The Future of the Gig Economy

The “gig economy” has become an ever-expanding meme, clocking over 500,000 citations in a recent search. It’s also become an interesting barometer of sentiment. Some people, especially techies, love the concept and can’t wait until the gig economy frees everyone from working as employees for large, bureaucratic organizations. Others worry that this is the latest form of labor exploitation that will surely consume all of us, driving us into the pits of poverty.

As I'm prone to do, I'm going to try to define a third path that will offer a different perspective on the gig economy. I believe that the gig economy, at least as currently conceived, is a transitional phenomenon that will likely evolve into something much more enduring, but quite different from the current model.

So, what is the “gig economy”? If you search the term, the following definition appears: “a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.” It’s kind of implicit in the definition, but I find that many people consider the gig economy to be individuals bidding for short-term work.

The gig economy has been a rapidly growing part of the US labor force. A recent study by two prominent economists (Lawrence Katz at Harvard and Alan Krueger at Princeton) concludes that about 94% of the net job growth in the US from 2005 to 2015 was in temporary work that would broadly be considered within the gig economy.

What types of gig work exist today?

If you look around at what passes for gig work today, it tends to fall into one of two categories: routine tasks and creative problem solving. I haven’t seen any reliable studies on this, but my impression is that the vast portion of gig work today falls into that first category – routine tasks.

Routine tasks. Perhaps the poster children of the gig economy today are the drivers who work on a freelance basis for various mobility fleet operators in large cities. But earlier participants in the gig economy were people working on a growing number of online platforms to do everything from routine software coding and translation services to bookkeeping services and clerical services.

One of the key drivers of the growth of this portion of the gig economy has been an increasing tendency for larger companies to shed major portions of their workforce in their quest to shift from fixed labor costs to variable labor costs, especially if there's significant fluctuation in the demand for certain kinds of tasks. This trend has been accelerated by the emergence of a growing array of platforms that help companies to more easily connect to a broader array of independent contractors to get these jobs done when needed and where needed.

Creative problem solving. Crowdsourcing has become a growing trend within corporate America. Do you have a really challenging question that needs to be addressed? A crowdsourcing approach encourages managers to go beyond the boundaries of the enterprise to ensure that they come up with the best answer possible. Companies can pose a problem or question on crowdsourcing platforms and offer a reward of some kind to the person who comes up with the best answer. The power of these platforms is the ability to tap into a broader and more diverse range of expertise, regardless of where it is located.

Key drivers of the growth of crowdsourcing are the accelerating pace of change and the pressure to deliver increasing efficiency by turning expertise into a variable cost – why not just pay experts when they come up with the right answer, rather than paying them a fixed salary?

The essence of gig work today. So, while there are two significant categories of gig work today – routine tasks and creative problem solving –gig work shares some common characteristics. First, it tends to be highly transactional. I have a specific short-term need and you have a capability that I need, so let’s do a transaction. Long-term relationships are generally not part of the equation. After all, that’s the attraction of the gig economy to corporate America – the ability to turn labor into a variable cost. And, yes, drivers for mobility fleet operators tend to work for the same operators over an extended period of time but they are paid just for tasks performed – the compensation system is highly transactional.

The second characteristic of gig work today is that it tends to be done by individual contractors who bid for the work independently and perform the tasks as individuals.

Forces driving the evolution of the gig economy

The gig economy is likely to evolve significantly in the decades ahead, shaped by three key forces: automation, changing customer needs and the mounting pressure to accelerate learning.

Automation. The first category of gig work identified above – routine tasks – is currently the dominant segment of the gig economy but it’s the most vulnerable to automation. Routine tasks? Machines are likely to be able to do standardized tasks more cost effectively and reliably than humans can. Even such complex but routine tasks as driving a car in a city or driving a truck across the country are likely to be automated to some degree as autonomous vehicles become more versatile and affordable.

Changing customer needs. There’s a new category of work that’s likely to emerge in response to changing customer needs. It starts in the consumer space where customers are evolving away from acceptance of highly standardized, mass market products and services and instead increasingly seeking, and even expecting, highly tailored products and services that meet their unique needs.

This began to play out in the digital media space where we have seen growing fragmentation of music, videos and software as the means of production became more accessible to a broader range of creative developers of these products. Now, technology is helping to make the means of production more accessible for physical products as well, and the expectations that customers are developing in the digital media space are cascading over into physical products as well. This trend is being accelerated by the growth of online platforms that can help connect producers of creative and highly tailored products and services with relevant customers, wherever they reside in the world.

