The Biden Labor Department released a proposal Tuesday [Oct 11, 2022] that could pave the way for regulators and courts to reclassify gig workers as employees rather than independent contractors.
A few threads that could be worth following*:
This could knock all impacted companies out of the 10x VC target realm.
Uber used VC money to subsidize ride prices, hoping to get riders hooked before adjusting to an actual market rate. Increasing driver costs is going to make that calculus even tougher. In some cases their only hope might be to drive any competition into the ground before they have to make a profit.
This could mean these services end up back in the cities, the exact areas where their marginal value is the lowest. I live in a non-urban area with taxi service and a county bus service. I don’t know many people that have used either of these, I know plenty of people who have used Uber.
Food delivery apps were already terrible economics for many restaurants and the market was crowded with little user loyalty. Could this be the end of the sector (for now (and, again, outside areas with sufficient density))?
The Silicon Valley PR playbook is in full effect:
- the platforms claim to benefit the “little guy” and impeding with their model is an attack on the soul of America
- ads are the answer!
*All of this is tempered by the current company statements that the proposed measure is not detrimental to their business. But one day these businesses will have to turn a profit, it could matter then.