Tuesday, July 21, 2015

The Courts Will Decide the Fate of Uber and the Gig Economy. For Better or Worse.

It's impossible to miss all of the news coverage this week related to Uber.  New York City Mayor Bill de Blasio is supporting legislation that will cap new-hire licenses for Uber drivers.  Nearly all of the presidential candidates are also chiming in with their view of whether Uber represents a model example of entrepreneurship or an example of how deregulation leads to wage stagnation hurting middle-class workers.

At the heart of the debate are these two fundamentally transformative questions:  Are the people who work for Uber employees or independent contractors?  Does Uber, the company, simply put a tool out there and act as a middle-man, or do drivers functionally work for them?

The relevant statistic:  according to the New York Times, over 160,000 Americans depend on Uber for at least part of their livelihood.  The company directly employs fewer than 4,000 of them.

This is the culmination of a phenomenon known as "the gig economy".  As more individuals have moved toward freelancing, contracting, or temping work, the result has been an existential shift in the nature of employment itself.  1099s are becoming nearly as common as W2s.

The argument in favor of the gig economy is that it fosters entrepreneurship and innovation.  It circumvents entrenched interests and monopolistic arrangements, like that of the medallion taxis in New York City.  It offers more opportunities for people to make money, while reducing the role of regulations and bureaucracy that might act as a roadblock.

On the other hand, the argument against the gig economy is that it leads to income stagnation and economic insecurity for the middle-class.  Re-classifying workers as independent contractors, critics argue, is simply a way for companies to avoid offering workers the protections and benefits they are entitled to under the law, such as abiding by the minimum wage and offering workers compensation for injuries suffered on the job. 

The legal classification between employees and independent contractors is, and ought to be, determined by the courts.  The key question  that courts must answer is "whether a worker is economically dependent on the employer or in business for him or herself".  The courts typically use a six-part test revolving around the following types of questions:

  1. Is the work being performed an integral part of the employer's business?
  2. How much control does the employer exert over workers?
  3. Is the relationship between the two parties permanent or open-ended?

Where do things currently stand?  Thus far, the conflict is being resolved primarily at the state and local level.  Just last month, the California Labor Commission ruled that an Uber driver was, indeed, an employee deserving of a variety of workplace protections and was not, as the company maintained, and independent contractor.  And, of course, New York City will decide the fate of de Blasio's proposed caps this week.

However, the larger point here is that the implications of the gig economy go far beyond Uber.  For example, in 2009, the Labor Department sued Cascom for misclassifying workers as independent contractors, and a judge ruled against the company in 2011, awarding nearly $1.5 million in back wages and damages to roughly 250 workers.  In another example, just last month, FedEx agreed to pay $228 million to settle a class-action lawsuit brought by truck drivers who also challenged their classification as independent contractors.

How "employee" will be defined in the gig economy will have major ramifications for every business model in the years to come - from WalMart carpet installers, to New Media and citizen journalists, to Amazon affiliates, to even the most popular everyday Facebook or Twitter users posting revenue-generating content on social media sites.

In this new frontier, the hope is that, however the courts ultimately decide, they decide soon.  Some detailed guidelines would be immensely helpful.


Thursday, July 09, 2015

The Reddit Shutdown: Model Cyber Protest or Temper Tantrum?

Last Friday approximately 300 discussion forums on Reddit were shut down by their moderators in a show of protest against the firing of Reddit employee, Victoria Taylor, the company's director of talent.  Some of the details of this story remain shrouded in mystery - most notably, the reasons for why Ms. Taylor was fired, as well as why moderators thought she was so valuable in the first place.  The stated reasons don't seem overly compelling:  that she "coordinated high-profile forums...  would walk participants through the basics of using Reddit, create verified accounts for them to use, and help them introduce themselves to the community".

As for the more specific reasons behind the protest, the volunteer moderators first posted a document online that asked for better communication with official staff, as well as improved software tools for community management.  Then, yesterday, two of these moderators published an op-ed in the New York Times explaining "Why We Shut Down Reddit's 'Ask Me Anything' Forum".  In it, they describe their "anger at the way the company routinely demands that the volunteers and community accept major changes that reduce our efficiency and increase our workload", "a long pattern of insisting the community and the moderators do more with less", and their desire "to communicate to the relatively tone-deaf company leaders that the pattern of removing tools and failing to improve available tools to the community at large, not merely the moderators, was an affront to the people who use the site".

