Beyond the valley of the gig economy

Interview with Steven Hill, 48 Hills, July 10, 2019

‘Raw Deal’ author Steven Hill on Uber tech, the perils of the “Californian Ideology,” and the twilight of the elites.

By Johnny Ray Huston

The overarching theme of this year’s LaborFest is “Labor On the Edge: Dystopia or a Future for Workers.” One of the events most relevant to that pressing concern is “The Gig Economy, AI, Robotics, Workers and Dystopia San Francisco.” For a window into the subject matter, which is applicable to anyone living in the Bay Area today, I caught up with one of the event’s speakers, Steven Hill, author of 2015’s influential Raw Deal: How the “Uber Economy” and Runaway Capitalism are Screwing American Workers.

48 HILLS How would you say the symbiotic relationship between San Francisco and Silicon Valley has changed over time?

STEVEN HILL When you ask about the history between San Francisco and Silicon Valley, I go back to the 1950s. People think of Silicon Valley as Facebook, Google and Apple, but really the basis of Silicon Valley is military funding. That’s what it’s been since the 1950s. The semiconductor industry, the first big tech companies that were funded by the military here, became the basis for everything else. That’s why you can have an ecosystem in which seven out of every 10 startups fail. It’s gambling at this point. The only reason you can do that is this solid, consistent funding going back decades from military spending.

With San Francisco, despite its alternative roots in the ’60s and ’70s, there was always an undercurrent of wealth here that was based on that spending. It’s ironic, since it was a hotbed of counterculturalism. But the wealth basis of it to a certain degree was military spending.

Within what we think of as Silicon Valley — Steve Jobs and the like — there was always an undercurrent of alternative left and right. You had the alternative left, but the alternative right was sort of a libertarian right that didn’t like government.

It sometimes has been called the California Ideology, this hybrid of left and right. Both didn’t like government for their own means. The left didn’t like government because they were against the Vietnam War and the Johnson and Nixon administrations. The right was against government because they didn’t want government intervening in their businesses. Someone like Stewart Brand was this unique, iconic figure who represented this hybrid of left and right.

When you talk about alternative San Francisco, you can kind of cherry-pick your own version. But from my point of view, it was always this odd mix. At any given time, one of them would be a little more current than the other.

The latest version is more of the politically right version — Travis Kalanick from Uber, a devotee of Ayn Rand and hyper-libertarianism that says get the government the hell out of our way. “I’m going to make a great product or service, you’re going to love it, I’m going to make a billion dollars — what could be wrong?” That’s the latest twist of this ongoing narrative that goes back many decades.

48H So much of tech and the “sharing economy” hinges on the idea that all new developments are good. What would you say to the inverse argument that tech critiques are driven by Luddite or more precisely retrograde tendencies?

SH I’ve been hit with that all the time. When Raw Deal came out in October 2015, many organizations, such as the New York Times, media organizations in particular both locally and nationally were going through this honeymoon period [with tech]. The reaction was, “Oh, Steve, your book is too extreme. You don’t get it — the work is going to come to all these freelancers. It’s going to flow to them. They’ll have flexibility and they’ll be able to command any price that they want.” I thought, you’ve got to be kidding me — this is not going to end well.

Now, here we are, four years later. It didn’t take long for the truth to come out. Uber is a disaster in many ways, unless you’re a person who has no other way to get around. I’m sympathetic to [local] people who use Uber — you’re living in a city with a terrible public transportation system. Also, I live in the Outer Sunset, where it would take 40 minutes just to get a taxi. I understand why people want a transportation alternative, but Uber was not it.

One of my greatest fears about San Franciscans and Americans in general is they they don’t even know what a good public transportation system looks like. I spent a lot of time in Berlin, for example. From 2016 to 2018, I was there more than I was here because of two different fellowships. I never had a car. You could get anywhere you needed to in the city with public transportation — whether subway or tram or the bus, there was a stop no more than a six- or seven-minute walk away. You’d wait no more than three or four minutes for the train to show up. It works.

San Francisco and Americans in general, they can’t even conceive of what a public transportation system might look like. If you can’t conceive of it, you’re not going to spend the money to create it. So here we are with a new service that decided, well, well just flood the streets with cars. It was pretty predictable how that played out: congestion. Everyone who uses it, even if they like it, is stuck in traffic. Those who use it, they don’t want to admit that yes, you tap the app and a car shows up in a few minutes, but you’re stuck in traffic for 20 or 25 minutes longer sometimes because congestion is so much worse.

48H Ecologically it’s not sound either, putting more cars out on the streets driving aimlessly.

SH Absolutely. At a time when we’re supposed to be reducing our carbon footprint and San Francisco is supposed to be a leader in that, you can’t blame Donald Trump and the Republican Congress and Fox News for the mess that San Francisco has become. Democrats did this. We could have a long conversation about which Democrats and what they did and didn’t do, but that’s the reality.

48H When you think of 20th century industrial cities like Detroit that went through severe depression to become relative ghost towns, do you think San Francisco has put itself in grave danger as far as its future goes, because it is so besotted with tech and the gig economy?

