A Worrisome Tech Trend

I had the chance to use Uber for the first time when I was in Seattle recently. Unfortunately, my first experience with this service was not great. The driver had trouble finding me at the hotel I was at and, even worse, had trouble following the navigation app on her iPhone while ferrying me from one part of town to another. In the end, I had to pull out my iPad and a mapping app to actually get us to the location I needed to be and got there with only minutes to spare. She admitted she was a new driver and, knowing that, I cut her a lot of slack and even tipped her well. However, as I started thinking more about this driver specifically and Uber in general, I knew something was troubling about this experience, although at the time I could not put my finger on it.

After a few days of pondering, I realized the thing bugging me is that she was just a contract driver for Uber with little training and yet I had entrusted my life into her hands. As I understand the business model, Uber drivers are contract employees who get 80% of the amount paid them and Uber gets about 20%. These drivers have no benefits and in many ways they have most of the risk. Now I know I also put my life into the hands of cab drivers and limo drivers too but they are pretty much professional drivers and, while some may also be contractors, many are actually hired by the company they work for. In the case of the limo drivers I have used, they have full company benefits.

I recently ran across an article that highlighted what I see as a problem with this idea but was having trouble articulating myself. Kevin Rouse, writing in NY Magazine a piece entitled, “Does Silicon Valley have a Contract  Worker Problem?” stated the following:

“With Uber valued at $18 billion, Airbnb valued at $10 billion, and new imitators popping up daily, Silicon Valley is clearly infatuated with the middleman model. A recent study by venture-capital firm SherpaVentures, which has invested in start-ups like Washio (Uber for laundry), BloomThat (Uber for flowers), and Shyp (Uber for packages), estimated that venture capitalists invested $1.6 billion in so-called “on-demand” start-ups in 2013 alone. SherpaVentures predicts that so-called “freelance marketplace” or “managed-service” labor models used by these companies are poised to transform industries like law, health care, and investment banking, and that fewer people have traditional full-time or part-time jobs as a result. This, in the firm’s mind, is a good thing.

“Perpetual, hourly employment is often deeply inefficient for all parties involved,” the report reads.

But increasingly, critics argue the freelance model is being abused, with workers being treated as if they were on payroll without getting any of the benefits afforded payroll employees. Some Silicon Valley insiders are beginning to worry that start-ups’ over-reliance on contract workers could come back to haunt them if they run afoul of longstanding labor rules. If that happens, these high-flying disruptors could be facing serious disruption themselves.”

We are already seeing this with Uber constantly coming up against local ordinances and regulations in place to monitor and license similar services in each community. You can imagine labor boards across the US will start taking a closer look at these business models and weighing in with their own concerns in the future. The role of contract workers is known as the 1099 economy and is by no means new. We have had contract workers probably since the beginning of time in one form or another. I also believe there is a place for them given the right circumstances. Most contract workers are self employed and fall under the various rules and regulations that guide self employment today.

The role of these contract workers in this Silicon Valley Uber model seems on the surface to be just another contractor working for an employer. However, it is a new twist on the idea and one that is concerning to many. Uber, and the other VC backed companies who use this model, give these folks minimal training, and as far as I can tell, none of these contractors are bonded. Uber and some others carry insurance related to their services but it is unclear how much of that insurance covers them vs their contractors. The recent case involving an Uber Driver attacking a passenger with a hammer underscore this issue. Although Uber touts its safety focus, if you read the small print in their terms, it clearly puts a lot of the risk on the consumer and tries to absolve themselves from as much responsibility as possible.

I know we are early in this business model’s life and much has to be fleshed out about how they work, train, pay, insure, and deploy these contract employees. After all Uber, Washio, Shyp and other similar tech companies are really logistic companies that mostly serve as a dispatcher for their workers to meet a specific need of their customers. However, they will increasingly come under governmental regulatory scrutiny and labor board investigations before we see if they will make it in the long run.

I admit I am highly conflicted on this issue. The Uber driver I had in Seattle was happy with her new job and I think she was only doing it part time to help pay for college. Many other Uber drivers and similar contract employees tied to these digital logistics services are full time and, like most contractors, are willing to carry the cost of being a contractor for the chance of making a living doing these jobs. Just the fact it brings more people into the job market is a good thing.

However, I think companies like Uber, Washio and others like them will eventually have to confront their responsibilities to their workers and their customers in better ways than they do today. How they treat these contract workers and protect their customers will determine if these types of companies stay around and thrive in the future.

