The Servant Economy

This long essay is written with the US economy in mind but arguably its relevance to the Indian economy is even greater. The main point of the article is: “In March 2009, Uber was born. Over the next few years, the company became not just a disruptive, controversial transportation company, but a model for dozens of venture-funded companies. Its name became a shorthand for this new kind of business: Uber for laundry; Uber for groceries; Uber for dog walking; Uber for (checks notes) cookies. Larger transformations swirled around—the gig economy, the on-demand economy—but the trend was most easily summed up by the way so many starry-eyed founders pitched their company: Uber for X.
This micro-generation of Silicon Valley start-ups did two basic things: It put together a labor pool to deliver food or clean toilets or assemble IKEA bookshelves, and it found people who needed those things done. Academics called this a “two-sided market,” but to a user, it meant tapping on a phone and watching the world rearrange itself to satisfy your desires. Convenience drove consumer demand. Economic need and work flexibility drove the labor supply.”
In India we have, for better or for worse, had the ‘servant economy’ in the conventional format since time immemorial. What’s worth thinking through today is whether the Uberisation of India’s servant economy is: (a) a profitable activity for an entrepreneur; and (b) a positive driver of social and economic change. Watching the thousands of youngsters running around Mumbai delivering parcels & pizzas and driving cabs inclines us towards answering that question on ‘social and economic change’ in the affirmative. Quoting from The Atlantic: “As a group, all of these companies have brought hundreds of thousands of people into new work arrangements that are more than a gig but less than a job. They’ve rearranged the way people get basic tasks done, and they’ve wired those in local industries—handymen, house cleaners, dog walkers, dry cleaners—into the tech- and capital-rich global economy. These people are now submitting to a new middleman, who they know controls the customer relationship and will eventually have to take a big cut, as Uber drivers would be happy to tell them.”
However, as this piece highlights, at the level of the entrepreneur, its worth thinking through the servant economy business model a little bit more before your burns billions of dollars of VC money for: “…because the ideas themselves are not rocket science, the competition has been fierce. Just in this sample, there are eight Ubers for doctors, six booze-delivery companies, five laundry services, and four each of massage, dog-walking, and car-washing start-ups. To drive faster growth, they have to charge customers less (increasing demand) and pay workers more (increasing supply), then fill the gap with venture-capital funding.”
It is in this regard that as a business model the ‘servant economy’ does not make it easy for a business to generate barriers to entry: “…a decade since Uber blazed the trail, and half that since the craze faded, we built a spreadsheet of 105 Uber-for-X companies founded in the United States, representing $7.4 billion in venture-capital investment. We culled from lists, dug in Crunchbase, and pulled from old news coverage. It’s not a comprehensive list, but it is a large sample of the hopes and dreams of the entrepreneurs of the time.
Of this group, four—DoorDash, Grubhub, Instacart, and Postmates—are unicorns, start-ups valued at more than $1 billion. (Notably, all are in the delivery business.) Forty-seven are gone—28 simply closed down; 19 were acquired. But 53 are neither unicorn nor roadkill. They remain alive in the great morass of the economy, successful but lacking explosive growth; or stumbling along with scaled-back ambitions; or barely functioning, like zombie start-ups. There are your weed start-ups such as Eaze, your high-end-grocery delivery such as Good Eggs, and some less high-profile companies that have found their footing as regular businesses such as Plowz & Mowz, a company in upstate New York that’s Uber for plowing and mowing. Blue Apron went public to much fanfare, but it has seen its share price fall under $1 as its results disappoint public investors. Other companies—such as the dog walkers Wag and Rover—are still on the rise, and knocking on the $1 billion private valuation. And then there are the more under-the-radar players, such as Waitr, which recently went public and, though its shares have been volatile, has a public valuation of more than $600 million.”