Posts Tagged ‘gig economy’

Race to the bottom

The way I see money being invested lately makes me think of a proverb, “a fool and his money are soon parted”.

There has been a lot of talk recently about “the gig economy”. The FT has a series titled the New World of Work. The NYT has been covering this as its part of the US election campaign as well (see: Defining ‘Employee’ In The Gig Economy). The WSJ continues on with What’s the Gig Deal?. The Economist was ahead of this trend in 2011 — Labour markets: The gig economy.

Anyway, this isn’t a post about the gig economy per se. For one, I’m enjoying the fruits of such a labour market, say every-time I ride in an Uber. This is me wondering if there’s a lot of money floating via a venture capital fuelled binge, in where companies spend lots of cash to acquire users, while trying to outspend their competition to become the monopoly in the space. This is basically a race to the bottom, except it doesn’t happen via government de-regulation, but more venture capital, the attitude that its better to do first and ask for forgiveness later, and governments wondering what hit them.

Why such a thought? Quite simply, read the headlines. Passport Asia wants “seven figures” to be the ClassPass of Asia. They’re entering a market where KFit exists (and is well funded, by meme hustlers, even). The bottom line being that this is all just a copy of ClassPass. Hopefully it’s “localised”, with the best option being an exit to them, eh? That was the modus operandi for Groupon Malaysia.

What about Uber? They lost a lot of money and will continue to lose more. They’ve even decided that its OK and this isn’t news.

It’s the case of business 101: you raise money, you invest money, you grow (hopefully), you make a profit and that generates a return for investors.

So let’s look a little locally at MyTeksi/GrabTaxi. They championed taxi drivers when Uber came into the market in Kuala Lumpur. They promoted the service like crazy, causing TaxiMonger to basically not exist, and Rocket Internet to pull EasyTaxi out of the market. Once the competition was removed, it became much easier to launch GrabCar and GrabCar Premium, which basically competes with Uber on the same MyTeksi platform! The taxi drivers finally woke up to a protest. But there are now a lot less choices in Malaysia and that’s the crux of the problem – the taxi drivers are using a platform that they’ve become dependent on but don’t necessarily like to be beholden to. And its only now that people might remember that they performed anti-competitive acts, like preventing taxi drivers from having competing apps on their phones (if detected, MyTeksi wouldn’t start).

Today, the headlines are: VCs see a bubble in food delivery services. $1 billion raised last year, and $750 million this year. Imagine the valuations. How much has GrabTaxi raised? Uber?

Yes, its a race to the bottom. As consumers, we should enjoy all these subsidised services. But never allow them to become a monopoly. Don’t be reliant on one app. Spread the love. You’ll get your subsidised services for a much longer time.