SH Detroit became what it became because the auto industry collapsed. I don’t see that happening. I don’t see any imminent collapse. Especially when you have investors from all over the world, global capital just looking for a return. They don’t care where they get that from, so you have huge amounts of Chinese money here.

48H There’s the Pacific Rim aspect.

SH Exactly. But at this point this iconic American city has been transformed. It has been stunning to see how quickly it happened, when you just flood it with money, a certain type of money. At this point there’s a housing crisis, there’s an ecological crisis, a transportation crisis — all these crises. I know many member on the Board of Supervisors, they’re all good people. But when I see the proposals coming out of City Hall, it doesn’t seem like they have an idea about what to do.

They’re overwhelmed, and again, I don’t think many of them know what a good public transportation system looks like. I had a meeting with a member of the Board not that long ago. I said, There’s a housing crisis. If you look at Vienna, the way they deal with housing is that 50 percent of their housing stock is what’s called social housing. About 25 percent of the whole housing stock is government-owned, and another 25 percent is all non-profit housing development. You can only do that if you use public land.

I asked if San Francisco was looking into public land and this person said, “Yes, we are.” I said, how about public golf courses? I was at Lake Merced not that long ago, taking a walk there, and there were about 150 people using that golf course, all from a very narrow demographic — basically white men. On that piece of a 163-acre plot, you could probably build housing for at least 7500 people. His eyes got big: “Oh, no.” We have six public golf courses here, why don’t we put one of them to use for housing if it’s really that’s big of a crisis?

That’s when you realize that the real challenge is that we’re in what has been called the twilight of the elites. Even when good people get elected, they’re still part of the elites. They say it’s a crisis all the time, but do they really understand the extent of the crisis, and are they willing to do truly radical things to deal with that crisis? I’m not sure they are.

48H Since Raw Deal has come out, have you dealt with blowback from Uber or Airbnb and their higher-ups? Also, a mainstream publication such as the Chronicle, I looked at their review, and there was overt investment in these businesses driving the review of the book. They basically were in agreement with your beginning and closing arguments, but when it came down to critiquing specific businesses, they didn’t want to deal with what you were saying.

SH It was an odd review, you’re right. I’m not aware of anything explicit [in terms of blowback] but there was this kind of effort to marginalize the book when it came out and say it was too extreme. I would get that in some of the interviews.

I was actually invited to Uber after the book came out, to meet with one of their mid-level executives. It was a rather strange meeting. I basically told them, You should all get your resumes ready because your business model is doomed to fail. You guys are subsidizing 50 percent of every one of these rides, and that’s why you’re losing billions of dollars. If you ever try to get to profitability, you’l have to double your fares and your user base isn’t going to use you anymore. It’s not clear how you guys are going to get to profitability, and you’re never going to get there by waiting for automated cars. That’s 15 to 20 years away, if ever. I don’t know if we’re ever going to get automated cars. That was the conversation.

With the Chronicle, certainly they are the business newspaper, that is part of their constituency. I have no information that they’ve somehow overtly or covertly campaigned to support the businesses. Carolyn Said has written some decent articles about Airbnb. Finally the problems got so bad that even the Chronicle couldn’t ignore it.

48: The LaborFest panel you’re on has “gig economy” in its title, but Raw Deal critiques the notion of the “sharing economy” as presented to people using these companies. Since Raw Deal has been published, have there been any popular newer terms that should provoke a sense of wariness?

SH They now are calling it ride hailing rather than ride sharing. A lot of the attention focuses on companies like Airbnb and Uber, but other companies like Upwork and TaskRabbit, the labor brokerages, are in some ways more potentially damaging down the road.

Upwork claims to have 10 million freelancers on their platform all over the world. It’s basically an auction in which labor is bidding on jobs, and you can watch the race to the bottom. You have people from Thailand competing against people from the United States. Someone from the US says, I’ll take 60 dollars an hour for a job and someone from Thailand or the Philippines says, I’ll take two dollars an hour. They’re skilled, they have access to technology and the Internet, they can upload the job when they’re done. you can see a whole range of occupations on this platform, from lawyers, architects and engineers to translators, graphic designers and journalists — you can hire just about anybody who doesn’t need to be working with anyone else as part of a team. They can finish the job and upload it to you through the internet or the cloud.

You’re basically competing against workers from all over the world, and more and more of these companies are using these types of platforms to access the freelance labor forces. Of course, the freelancers are not getting any kind of safety net, and they’re not paying any taxes. Those companies don’t get a lot of attention, but in some ways they’re even more potentially destructive.

48H Do you think the freelance economy is continuing to splinter more and more into a servant class since Raw Deal was published? Has the momentum been continuing?

SH Yes, I would say it’s continuing. The unemployment rate has been going down, but it’s not just the quantity of jobs, it’s the quality of jobs, and the quality of jobs has declined since the economic collapse of 2008. You have more people working part-time, temp, freelance, who don’t have access to any safety net and don’t have any job security. The companies try touting these gig workers and there’s been a bunch of different organizations trying to count them that conclude there’s not that many of them, but what they are missing is that more and more workers work a very complicated labor profile now. They may have a regularly employed part-time job for 15 or 20 hours, but then they supplement that by driving shifts for Uber or some kind of gig work.

