The Gig Economy (sic)

The Gig Economy has merely exposed the lie that our labor is the most valuable asset we own. Rather, our man-hours have been depreciated drastically in the last 50 years. Much of this has been due to the explosion in capital credit after the abandonment by Nixon in 1971 of the gold peg under the Bretton Woods international monetary regime. This has led to capital-labor substitution, technological innovation, and productivity increases that have reduced the demand for labor, both skilled and unskilled. It’s made some of us richer.

The second contributing factor has been capital mobility under globalization and the liberalization of the populations of the developing world. This has led to a vast increase in the supply of both skilled and unskilled labor. China and India, for the past 30 years, but we still have Africa and South America in the pipeline. 

The combined effect of these policies and geopolitical trends has driven the marginal price of labor down towards the subsistence level. We need to think outside this shrinking box. Btw, union organization will do nothing to reverse these trends unless the focus is not on controlling the supply of labor and artificially raising wages. Asset ownership, risk sharing, and personal data ownership are key.

(Note: We can’t really expect Vanity Fair to tackle these issues.)

“What Have We Done?”: Silicon Valley Engineers Fear They’ve Created a Monster

Vanity Fair

In the heart of San Francisco, the gig economy reigns supreme. Walk into a grocery store, and a large number of shoppers you see are independent contractors for grocery-delivery start-up Instacart. Step outside, and cars with black-and-white Uber stickers or flashing Lyft dashboard lights are sitting, hazards on, blocking the bike lane as they wait for passengers. Cyclists zigzag around the cars, many hauling bags branded with various logos—Caviar, Postmates, Uber Eats—as they deliver food to customers around the city. You can stand on a street corner and count the number of gig-economy workers walking by, as I often do; sometimes it’s 2 out of every 10. On some corners, like the one near the Whole Foods on 4th and Harrison, I’ve counted 8 out of every 10.

The gig-economy ecosystem was supposed to represent the promised land, striking a harmonious egalitarian balance between supply and demand: consumers could off-load the drudgery of commuting or grocery shopping, while workers were set free from the Man. “Set your own schedule,” touts the Uber-driver Web site; “Be your own boss,” tempts Lyft; “Make an impact on people’s lives,” lures Instacart. These companies have been wildly successful: Uber, perhaps the most notorious, is also the most valuable start-up in the U.S., reportedly worth $72 billion. Lyft is valued at $11 billion, and grocery delivery start-up Instacart is valued at just over $4 billion. In recent months, however, a spate of lawsuits has highlighted an alarming by-product of the gig economy—a class of workers who aren’t protected by labor laws, or eligible for benefits provided to the rest of the nation’s workforce—evident even to those outside the bubble of Silicon Valley. A July report commissioned by the New York City Taxi and Limousine Commission found that 85 percent of New York City’s Uber, Lyft, Juno, and Via drivers earn less than $17.22 an hour. When the California Supreme Court ruled in May that delivery company Dynamex must treat its gig workers like full-time employees, Eve Wagner, an attorney who specializes in employment litigation, predicted to Wired, “The number of employment lawsuits is going to explode.”

Of course, the threads of this disillusionment are woven into the very structure that has made these start-ups so successful. A few weeks into my tenure at Uber, where I started as a software developer just a year after graduating from college, still blindly convinced I could make the world a better place, a co-worker sat down next to my desk. “There’s something you need to know,” she said in a low voice, “and I don’t want you to forget it. When you’re writing code, you need to think of the drivers. Never forget that these are real people who have no benefits, who have to live in this city, who depend on us to write responsible code. Remember that.”

I didn’t understand what she meant until several weeks later, when I overheard two other engineers in the cafeteria discussing driver bonuses—specifically, ways to manipulate bonuses so that drivers could be “tricked” into working longer hours. Laughing, they compared the drivers to animals: “You need to dangle the carrot right in front of their face.” Shortly thereafter, a wave of price cuts hit drivers in the Bay Area. When I talked to the drivers, they described how Uber kept fares in a perfectly engineered sweet spot: just high enough for them to justify driving, but just low enough that not much more than their gas and maintenance expenses were covered.

Those of us on the front lines of the gig economy were the first to spot and expose its flaws—two months after leaving Uber, I wrote a highly publicized account of my time there, describing the company’s toxic work environment in detail. Now, as Silicon Valley struggles to come to terms with its corrosive underpinnings, a new vein of disquiet has wormed its way into the Slack chats and happy-hour outings of low-level rank-and-file engineers, spurred by a question that seems to drown out everything else: What have we done? It’s a question that I, too, have been forced to grapple with as I notice how my job as a software engineer has changed the nature of work in general—and not necessarily for the better.

The risk, we agreed, is that the gig economy will become the only economy.

