
A new wave of startups that rewards the individuals generating value - JumpCrisscross
http://www.nytimes.com/2016/07/21/business/smallbusiness/a-new-wrinkle-in-the-gig-economy-workers-get-most-of-the-money.html
======
brudgers
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".

~~~
meira
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? :)

~~~
jackfrodo
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?

~~~
Bartweiss
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.)

~~~
learc83
20% of what remains on tax and vehicle costs?

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%.

~~~
Bartweiss
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.

~~~
learc83
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.

~~~
Bartweiss
This seems like a good summary.

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.

~~~
marcosdumay
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.

~~~
learc83
Depreciation is also a function of mileage.

------
pjc50
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.

------
quirkot
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

~~~
adamqureshi
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?

~~~
monodeldiablo
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?

~~~
adamqureshi
I looked them up:
[https://en.wikipedia.org/wiki/Mondragon_Corporation](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?

~~~
monodeldiablo
Absolutely. Hit me up. I can also try to put you in contact with more
knowledgeable people.

~~~
adamqureshi
gimme your contact info... mine is in my profile

------
ryanmarsh
Lots of conjecture and few facts in this article.

------
tonyedgecombe
It would nice to see this sort of thing extended to other sectors, Upwork
strikes me as an ideal candidate.

~~~
brookside
Burgeoning sector in the gig economy: picking up other people's dog poop.
[http://pooperapp.com/](http://pooperapp.com/)

(Seems ripe for a Augmented Reality / Pokemon Go integration.)

~~~
randomgyatwork
That must be a joke, like the site looks legit, but it has to be a joke.....
right?....

------
goofyfoot
Our site ([https://motionarray.com](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.

~~~
opendomain
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.

~~~
goofyfoot
I'm not going to waste my time with responding to this. You obviously haven't
a clue or an eye for design for that matter.

~~~
Quanttek
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

~~~
goofyfoot
We're actually very competitive:

[https://themeforest.net/become-an-author](https://themeforest.net/become-an-
author) [https://www.pond5.com/sell-stock-footage](https://www.pond5.com/sell-
stock-footage) [http://www.istockphoto.com/sell-stock-
photos.php](http://www.istockphoto.com/sell-stock-photos.php)

------
bluejekyll
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.

------
marknutter
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.

~~~
rhino369
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.

------
EGreg
This may be relevant:
[http://m.youtube.com/watch?v=xzYgiOC9cj4](http://m.youtube.com/watch?v=xzYgiOC9cj4)

------
mempko
What the article described is good old fashion socialism. Employee ownership
is an old idea. The intellectual laziness in this article is astounding.

------
api
Nice submarine ad.

------
dang
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.

~~~
Kinnard
What's the opposition to sticking with the actual titles chosen by the
authors?

~~~
dang
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](https://news.ycombinator.com/newsguidelines.html).

------
pkaeding
Oops, this wasn't meant to be a top level comment.

~~~
dang
OK, we've moved your comment
([https://news.ycombinator.com/item?id=12137751](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.

