/min.
Edit: Reviewed parent, and they say Uber takes 20% of the $0.18/min and the $1/mi base rate. That's even worse. So drivers only make $0.14/min, or $8.64/hr if driving every minute. Yikes.
They only make 8.64 if they aren't going anywhere with their passenger. If they take their passenger 60 miles in that hour (admittedly a long distance, but legally possible), then they'd make 8.64 for the time, and $48 for the distance, making it a total of 56.64/hour. This is probably an upper limit on the hourly rate an uber driver might make.
What really surprises me is that people simultaneously claim Uber cannot possibly be profitable while lambasting it for taking too much of a cut.
Which one is it? Either they're being greedy with excessive margins or dangerously dependent on venture capital to sustain an unprofitable business model.
First, false dichotomy. There is the possibility that they are taking too large a cut, and not charging enough to be profitable. But I don't think that's what the issue is.
I think that there's two perspectives here. One, Uber is a match-making service, and charging 20% to make an automated match on a server... That could seem excessive.
However, once you tack on things like boarding, marketing, development, legal fees, etc., it's possible that 20% isn't enough.
> The only other alternative is that you think consumers should pay higher prices.
I don't think anything in this particular matter. I don't use Uber and I don't work for Uber, so I don't really have a dog in this race. However, I don't see how Uber not charging enough isn't a valid viewpoint.
Well, if customers paid 20% more, both Uber and drivers woould get more. And they would lose appeal compared to táxi, só Uber prefers to earn less and forces drivers to do the same in the fate of market share lol.
Ah, the good old "no one forced him" gig. Yes, no one literally went up to an Uber driver and told them to become one. Same way that no one literally goes up to a homeless immigrant and tells them to steal food [0]. But it's folly to pretend that the "invisible hand" of economics doesn't have a strong part to play in such decisions.
I don't know, but they expend billions of VC dollars subsiding rides to get market share. Maybe they could change strategy and expend the same money lowering their share in the rides. Probably the first strategy worked better for them until now.
They certainly could have had the same success or even better, by taking a 10% vs 25% from the get go. I think it has more to do with the Uber management's vision of what that platform is. This has never been a platform to empower drivers or to right inefficiencies in the transportation business. It has always been a platform to exploit inefficiencies in the system.
There are (were?) lots of taxi co-ops. Unfortunately, they've been demutualizing over the last 50 years.
The issue, in the US at least, is the IRS. There's a fairly massive legal grey area in how to treat patronage (distributed profits) for members of a worker co-op. Are they dividends? If so, they should be taxed at the capital rate. Or are they bonuses? Then they're taxed at the income rate.
But the IRS doesn't want to give any guidance on this and other issues it created with co-ops. You literally only find out the day they sue you whether you've been doing it right. And, if you put up a fight, they always settle instead of pursuing the case to judgement, in fear of setting a precedent.
Oh, and good luck finding a lawyer or accountant specializing in co-op law to help you out.
The problem with worker co-ops is not that they're infeasible. It's that decades of lobbying and IRS paranoia have hobbled the model. Ironically, they work fantastically well here in the developing world. It's an extremely efficient way of pooling risk, aggregating labor, and achieving economies of scale without selling off a massive stake to VCs.
AFAICT, the IRS has consistently treated them as non-dividend income for income tax purpose, with the main unclear (and changing over time) question being whether they would insist they were subject to either self-employment tax or employer-based payroll tax, or neither.
Ah, that's right. Thanks for pulling me up on that. It's been awhile since I've looked at this.
I believe another bone of contention is whether the IRS even allows worker cooperatives to exempt patronage dividends from their taxable profit, to avoid double taxation (corporate, then personal income tax).
Technically (under Subchapter T), they should be allowed to. But the IRS is pretty sue-happy about this and refuses to issue much guidance. The last clear ruling was in 1971 and only allowed dividends to be issued on the basis of hours worked, not value earned (or other metrics).
I think you have the impact of the 1971 decisidn almost backwards. Patronage on the basis of earnings derived from work done with the member is explicitly allowed in the statute, hours worked is not an explicitly allowed bases, and it wasn't initio 1971 that there IRS issues a ruling that goes worker was a valid basis for patronage under one of the statutory categories.
OTOH, the IRS has been accused of being reluctant (even after a court decision allowing it with specific standard) to allow weighting of work hours vs. flat work hours in determining the amount of earnings attributable to members as a whole (vs nonmembers) in determining how much of the forms revenue is eligible for inclusion in patronage distribution. This may be because actual mechanisms that came before it did not meet the standards of objectivity set on the court decision (that the problem is the application methods it's seen and not the concept entirely seems closest as they've indicated that weighting contribution of different jobs proportional to an applicable union pay scale would be acceptable.) This is an issue for coops with both member and non-member employees.