As a result of all this, we’re likely to see a new category of gig work emerge – let’s call it “creative opportunity targeting.” As we developed in much more detail in our research paper on fragmentation and concentration trends in the economy, we're likely to see more and more people abandoning their role as employees within large companies and venturing out to develop creative new products and services for smaller and smaller customer niches. We can already see early signals of this in such diverse areas as the Maker Movement and the craft movement that platforms like Etsy, Grommet and eBay are helping to support.

A little more speculatively, I anticipate that consumers are going to show increasing interest in highly specialized, creative services that help them to draw out more of their potential. This could come in the form of creative experience designers that help them to learn about things or people that matter to them or highly specialized wellness providers in such diverse arenas as massage, meditation and nutrition. These tailored services are likely to be provided by gig operators.

Mounting pressure, on companies and individuals, to accelerate learning. So, as routine tasks become more and more automated, gig work is likely to evolve toward creative problem-solving or creative opportunity targeting. In a rapidly changing world, success in this type of work means coming up with ever more creative and differentiated offerings; doing so will likely hinge upon the ability to accelerate learning (about new approaches, new markets, new needs, new tools, etc.)

So, how might this pressure to learn faster affect how gig workers operate? I believe that it will increase the incentive for individual workers to band together into small workgroups of 3-15 workers who collaborate on gig projects. No matter how creative and smart individual workers are likely to be, they will likely learn a lot faster if they are collaborating together with a small group of other equally motivated people who have built long-term, trust based relationships with each other and who are challenging each other to come up with even more creative ideas. While some of these workers will continue to collaborate informally, the imperative to learn faster forever will drive the gig economy towards more sustained collaboration.

Like all things in the future, this is already starting to happen today. For example, one crowdsourcing platform, InnoCentive, discovered that some the top performing problem-solvers on its platform were actually groups of people who had come together on a sustained basis behind the scenes to tackle a series of problems, rather than just tackling one problem.

As the gig economy evolves to focus more on creative tasks that are highly specific to one small set of customers or to one specific kind of context, it is also likely that these gig workgroups will begin to build more sustained relationships with specific customers rather than broadly distributing themselves across any random customer that comes their way. The deeper and more nuanced understanding that a gig workgroup has of the customer or the work context, the more creative they are likely to be in addressing the evolving needs relative to gig workers that are coming in without any familiarity with the situation. The growth of reputation systems that specify the impact over time of gig workgroups can help to draw new customers with comparable needs and contexts, helping the gig workgroups to deepen their expertise.

If our research on fragmentation and concentration trends in the economy is right, we anticipate that more and more of the workforce will be pulled into this arena of creative gig workgroups. While there will likely be growing pressure on these workgroups to learn faster and deliver more value to their customers, the people in these workgroups will be sustained by deep, trust-based relationships both within their workgroup and with many of the customers they are serving and they will be rewarded by their growing ability to add tailored value to the customers they serve.

I’m often confronted by two objections to this somewhat optimistic view of the future of work. First, many people wonder whether all humans are capable of this kind of creative work or whether it will be limited to just a privileged few. Second, others wonder whether there will be enough demand for this kind of creative work. I believe that all humans are intrinsically capable of this kind of creative work and I also believe that there will be unlimited demand for this kind of creative work, but this blog post has already gone on way too long so I will leave everyone in suspense and promise to address these concerns in yet another blog post.

Bottom line

We're just in the earliest stages of an emerging and evolving gig economy. Very broadly, the gig economy is likely to evolve from a focus on routine tasks to a focus on creative work. As this evolution plays out, we're likely to see the focus of work shift from individuals to small, sustained workgroups that are driven by a desire to learn faster together. This in turn will lead to a shift from work that is defined by short-term transactions to work that is pursued in the context of rich, trust-based and sustained relationships. In short, the gig economy may become a fertile seedbed to help all of us achieve more of our potential and deliver expanding value to the marketplace.

The emergence and evolution of the gig economy is simply one more manifestation of the power of pull. The early initiatives in this arena have focused on harnessing the first level of pull - accessing skills when and where needed. But the real opportunity latent in the emerging gig economy is the opportunity to tap into the third and highest level of pull - achieving more of our potential by creating environments that can pull that out of each of us, especially when we work together.

Given this emerging reality, we may want to find a different name for this part of the economy – rather than gig economy, what would be a more accurate way of describing the evolving nature of work? Collaborative economy?