More and more workers are having to figure out how to stitch their economic lives together. The unemployment survey isn’t well-suited for this type of complexity of a labor force.The unemployment survey, the household survey, the business survey, they just ask you, Are you employed, yes or no? Do you have a second job, yes or no?

We don’t have a portable safety net for workers, which is one of the ideas I propose in chapter 10 of my book. Other countries already have this type of thing in place. A country like the Netherlands, about 50 percent of workers work part-time at this point, and they earn enough to make a living, they have a potable safety net, they have the things they need, because they’re gearing their laws and system towards these types of work. In the US we’re just letting the workers fend for themselves. The ownership society has become the on-your-own society.

48H Does this dovetail economically with what’s been happening under the Trump administration?

SH It’s been going on before Trump. Obama, in his 2016 State of the Union address, did endorse my idea for a portable safety net. Senator Mark Warner introduced a bill. But the Democrats have not been that much better than the Republicans. There is a bill in the state legislature, AB-5, to turn a lot of these freelance occupations into regular employees. That would be a step in the right direction. We’ll see if it actually makes it through the legislature and gets signed by [Governor] Newsom without being gutted by spineless Democrats. I suspect that’s what’s going to happen.

48H Would you say there’s any presidential candidate on the Democrat side that has a direct engagement with what we’re discussing?

SH The two are Elizabeth Warren and Bernie Sanders. The rest of the candidates are pretty clueless.

48H You were talking earlier about transportation systems, and more recently about the Netherlands. What other suggestions would you have about switching the direction we’re going in with the gig economy?

SH One is to upgrade the laws so that the law sees occupations that are employees and not contractors. The loopholes now are so big and the laws are not being enforced. The is one step, but in addition we have to have the portable safety net idea, which is just that every worker would have established for them what’s called an individual security account. Any business that hires that worker, regardless of that worker’s classification, whether they’re freelance or regularly employed, that business contributes a certain amount that is prorated to the number of hours that you work for them. If you just work 10 hours a week for that business, you get what would be like a quarter of a safety net contribution into that individual security account. A worker then uses those funds to buy their Social Security, Medicare, health care, unemployment, paid sick leave — all these sorts of things.

On top of that we need to enforce anti-trust legislation. We’ve gotten out of enforcing anti-trust in this country. Clearly these platforms are a form of monopoly. Elizabeth Warren has introduced some legislation regarding that.

When you talk about specific companies such as Uber and Airbnb, there’s a whole bunch of things that need to be done. For a lot of these companies it comes down to who controls the data. For example, everyone talks about data in terms of Facebook and Google, but with Uber, San Francisco should be getting the data about who the drivers are, and then that data should be given to the drivers so they can organize.

So many of these platform companies have been creating what is called a distributed labor force. These are workers who don’t work in any one place together, so they don’t know each other, they can’t find each other, they can’t organize. By getting the data from these companies, including Airbnb, to enforce the laws around these workers, that’s another important step.

There are other things that I propose. Digital licenses — if you think about any traditional brick and mortar business, Ford Motor Company can’t just set down in California with an auto plant and do whatever the hell they want. They have to sign up to a lot of business licenses and permits and environmental laws that say you can do this but you can’t do that. But these platform companies can exist everywhere and nowhere. They can set up servers anywhere in the world and beam into anywhere in the world. They take advantage of this to basically follow nobody’s laws or rules but their own.

The idea of a digital license is to say to Google or Facebook, If you want to operate in Spain or Europe or the United States or California, here’s our digital license for you to sign up to, here’s our rules that we want you to follow, and if you don’t follow them, you’re not going to be allowed to operate. This seems radical because we had this dream that the internet was going to be this wide open beautiful thing with information free-flowing and governments [not able to] control it.

That’s the dream that’s dying right now. At this point we have several different versions of the internet. We have the US, which is basically the Silicon Valley version. There’s the Chinese version — they’ve got their own companies and their own rules. And increasingly there’s more of a European version that is kind of a tweak of the Silicon Valley version — the general data protection regulation, the European Commissioner for Competition, Margrethe Vestager, who has cracked down on Google and Apple and all these companies. That’s three different versions of the internet out there already, and we have to start making these companies act like traditional brick and mortar companies. Not all that much is different. They’re just conducting business in a different way. The idea is that the things that have worked for companies in the past we can apply to these new companies. We just have to get around our mindsets, which have been injected with Silicon Valley values. These are just companies. They have a product, they have a service, and we need to regulate them to get the good from them and leave out the bad.

48H Whether one-on-one or in critical discourse, what sorts of positive responses have you gotten to Raw Deal since the book was published?

SH The book was a mini-bestseller in China. It’s had a good run. It’s been part of a wave of critics of Silicon Valley that now at this point is dominant. Silicon Valley is backpedaling pretty fast. Raw Deal was one of the first books to say, Hey, hang on, this is not going to work out.