People have had cars, addresses, and telephones for a century. Pizza and Chinese food have been showing up at people’s doorsteps for decades. Surely it seems like everything one would need to build a food delivery contracting company existed before the internet. What was missing that prevented me from ordering tacos by phone in 1995?
In: Economics
It’s tricky because it’s not completely clear IF they are economically viable.
A lot of these businesses don’t make a profit. That’s in large part because today, the name of the game is “corner the market”. Basically, growing and taking over the market is more important than profit, because once you’ve succeed then you’re the king of that world and can easily become profitable. This makes it high risk / high reward and is the reason these businesses can have so much investment and such high valuations.
Of course, from a free market perspective, this is terrible. These businesses are not “competing in the market” as is considered good for society as a whole, instead they’re competing to gain a monopoly, which kills the market. This is not a new strategy and was banned a long time ago but apparently no one cares about enforcing those rules anymore.
The above point is true for most markets today unless they have nothing to do with technology (soon everything will be tech though). But the other point has to do especially with the so called “Gig Economy” which basically means that people are not employed but instead run their own business, except they don’t actually run a business.
The question here about economic viability comes from the fact that regular people are terrible businessmen. Most people who work in the Gig Economy don’t realize all of the cost that they have to pay themselves, such as taxes, depreciation on cars, even the cost of gas is not always considered. And then you have healthcare, saving for retirement, safety regulation, benefits of having a steady employment, and on and on.
This allows businesses to hire “employees” with both a lower pay than normal And for it to be completely performance based which means labor is both cheap and risk free. They also don’t need to invest capital in cars, car parks, buildings (AirBnB etc), camera equipment (YouTube etc) or pretty much anything else. You might also consider social media (and even Reddit) part of the Gig Economy since it’s regular people who provide all the value (data and content) but in that case the profits are not shared at all with the regular people.
The third point is Technology, which is the only point in favor of these businesses being economically viable. It’s because of the internet and smartphones, as well as the whole “big data” sector, that it is possible to connect so many people and so many resources in real time, on demand, anywhere in the whole world, with an extremely high rate of efficiency. The economic value of technology is immense.
TL;DR: “Cornering the market” strategy is not good for society, the Gig Economy is mostly bad for the “employees”, but modern technology does make things better.
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