Uber investor: the “1099 economy” is here regardless of whether it’s good for workers

Howard Morgan has been investing in mobile technologies for decades – he remembers one of the first ever venture capital investments in the category in the 1980’s – a deal for Franklin Electronic Publishers, which made handheld dictionaries and spellcheckers. He discussed that and a wide range of mobile-related topics recently in an interview at the M1 Summit in New York. A video of the talk can be viewed below.

Morgan’s firm First Round Capital is among the earliest investors in Uber, the most valuable privately held startup in the world. (Our story from last year, Meet the Uber Rich, outlines the other smart – or lucky – investors that got into the fast-growing on-demand car service company early.)

Uber is just as famous for its controversies and critics as it is for its lofty valuation. One major criticism is the way Uber and the myriad of “Uber for X” copycat companies is the way they categorize their workers. Rather than hire drivers as employees, Uber drivers are considered third-party contractors. Same goes for workers on TaskRabbit, or delivery people on Instacart, or maids on GetMaid. The company has used its drivers’ freelance status as a defense – we’re not responsible for the drivers’ actions, we’re just a platform – when its drivers behave badly. Economists call the proliferation of companies hiring part-time workers the “1099 economy,” in reference to the contract worker tax form.

Morgan believes the 1099 economy is the future, for better or for worse. Here’s his take on the situation:

“I do know that you have to be fairly careful, if you’re in one of these contracting situations, to take steps to make sure you’re not an employer. And most of the companies who are involved, who that are doing this, have been pretty carefully coached about that.

“I think that this country is going to a place where there are a lot of people doing part time 1099-type work. We see a lot of people doing it from multiple companies. We see somebody who will be a TaskRabbit for one hour and then they’ll drive an Uber for two hours and they’ll do something else for another 1099-type company.”

But is that a good thing?

“Our economy has evolved from going to work for a corporation and working there for 40 years and getting your pension and retiring, and I think that’s the natural evolution of things. Is it good or bad? I don’t want to put a moral judgment on it, but I think its where we are, and its better for people to be able to work and earn a living than not,” Morgan said.

Earlier this week, Rebecca Smith, deputy director of the National Employment Law Project, argued that the Ubers of the world create a perverse system, noting that one survey estimates that half of on-demand workers have college degrees. She wrote:

When the benefits of these new techniques are skewed to a tiny few who control the platforms, while those who provide the services and perform the work struggle to get by, that’s perverse.

Smith noted that companies should be required to pay into universal systems like Social Security and workers’ compensation, as well as provide fair pay and predictable jobs to their workers, regardless of whether those workers are formerly called employees.

Indeed, drivers for Uber and its competitor Lyft have sued the companies for misclassification, arguing that they should be treated as employees. Last month two San Francisco judges ruled that the two separate cases will be heard before juries.
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