Jonathan Matus is CEO of Zendrive, a venture-backed startup focused on re-imagining transportation through mobile driver analytics. Previously, Jonathan was an Entrepreneur in Residence at Redpoint Ventures, a top Silicon Valley VC. Prior to Redpoint, Jonathan spent six years at Facebook and Google, focused on various mobile and speech-recognition projects. He graduated cum laude from Harvard University with an Honors thesis on Artificial Intelligence. Jonathan lives in San Francisco.
What does the future of work look like?
When you think about the future of work, what is clear is that we are at the beginning of a massive disruption of the way people will work, of the types of jobs that will drive our economy and the type of workers needed for that new economy. This disruption will occur at every level of the workforce, from blue collar workers to physicians. It’s both exciting and daunting. This change is happening in stages. Let’s start with the far future — 15 years and further — because it’s really interesting and perhaps controversial.
Moore’s Law predicts exponential growth for the output of computing power per dollar spent or per inch of microchip. Many futurists, technologists and scientists see similar exponential growth curves for other technologies — for instance solar power, nanotechnology, the cost of energy, and so forth.
When you think about the last 6 or 7 years with the rapid rise of mobile, we see how this one technology and new paradigms resulting from it can disrupt the world and very quickly changed the way we do many things. The on-demand economy, advanced Robotics and AI are all increasingly important to how we think of jobs and the workforce. So when you ask about the future of work, Ray Kurzweil and other futurists are predicting that human labor is going to be less and less common. As a result, there’s going to be massive job destruction in most roles that can be well defined. For instance, being a driver or being a burger flipper or even a doctor — jobs that can be well defined and then picked up by artificial intelligence — will start being disrupted 15 years hence. When you think of the future of work in the long distance future — 15–20 years and beyond — the concept of the traditional working class will change radically.
In the near future, 3–5 years out, I think there are two segments you want to think about that’ll pop up and play an interesting role. The first one is the rise of the “1099 workers” of the on-demand economy, and the second one is proliferation of the “1099 entrepreneurs”. I’m intentionally creating a distinction here between 1099 entrepreneurs and the 1099 workers of the on-demand economy. Think of the first category as the “blue collar” 1099 worker — this is the fastest growing 1099 segment right now. The Uber partner drivers, for instance. The reason it’s growing very quickly is because these jobs are immediately available, highly flexible, and there’s a low hiring bar — people out of college, people between jobs, people with low levels of education — can pick up these jobs and immediately start making money. Consequently, the blue collar 1099 worker is a segment that will grow quickly and become an increasingly large population in the world. These are also the workers who are going to be replaced by AI later on. Thinking of the Uber example as a case study — they’ll be replaced by the autonomous vehicle. Of course, the 1099 economy extends beyond driving — a lot more people will be doing on-demand work; this is just an example of how disruption over the longer term will play out.
The second type of on-demand economy workers is the 1099 entrepreneur. These workers are more like what we traditionally think of as entrepreneurs — they own their customer relationships and they own their business, they are using enabling platforms and technologies to solve problems that previously required them to have a small business office operation. For example, they’re using the App Store, Kickstarter, Shopify, and Square to replace marketing costs and enabling them to focus on the things they do well — their craft, art, service, and passion. I think this segment is going to continue growing, and it’s much less likely to be replaced by artificial intelligence until much later on.
These are the two large segments I think are growing — both are part of the on-demand economy — and in the short term both will grow very quickly, but blue collar segment will grow more quickly. In the longer term the 1099 entrepreneurs are the ones who will survive the introduction of AI.
What are some of the big challenges in the near 3–5 year future for both aspects of the workforce — the blue collar segment and the 1099 segment?
The blue collar segment and the 1099 segment have similar challenges, for the most part. I’m going to focus on the things that are common to both of them. The first thing is, this is a new type of employment structure, so most of these workers are new to 1099 work. The entrepreneur class has not been as lively and fast growing as it is now, ever. So, they’ll need to deal with issues such as filing taxes, if they’re contractors, calculating their costs, creating budgets. They’re going to need to deal with all of those things for the first time. There are a variety of services that are now popping up to help. Some of our customers, like SherpaShare or Zen99, are dedicated to helping the 1099 drivers deal with the financial aspects and analytics of running a small business.
The other aspect is the rapid growth in both the number of drivers and the companies that are offering jobs for 1099 employees. There are literally hundreds of on-demand companies now that you can work with. Choosing which company to work with is becoming more and more complex. If you like working with kids, for example, you can work with Shuddle; if you like pets, DogVacay; if you like meeting new people, you prefer Lyft versus Uber. There are thousands of these decisions you need to make. Navigating this for the 1099 employee is really difficult. First of all, there needs to be a way for those new employees to search for those type of jobs and understand the differences between them. Right now, the job search websites are not optimized for the 1099 employee. Secondly, these workers need to be able to differentiate themselves to be more competitive. They’ll need to show they have certain skills, or they’ll need to have certain backgrounds or tendencies in order to unlock better paying gigs that fit their aspirations or interests. They may also need to be better certified. For instance, in the 1099 driving economy, drivers who have a good Zendrive score will eventually be able to earn more. Why? Because companies that move people around (e.g. Uber, Lyft, Shuddle) are willing to pay a premium for safety.