Why Silicon Valley Needs a New Name

I was visiting with one of Silicon Valley’s bright thinkers last week, Kanwar Chandra the CMO of CSR and founder of Sirf, and he told me that Silicon Valley is really no longer Silicon Valley. In fact, he said it needs a new name. He went on to say that Silicon Valley has really become the Valley of platforms.

He astutely pointed out that it is the center of mobile and wireless development platforms with Apple’s iOS and Google’s Android platform driving major growth around the world. And with Intel jumping on the low voltage processor bandwagon, along with the many Valley companies building IP around ARM cores, it is also the center of platform development in mobile related processors for companies to build next generation mobile devices. The company he founded, Sirf, is the leader in GPS processing and much of the GPS and mapping platforms are being driven by Sirf and other companies in the Valley related to location based hardware and software.

It is now the center of activity in social networking with Twitter and Facebook leading the way with their various platforms that people can develop on. eBay and Craigslist were created to be major platforms for driving eCommerce and both companies are based in the Silicon Valley region. The Bay Area has also been at the heart of BioTech thanks to the pioneering work of Genentech and work at Stanford and UC Berkeley along with many Valley based biotech firms. The Valley’s VC’s are backing start-ups in green energy here in Silicon Valley in a big way that suggests that the Valley will become a hotspot for alternative energy platforms too.

Companies in the Valley are also leading most of the major cloud based projects and initiatives with SalesForce.com and Oracle’s Web based apps providing critical platforms for enterprise. And we will soon see the introduction of Apple’s iCloud and I am willing to bet that they will define how the consumers see and understand what the cloud is all about.

More importantly, Apple’s iCloud will become a major platform for innovation. And of course, Google’s cloud programs are already a big hit and as they make their cloud based business tools more robust and take on Microsoft with their cloud initiatives from an Open Source approach, they too will provide a major cloud based platform for business and consumers.

This shift from silicon being at the center of the Valley’s tech existence to one of platforms driving its future growth is actually quite significant and one that needs to be recognized. To frame our region as just Silicon Valley these days does it an injustice.

But here is the problem. If we see the Valley’s reason-to-exist moving from Silicon to platforms, what do we call it? Silicon Platform Valley does not roll off the tip of the tongue. Or perhaps Technology Platform Valley is the right name. Or how about Silicon Valley now Platform Valley? OK I admit that I am very bad at naming things.

So, I need your help.

If Silicon Valley has evolved beyond its core technology and is now becoming the center for broad technology platforms, is there a better name for it then Silicon Valley? I know the tendency will be to just leave it as it is, but somehow I sense we need to grab hold of this idea of it being the center of new and innovative platforms and embrace it wholeheartedly.

So, while the chance of actually changing its name is remote, I am still open to any good names you can come up with that perhaps we can push behind the scenes and at least get people seeing Silicon Valley for more then being just the center of the universe for silicon based chips.

Your comments and name suggestions are appreciated.

If you feel obliged please comment below or feel free to send me electronic mail at Tim@techpinions.com.

Designed in California and More Importantly in Silicon Valley

Last week in a blog post by Kevin Kelly at his blog The Technium, he wrote an article title Designed in California. To open his blog post he makes this statement:

“We rightly understand that how we arrange atoms is more important than what atoms we use. Same with information. The arrangement is more important than the ingredients. That’s why we crave design.”

In his post he uses Apple’s subtle but powerful wording on the back of their devices and in printed material that says “Designed by Apple in California. Assembled in China.”

Kevin’s point was that he had noticed a trend of design emphasis coming from companies in California. He goes on to mention a number of other companies, not all tech companies, who were also emphasizing a California design.

All though true that California does have some unique elements and a style all its own, what hits me about Apple’s statement is more about Silicon Valley than California.

When people I know who work for tech companies in other parts of the country or world come back to Silicon Valley I hear this phrase often: “There’s nothing like Silicon Valley.”

This statement is overwhelmingly true. All though there are certain places where entrepreneurialism happens, no place breeds and fosters entrepreneurs like Silicon Valley. As you walk down the streets of University Avenue in Palo Alto or through the halls of buildings on Sand Hill road you can feel the energy of the entrepreneur. We even have our own conference dedicated to teens who are starting companies called “Teens in Tech.”

There is a mentality, a culture and an atmosphere in Silicon Valley that fosters innovation that is unrivaled in the rest of the world.

So all though Apple’s statement on the back of their devices mentions California, the more pertinent observation is that these types of innovations are coming from Silicon Valley.