Reddit's CEO, Ellen Pao, apologized for not informing the community.  Meanwhile, all of the subreddit forums are back online.

Should the rest of us care?  On the one hand, because of Reddit's 160 million regular monthly visitors, this is a cyber protest with high visibility and, arguably, impact.  The volunteer moderators expressed their voice effectively in communicating their discontent to their corporate overseers, and did so, publicly, through collective action.  As far as cyber protests go, that's fairly significant.

On the other hand, Ms. Taylor is still fired and, only a few days later, the subreddits are cruising along as if nothing ever happened.  The practical effect of the cyber protest has been simply to get an apology and to publicly complain about "having to do more with less".

Unless I'm missing something, that's not exactly the sign of the apocalypse.


Tuesday, July 07, 2015

The Emerging Bitcoin Governance Regime...

As someone long immersed in the study of Internet governance, I often find it striking how similar the discussions and activities are surrounding another supposedly "ungovernable" phenomenon...  Bitcoins and alternative cryptocurrencies.

The Bitcoin system, like the Internet, has a highly decentralized architecture, and this is by design.  But also similar to the Internet, being decentralized is not the same thing as being in a state of anarchy.  Certain clearly identifiable stakeholders have influence in shaping Bitcoin's usage and development, and others even have a demonstrable authority to constrain or enable behavior with intentional effects.

The open source model has a long-established tradition of decisions being made by "rough consensus".  With Bitcoins, there are three different types of consensus that are all necessary - consensus about rules, consensus about history, and consensus that coins have value.  Because the blockchain at the heart of Bitcoin is based so strongly on distributed copies of transaction histories, any new changes to the system must acquire a rough consensus among the Bitcoin community in order for the new changes to be adopted by others and interoperable with the rest of the currency system.

The rough consensus model, then, is the primary way in which decisions get made regarding the technology.  Policies are built into the code itself.

However, human beings play a large role as well.  Bitcoin Core is software licensed under the MIT open source license, and is the de-facto rulebook of Bitcoin.  So the question for Political Scientists is:  Who exactly is writing the rulebook?

Officially, anyone can contribute new rules, or ideas for technical improvements, via "pull requests" to Bitcoin Core.  Anyone can formally submit a new Bitcoin Improvement Proposal (BIP) and advocate for their proposal to be adopted, which occurs when it gets published in the numbered Bitcoin Improvement Proposal series.

In reality, there are a small handful of individuals who have far more policymaking authority than others.  There are currently five developers who maintain Bitcoin Core:  Gavin Andresen, Jeff Garzik, Gregory Maxwell, Wladimir J. van der Laan, and Pieter Wuille.  These are the people who "hold the pen" of the Bitcoin rulebook.  Any rule changes that they make to the code will get shipped in Bitcoin Core and will be followed by default.

Beyond the Core developers, formal institutions have begun to play a larger role in Bitcoin governance as well.  The Bitcoin Foundation is a nonprofit founded in 2012 whose main roles are 1) to help fund the Core developers out of the Foundation's assets, and 2) to act as "the voice of Bitcoin" while engaged in lobbying national governments around the world who increasingly seek to regulate Bitcoin activity.  Some of the Bitcoin Foundation's board members have been involved with criminal and/or financial troubles, and it remains an open question to what extent the Bitcoin Foundation actually represents the Bitcoin community at-large.

All of which serves to illustrate just how much governance has already emerged in this supposedly "ungovernable" space.  Just as how the Internet's protocols, or "rules", are governed by the rough consensus model led by institutions like ISOC and the W3C, Bitcoin also has a clearly identifiable governance regime which makes decisions based on the rough consensus model, whose rulebook is the Bitcoin Core, and its rules are written by its five Core developers.  And although the role of formal institutions like the Bitcoin Foundation is still unclear, they are quickly becoming recognized as an integral part of the governance equation going forward.

The bottom line is that, even in decentralized systems, rules are needed just to ensure basic functionality.  And where there are rules, there are rule-makers. 

Meet the new boss, same as the old boss.