Gig-economy “platforms,” as they’re called, take their inspiration from software engineering, where the goal is to create modular, scalable software applications. To do this, engineers build small pieces of code that run concurrently, dividing a task into ever smaller pieces to conquer it more efficiently. Start-ups function in a similar way; tasks that used to make up a single job are broken down into the smallest possible code pieces, then partitioned so those pieces can be accomplished in parallel. It’s been a successful approach for start-ups for the same reason it’s a successful approach to writing code: it is perfectly, beautifully efficient. Across so-called platforms, there are no individuals—no bosses delegating tasks. Instead, various algorithms run on the platform, matching consumers with workers, riders with the nearest driver, and hungry customers with delivery people, telling them where to go, what to do, and how to do it. Constant needs and their quick solutions all hummingly, perpetually aligned.

By now it’s clear that these companies represent more than a trend. Though it’s difficult to accurately determine the size of the gig economy—estimates range from 0.7 to 34 percent of the national workforce—the number grows with each new start-up that figures out how to break down another basic task. There’s a relatively low risk associated with launching gig-economy companies, start-ups that can engage in “a kind of contract arbitrage” because they “aren’t bearing the corporate or societal cost, even as they reap fractional or full-time value from workers,” explains Seattle-based tech journalist Glenn Fleishman. Thanks to this buffer, they’re almost guaranteed to multiply. As the gig economy grows, so too does the danger that engineers, in attempting to build the most efficient systems, will chop and dice jobs into pieces so dehumanized that our legal system will no longer recognize them. [Note: yes, labor contracts will be obsolete and meaningless, which means asset ownership is the only defensible right.] And along with this comes an even more sinister possibility: jobs that would and should be recognizable—especially supervisory and management positions—will disappear altogether. If a software engineer can write a set of programs that breaks a job into smaller increments, and can follow it up with an algorithm that fills in as the supervisor, then the position itself can be programmed to redundancy.

A few months ago, a lunchtime conversation with several friends turned to the subject of the gig economy. We began to enumerate the potential causes of worker isplacement—things like artificial intelligence and robots, which are fast becoming a reality, expanding the purview of companies such as Google and Amazon. “The displacement is happening right under our noses,” said a woman sitting next to me, another former engineer. “Not in the future—it’s happening now.

“What can we do about it?” someone asked. Another woman replied that the only way forward was for gig-economy workers to unionize, and the table broke out into serious debate [Labor contracts, union or otherwise, will be legally ill-defined and indefensible]. Yet even as we roundly condemned the tech world’s treatment of a vulnerable new class of worker, we knew the stakes were much higher: high enough to alter the future of work itself, to the detriment of all but a select few. “Most people,” I said, interrupting the hubbub, “don’t even see the problem unless they’re on the inside.” Everyone nodded. The risk, we agreed, is that the gig economy will become the only economy, swallowing up entire groups of employees who hold full-time jobs, and that it will, eventually, displace us all. The bigger risk, however, is that the only people who understand the looming threat are the ones enabling it. 

Identity – National or Cultural?

Mr. Kotkin offers a powerful warning for US politics. In a world where the nation-state and national sovereignty are the organizing principles of global politics, a national identity is the necessary glue that holds democracies together and strengthens them against chaotic change. Multiculturalism and identity group tribalism only weaken democratic societies.

America’s Future Depends on Believing in a Shared National Identity.

 By Joel Kotkin

City Journal, August 7, 2019

This week, the troubled state of American democracy was on display in the reactions to the mass shootings in Texas and Ohio. To the establishment Left, led by the New York Times, the El Paso shooter operated as if he were a white nationalist acting on orders from Donald Trump. Some on the right, meantime, linked the Dayton shooter’s actions to Antifa. In a healthy political environment, Americans, regardless of political views, would consider these tragedies the heinous actions of disturbed people, motivated mostly by a dangerous combination of madness and ideology. But in our warped political climate, everyone assumes that their enemies want to kill them.  

Our political polarization reflects a decline in the notion of American identity. Tribalism on the left has supplanted foundational ideals of citizenship. Representative Ayanna Pressley recently insisted that blacks, Hispanics, gays, and members of other minority groups must promote identity-first politics over any notion of the common good; failure to do so, she suggested, is a betrayal of the group. In addition, progressive Democrats have effectively championed open borders, advocating the removal of criminal penalties for border-crossers, who also would get free health care not readily available to most American citizens. Such views represent the triumph of identity politics over the civic ideal of E Pluribus Unum.