Most US-based photographers selling stock photos are not, in fact, full-time stock photographers, but there are US-based full-time professional photographers who do some stock photography (either with photos shot for stock's sake, or sometimes with surplus photos from other photo shoots, as permitted by the specifics of the shoot). High-quality cameras are expensive, and the relatively low returns on stock photos aren't usually the best use of that capital.
More full-time stock photographers are from places like eastern Europe, where the cost of living is lower.
My intuition [maybe that's not knowledge] is that the application would require a portfolio of stock images, hence the photographers are almost certainly already in other stock image sales channels. There's little reason to assume that they will drop those other channels.
Because of the ownership model of Stocksy, there's little reason to bring on photographers without an existing track record selling stock images.
This isn't the "gig economy" as that phrase is traditionally understood, it's an artist's cooperative.
Workers only get most of the money in a co-op because they're co-owners. By contrast, most "gig economy" situations involve a VC-funded middleman trying to create a dominant position in a two-sided market so they can make most of the money.
The tiered share classes is the key here. A cooperative is great and all, but who puts up the money to start it and market it at first? Those people will get paid first
That is the same question i am thinking about. I have a small software shop in NYC. One of our clients suggested a co-op model. Im thinking using the example in this article and apply to software. Building apps. Design. UX. I have a local talent pool who i work with on a gig based set up. I get a gig ,set up the team , take down the project , move to the next. I am now thinking if this guy gives me money for the co-op idea and how much THEN figure the structure. From the article, it’s what’s known as a multi-stakeholder cooperative, with three classes of shares: one for executives, one for staff and a third class for providers. thoughts?
I'm a little uncomfortable with the executive class of stock ownership there. How do they maintain their accountability to the other two classes? How are voting and profit options arranged?
Anyway, you might do well to look at how the Mondragon Cooperatives structure their worker ownership schemes. They have a seniority model, where member-owners pay into a capital account when they join. Capital accounts accrue interest at the same rate (the percentage of profits distributed as dividends), but because older accounts have larger balances, they grab a larger share of the dividend. By the same token, workers adjudged to bring greater value to the company have larger initial capital accounts than the guy at the loading dock.
In lieu of an executive class of shares (which is sure to cause grumbling one day), why not give the individuals taking the initial risk a larger initial capital account (i.e. share of the financial pie)? That way, you retain a single class of stock, remain accountable to your peers, yet retain a portion of any future profits commensurate with the initial risk you took?
I looked them up: https://en.wikipedia.org/wiki/Mondragon_Corporation
I just dont know who sets this up in accordance with laws in New York State ( a lawyer i'd imagine ,duhh. lol) but the nitty / gritty details, like mapping value to capital etc... This model is VERY interesting and I believe the main 3 guys can pay into the initial capital account from a large project we are starting in September. If you don't mind i'd love to talk more via email. thoughts?
Our site (https://motionarray.com) does things differently. We take the entire site's earnings each month and distribute 50% to all of our producers based on their products' download percentages.
For example, if one producer somehow managed to have only their products downloaded for the month, they would take home the entire 50% of the site's earnings.
You charge producers FIFTY PERCENT to create content for your website? This is what is wrong with the 'Gig Economy' - you charge too damn much with out providing value yourself or to the sellers.
What do you provide for the 50% you are charging? It sure is not web design or marketing - I looked at your website and it looks like you just bought it from ThemeForest.
Not even Google/Apple take such a large cut and they catually provide more value to their value-creators and they also don't try to sell themselves as altruistic
This is something I've been thinking about a lot recently. I'd read this as the creators being compensated directly from the market place. There are so many industries where the creators of something are very much removed from the market place, so much so that there are many middle players that make more money than the original creators.
Since when do individuals in the "gig economy" not receive most of the rewards? AFAIK, companies like Uber take a small cut of the far, not the other way around.
They take 25%+ of gross which is pretty high. And that's because they are burning billions of equity trying to capture the market. I wonder what happens when they want to start making real money.
We changed the misleading title to a more representative sentence from the article. If anybody suggests a better (i.e. more accurate and neutral) title, we can change it again.
For the most part that's just what we do, but the important exceptions are when a title is misleading and/or linkbait. This is in the HN guidelines: https://news.ycombinator.com/newsguidelines.html.
OK, we've moved your comment (https://news.ycombinator.com/item?id=12137751) to the parent comment you were quoting from, and will detach this one so it doesn't distract from the discussion.
These aren't people waiting in line for another person's sushi or drycleaning. The article's title is a bit misleading. This is a niche in the world of professional photographers that doesn't really generalize to the scale of an "economy".