The ultimate labor market?

The trend known as ‘globalization’ tends to be the cumulative effect of many small, incremental steps. Once in a while there are technical innovations which result in a step change, or acceleration of globalization – the advent of shipping, flight, etc. Computers have also supported the increasing complexity of business, enabling more complex (but still economically and chronologically viable) sourcing solutions to be developed.

Recently I came across a website which, while relatively simple, appears to me to have potentially astounding consequences for globalization:

Peopleperhour (PPH) is a virtual labor market – individuals can register and thereby make themselves available to undertake ‘work’ at a chosen price (hourly rate) and under certain terms and conditions.  At the same time, individuals can also register to purchase ‘work’ – naming a job, finding individuals with appropriate skills to do the work, agreeing a rate and volume of hours to be undertaken, as well as other criteria to determine the quality and nature of output.

So far, so good: similar to many ‘group buying’ concepts that seem to be the standard entry point for entrepreneurial concepts on the internet, only this time with labor rather than goods.

Global labor market

What makes PPH, and any similar sites, so incredible (to me, at least) is the worldwide user base, and lack of need for physical connection/co-location. If I want something done, I can put it out to tender to anyone in the world. Anyone, anywhere. Involvement requires only enthusiasm, an internet connected PC (not even a requirement to have a particularly fast connection), and some form of skills (not necessarily even particularly good skills, but then price at which such work will settle will likely reflect this).

So, for example:

  • You own a kindergarten, and would like to have a website to have an internet space on which you can connect with parents, of existing children, and potential new candidates.  Only problem, you have no experience with HTML, and you’re not particularly artistically skilled.
  • You have an idea for a great mobile app (eg, for iPhone), but you don’t know your Cocoa from your Java.
  • You want to research your family tree, but never seem to have the time to scour the web, research libraries, etc.

PPH tends to currently focus on individuals, and the labor/work that they can themselves offer. This tends to mean that the work is not capex or asset intensive (typically, other than a PC, the tools are nothing more than one might already have if one has developed certain skills).  PPH also favors work that can be done off-site (increasing the pool of available labor), however local services with physical interaction are also possible.

Much of the work offered/purchased is therefore “intangible” – eg, knowledge based work, or programming/coding solutions. This is reflected in the categories of work/jobs that are shown on PPH:

It tends also to be work that an individual can carry out alone (you provide the innovation/idea, the worker implements/executes). I see no reason why this can’t develop further, but then we are effectively talking about the involvement of organizations, and we’re back to a global network of businesses/corporations/partnerships.

Taking the iPhone app idea mentioned above:

  • In the past you might have given up, thinking “Oh well, interesting idea, but I’ve no idea how to take that forward”.
  • If you are so inclined, you might have started classes at a local night-school, or bought a self-teach book, and started to learn how to code for the iPhone (but that might take a while before you are able to build an iPhone app that delivers according to your original idea).
  • If you are very serious about your idea, you might have found a partner, and shared ownership of the idea, or you might have looked in the yellow-pages and found a local software development house that could help you.
  • PPH lets you tap the whole world to find available resource to help you with your project, starting with small, incremental steps as defined by you.

Except, it’s not just about available resource. It’s a full-blown temporary labor market, with competition for the best jobs at the best price, with the best delivery, without the need to commit to long employment contracts. Every job gets rated, for subsequent buyers/sellers to observe (similar to the way buyers and sellers are rated on eBay).

Virtually every job can be put out for tender, with buyers able to select on quality ratings, price, and other specifications. So even if you sit in Paris, London or New York, you might find that the best iPhone app skills are available from groups of college students in Bangalore, or from a teenagers’ bedroom in the suburbs of Toronto. A totally global, free, efficient labor market. In the past, individuals would have found it difficult to benefit from procuring services from ‘low cost’ labor markets – with sites like PPH that is both possible, and easy.

I’ve not yet looked in detail as to how the legal aspects are managed (taxes, social commitments, etc.), but one presumes that solutions can be found since, in the end, the recruitment of labor isn’t new (rather we only talk about a tool making it easier for potential employers and employees to come together).

So what does this all mean for globalization and society?

Some initial thoughts, but one could go into a lot of depth on this:

  • Whoever you are, wherever you are, you can sell your skills – differences in cost of living will be a significant factor in pricing, eventually ‘normalizing’ quality of living (increasing wages in emerging markets, while putting further pressure on wages in developed markets, as well as increasing/decreasing wages depending on supply versus demand on a global basis)
  • Anything is possible for those with a dream: everything can be outsourced – only the idea and the drive to ship/start are required (the ultimate premium/value-add will often rest with the buyer of the service, based on the ‘brilliance’ of the idea)
  • With careful planning of initial purchased services, on an incremental hourly basis, the cost of entrepreneurial failure can be minimized, allowing individuals to enter the market to aggregate skills at a relatively low price/risk (possibility of more ‘hobby’ businesses being set up?) – in the past, many websites (eg, Facebook) depended on people with necessary skills meeting through a common location (eg, university/college); now this can be done virtually (raising new questions like ‘how important is physical proximity?‘ or ‘how important is it that all service providers share in the enthusiasm and vision of the project, not just deliver a service?‘)
  • Quality of delivery and pricing are becoming ultra-transparent, driving business to best quality at the lowest market price (a truly efficient free market, with likely a large enough pool of supply that only the best quality will survive – anyone else will be squeezed out of the market)
  • Locality becomes irrelevant for many services – only quality and price/availability will count for these servives; local services which require a physical presence will also change, given a much greater transparency and formalization of feedback (documented online, not just word-of-mouth)
  • New risks could appear, which will need to be understood, addressed and maybe priced into services, such as: maintaining confidentiality, intellectual property protection, fraud, legality of service providers, taxation matters, uncertain or poor reputation of counter-parties, etc. (eBay could be a good case study for some of these)
  • Scalability (and therefore leverage effects) of employment will be driven by efficient use of capital, and return on investment/assets (as today’s business already is, but the competition  between small teams (or individuals) and small (or large) organizations will become more blurred, and more competitive)
  • While PPH and similar put a lot of power in the hands of the individual (buyer or seller), effective and efficient teaming (ie, organizations) will also become more important for larger or more complex jobs – buyers will be able to decide whether to take on the role of project/team manager (ie, to engage multiple individuals in a ‘virtual team’ to undertake various tasks to complete a goal, or to outsource that also)

In recent years we’ve seen significant developments in mobility, high-speed communications, worldwide social networks and cross-border transactions. PPH and other similar sites are another important step in reaching a truly global market for labor. And so, I see the consequences of this to be so incredible for young people all over the world, who are currently developing their skills to eventually join the labor market (and since the changes are happening so rapidly, this affects pretty much everyone, not just the young).

One Response

  1. Another interesting site, in a similar vein, which seems to be created by a bunch of students looking to exploit the demand for their potential is ‘Internstore’, with an excellent take on Apple’s appstore:

    Well done guys, and good luck!

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