The Left’s positions, according to Jeh Johnson, Homeland Security secretary under Barack Obama, are “unworkable, unwise,” and lack support of “a majority of American people or the Congress.” And yet our press, cultural institutions, and universities—all controlled by progressives—amplify those views each day, shaping an angry younger generation with little use for citizenship, free speech, open dialogue, democracy, or capitalism. Some 40 percent of millennials, for example, favor limiting speech deemed offensive to minorities—well above the 27 percent that prevails among Gen Xers, 24 percent among baby boomers, and just 12 percent among the oldest cohorts. Many millennials also dismiss basic constitutional civil rightsand support socialism over free markets.

While progressives seek to impose their agenda, some populist conservatives are understandably resentful at being told by 1 percenters like Beto O’Rourke that they are beneficiaries of “white privilege” and are members of the “male patriarchy.” Most Republicans, according to Pew, worry that foreigners are remaking and undermining the country’s identity. Considering the country’s demographic trajectory, this politics has a limited shelf life. A return to 1950s America is no more likely than the mass expulsion of Trump’s white “deplorables.”

Fighting for a robust and inclusive American identity won’t be popular with our corporate elite. “Transnational class formation”—long linked by various parts of the industrial and financial aristocracy—is becoming more pronounced. The late Peter Drucker, considered the father of management thinking, suggested that national citizenship may no longer be “meaningful” in a world connected by digital technology and global markets. Many top firms including Amazon, Apple, Chevron, and General Electric refuse even to identify as American companies. Like feudal lords loyal to the European Christianitas, not their locale, this corporate elite increasingly identifies with global markets and a cosmopolitan, post-national worldview. Since Trump’s election, many companies, including Google, have grown reluctant to work with the U.S. military, immigration agencies, and police departments, while assisting the surveillance agenda of  authoritarian China.

Given their post-nationalist inclinations, it’s not surprising that many corporate powers—notably in tech—prefer unlimited immigration. This partly reflects the non-native share of the tech workforce, which has reached 24 percent nationwide, compared with 16 percent for the rest of labor force. In Silicon Valley, it’s roughly 40 percent. Though they defend open borders, tech leaders express little concern for the native-born, largely white middle class. Immigrants, suggests Steve Case, former CEO of AOL, should replace our troubled, indigenous working class.

Such positions invite backlash from those who live outside the charmed circle. After all, if uneducated migrants want to enter the country, they won’t settle in Malibu, posh parts of San Francisco, or the Upper East Side, but instead in working- and middle-class neighborhoods. They’ll compete for housing and jobs in hardscrabble neighborhoods, but they won’t bid up the price of houses in exclusive enclaves or threaten well-paid jobs in the executive suite or at universities.

Our present trajectory is ruinous; it will exacerbate political antagonism and likely produce even more politicized violence. The only solution to greater polarization lies in reestablishing the norms of a civic nationalism that transcends identity politics of all kinds.

Developing a renewed sense of American identity won’t be easy. As a lifelong Democrat, I saw nothing remotely unpatriotic in the rhetoric of George McGovern—a World War II hero—and certainly not from Jimmy Carter or Bill Clinton. Yet today, according to Gallup, only 22 percent of Democrats today say that they are “proud to be Americans,” down from 65 percent in 2003, when the widely disliked George W. Bush was in the White House. Modern progressives generally reject any thought of American exceptionalism, maintaining, in the words of Pete Buttigieg, that America was “never as great as advertised.”

It’s hard to build a positive agenda without some sense of national pride and shared culture. Fortunately, America’s founding principles—rule of law, protection of minority rights, market-based capitalism—are not dependent on race and heritage. Unlike Europe, we don’t have one great historic tradition that we must embrace or lose. By contrast, America, based on ideas that transcend race, boasts a remarkable record of incorporating newcomers, first from Ireland and Germany, then Italy and Eastern Europe, and more recently from Latin America and Asia. These generations of new Americans constitute the secret sauce that makes this country work and could sustain it in the future.

This expansive civic nationalism also represents an economic imperative. Due to sharply lower birthrates, most of our prime competitors—the EU, Japan, and even China—are on the verge of demographic collapse. Europeans may need immigrants, but their welfare states, slow growth, and lack of cultural cohesion will make absorbing these newcomers problematic at best. Most Asian countries have little interest in large-scale immigration.

America’s future will depend on believing in a shared mission. Calling progressives “Communists” or conservatives “fascists” gets us nowhere. Convincing young people, particularly young men, that they have no future won’t dissuade them from authoritarian views—or even violence. The road to sanity starts with a renewed embrace of a shared American identity that transcends all others.

Money?

Good historical narrative of what really determines our economic fates, published in The New Yorker. The most relevant lesson:
 
“…the oldest and simplest reason of bankruptcy in finance: lending money to people who can’t pay it back.”
 
Those enthralled by Modern Monetary Theory should give this a bit of thought, especially our starry-eyed politicians.