Related to that, there’s going to be all sorts of training as well as training programs required for the best paying gigs. Workers won’t be able to just go and pick up any gig when they have the time — they’ll need to prove how they are different from millions of others that are looking for these types of roles.
How is Zendrive adapting to the needs of the 1099 workforce?
Our vision is to enable the 1099 workforce. The on-demand economy represents the biggest disruption to the traditional fleet economy and to personal car ownership. We are helping those fleets ensure that their drivers are as safe as possible. We believe that using the data that we collect and the insights that we extract from the data those drivers won’t just improve their driving, but also improve their earning power. So in the future, drivers will be able to use their Zendrive scores to get more opportunities and better pay.
If you think about it, while everyone cares about safety and wants to cut down insurance costs, some services will inherently want the safest of drivers on board. So if you’re moving people, then you really care about speeding, aggressiveness and distracting phone use of your drivers . We directly help monitor and mitigate that and we help drivers improve their driving and earnings.
Another aspect of the 1099 economy, and particularly for the driving subset, relates to the regulatory issues around risk and safety. Regulators around the states and around the globe are basically saying: ‘Hold on a second, you’re growing so fast, we’re not sure how this thing will work out in the long term, and we’re not sure if all these drivers, who aren’t professionals, are safe.’ So, there’s a real need for a reliable third party to prove, without bias and without doubt, that 1099 drivers are as safe, if not safer, than other drivers.
We ran a study — comparing driving safety for a rideshare ride versus a taxi ride — and data shows that in SF rideshare drivers are not as likely to speed and use their phone while driving, making them safer. While we don’t take sides and simply report the data we collect, we hope that our technology can be an enabler for safer roads and can help on-demand companies make a data-based argument when challenged by regulators.
Any insights people might miss when thinking about the 1099 workforce?
I think there are a couple of things here. First of all, just based on my own personal experience — not based on Zendrive’s data — as a consumer of these services — I ride a lot with Uber, Lyft, etc. I meet people from all walks of life: I meet students, new immigrants, retirees, ex-taxi drivers, musicians. It’s just amazing what kind of enablement and mobility this allows. This mobility is really a phenomenal social benefit for these type of jobs and for communities that host them. They allow people to follow their passions — if you’re an artist or musician, you can go and drive for Uber a few hours each day and at night build the rock band that you dreamt of. You wouldn’t be able to do that with a traditional job — this flexibility is unique and makes for a better world.
The second thing, which is a little more related to the insights and technology that we pull, is that insurance is actually a big issue in the on-demand economy, and it might be something that regulators step in and try to fix. At the moment, specifically in the driving vertical, there’s a gap, where insurance doesn’t cover some of the time when drivers are seeking to pick up someone but do not have a passenger yet in the car. There’s a blind spot there, and it’s unclear how to best fix it. Insurance companies, for the most part, are relatively slow to adopt new technologies and business models, so they’re slow to react to this new reality. We believe that insurance companies will over time reconsider how they do business with the on-demand economy. And we believe that driving data will be key in making this transition.
There’s a need for both regulators and on-demand companies to require or request that insurance policies for on-demand fleets be priced based upon data. Our data shows drivers for rideshare companies happen to be as good or safer than most drivers, whether professional or personal. It makes no sense for them to pay more for insurance. But that’s what happening now. In the future those decisions and business models will be data driven. Helping make this transition is a part of our mission and business model.
The final point I’d like to share with you is this: You often hear in the media and even some regulators say that 1099 companies are exploiting their workers, or they’re being draconian, or they’re using 1099 status because they don’t want to pay for benefits. I just came from the Collision Conference in Las Vegas. Both the Handy CEO and Postmates CEO were asked about this onstage. They said that this is far from true. The rules defining who is a 1099 and who is a full-time worker are pretty old and strict. So these startups are in a situation where if they gave workers/drivers some additional benefits, it would force-trigger a shift from 1099 to full-time employee status, which would make it very difficult for them to run their business.
They said there needs to be a third way — a new definition of what it means to be 1099 worker — so companies can give them better terms and benefits, but still allow these 1099 workers to be the entrepreneurs and have the flexibility that’s so attractive. On-demand companies would like to give more benefits, but they’re afraid to do so because the rules will then trigger transformation of the status of their workers.
My hope is that regulators and legislators will consider creating a new model for 1099 workers that is more in line with today’s on-demand economy. If you think about the competition between all these new on-demand companies, it just makes good business sense for these companies to want to attract the best workers. But their hands are tied because of outdated work models that create a binary decision between a 1099 or W2 workforce. We need new models that give workers the flexibility they want, give companies options for creating benefits that attract the best workers, and provide the protections and fairness that regulators and legislators are concerned about.
The people in the 1099 economy actually love their jobs. They can use 1099 work in a clever way to grow their businesses. There’s an interesting story about a guy who has built a diamond distribution business on top of his Uber gig. You’re going to see more of this. You meet 10–20 people a day and you make small talk with them. This allows for a lot of entrepreneurial endeavors, and we’ll see more of that in the future.
Requests for Startups is a newsletter of ideas that investors, companies, and influencers would like to fund. New readers can subscribe here. This issue was curated by Isaac Madan, Shaurya Saluja, Andrew Jiang, and David Choi.