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VCs are financing an economy of servants

VC money is pouring into 'servant economy' companies — that should stop.

Credit: Paolo Feser
Johannes Lenhard

By Johannes Lenhard

I live in a house in central London with four flats. Most nights the bell rings (often mistakenly ours, as the letters are rubbed off the sign) and the sound of a bulky backpack rubbing against the wall betrays our visitor — food delivery is here. While Deliveroo is still the most common ‘service provider’ in our house, I’ve also seen the recently launched immediate-delivery companies Getir and Gorillas. 

These 10-minute grocery startups are the newest wave of VC bets on human laziness, after taxi-apps — Uber, Lyft, Via — and meal delivery — Grubhub and DoorDash in the US, Deliveroo and Just Eat in Europe. VCs have ploughed hundreds of millions of euros into these companies in 2021 alone. 

But this is more than just the most recent unicorn-bubble fad. It’s bringing us one step closer to living in a servant economy. The world’s most powerful VC investors are funding an economy where technology allows a ‘ruling class’ to command an ‘underclass’ of servants with the swipe of an app.

The new luxury: having people bring things to you

Already in 2019, one in 10 Brits was employed in the gig economy, up from one in 20 only in 2016. The number of those in these precarious jobs will only have risen dramatically during Covid-19 as other jobs — in hospitality and events, for instance — were temporarily lost. That means ‘entrepreneur-drivers’ for Uber and Deliveroo, riders for Getir and Gorillas (even though we are slowly moving away from the gig workers, at least in the UK). They help with assembling IKEA furniture, cleaning or completing other maintenance tasks in our homes. All of these jobs are part of the ‘servant economy’.

While for some — people self-isolating, people with mobility issues — these helpers provide crucial support to procure goods, these workers mostly cook, repair, shop and deliver for people who don’t fall into these categories. On the contrary, the customers of these on-demand services are more likely people with (relatively speaking) high discretionary incomes, who are happy to pay other people to do daily tasks for them. The ‘new’ (Covid-driven) luxury is not mobility, but staying put and having others running around you to satisfy your desires. 

The servant economy also reinforces existing racial, socioeconomic and generational divides, often in an algorithmically surveyed and enforced way. 85% of Uber drivers are from Black, Asian or other underrepresented backgrounds (similar statistics can be found for Lyft drivers in the US). In 2018, almost 60% of gig workers in the UK were 18 to 34. We talk about people working in dark stores and dark kitchens, out of sight, out of mind — exactly like the servants who waited on Western aristocracy (and colonialists) in the past. 

One class against another

But what’s at stake is not just employing people properly and/or paying them well — what is often called the casualisation of work’. At the core of enabling, financing and founding this servant economy is something much less tangible but substantial: what kind of an economy do you want to produce with your decisions? How far do you want to push the division of labour between (elite) educated high earners and people providing menial services for this class? 

The economy we are currently seeding is one where convenience for some is worth more than community and solidarity for all. It pits one class of unstably employed (gig) work ‘entrepreneurs’ against an often older, surely more established class blessed with safety and security, benefitting from a new choice of servant services. 

It pits one class of unstably employed (gig) work ‘entrepreneurs’ against an often older, surely more established class blessed with safety and security, benefitting from a new choice of servant services. 

The financial incentives some of these apps provide are at times hard to resist, especially given the VC money that fuels them. But should it really be cheaper to have a delivery driver fetch a bottle of water for you and get it to you within 10 minutes, rather than going to the corner store yourself? Recent mega-rounds in the immediate-delivery apps — $290m for Gorillas, $550m for Getir or $100m for Zapp, among others — make this possible at least in London, Berlin and Paris, further extending the city/rural divide. 

VC money is fuelling this divide

Interestingly, many of these ‘servant economy’ apps are not unit-economics positive even after years of operations (and far from profitable, as in the case of Uber or Deliveroo). But profitability — ie. building a business that is able to sustain itself long-term — is not necessary for the VC model to work out (in the current climate); unlike the origins of venture capital, focused on seeding sustainable businesses, today’s VCs are about blitzscaling unicorns.

A series of mega-rounds is pushing the startup in the direction of an exit/sale or a public listing, at which point the VC can leave the table — ideally with a sizeable return on investment. The amount of private capital available has also fuelled a crazy market of secondary sales, allowing VCs to get out even more easily. Whether the company survives beyond that point doesn’t matter. Solving a real issue even less so. You just need to find an investor that is willing to buy you out. We should keep that in mind when we think about who to blame and hold responsible.

This makes me ask an even more fundamental question: is the structure and business model of most VC firms today unfit for solving complex problems sustainably and long-term? Do we need a rethink the VC business model more generally? A first starting point could be a strong embrace of ESG principles — if done correctly and beyond a simple tick-box and reporting exercise. Taking into consideration the impact (and unintended consequences) startup investments might have on society — where we shop, how much we move, who we interact with — would at least spur reflections on the dangers of what I call the servant economy. 

In the meantime, we as consumers need to make the conscious choice to avoid supporting the servant economy whenever possible. We can decide against fulfilling the absurd market projections VCs base much of their excitement on. We can choose local and choose community (and at times exercise) over convenience.

Dr. Johannes Lenhard is a research associate and centre coordinator at the Max Planck Cambridge Centre for Ethics, Economy and Social Change. He is writing a book about the ethics of venture capital and is also the coauthor of Better Venture. He tweets at @JFLenhard

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Dmitri Seletski
Dmitri Seletski

All of that us bunch of opinions, like ” All of these jobs are part of the ‘servant economy’.”, so far NOTHING interesting. Unsubstantiated claims. Of which half don’t make sense. “The world’s most powerful VC investors are funding an economy where technology allows a ‘ruling class’ to command an ‘underclass’ of servants with the swipe of an app.” And? Half of them are flop, like Uber for example, and? “The new luxury: having people bring things to you” – this has been there for ages. Many people covered it here. “On the contrary, the customers of these on-demand services… Read more »

Bruce Rosner
Bruce Rosner

On the other hand these “servant” jobs can not be outsourced to Asia or elsewhere unlike the high paying jobs for lawyers, accountants, computer programmers, etc.

Scott Janssen
Scott Janssen

When I was a kid we had the ice cream truck that allowed you to get ice cream without going to the store, the milk man delivered milk, eggs, and cheese to your doorstep, doctors made house calls, and TV repairmen came to your house to fix your TV. When my grandparents were young, there were ice men who brought Ice to their house. I think the concept of a business filling a consumer need by bringing their product or service to your door isn’t new. For me, the takeaway of this article is that it’s sad that young people… Read more »

Phil
Phil

More to it than this: all this “disruptive technology” isn’t really tech at all – it’s war of attrition, monopoly. Get people hooked on a money-losing (and unsustainable) proposition, requiring gobs of VC dough and post loss after loss in order to put existing businesses and new competitors out of business, and then raise rates to a profitable level. (And hopefully by then you can use self-driving vehicles or drones and get rid of those pesky “servants.”) Why should Uber be allowed to exist when cab companies vetted and trained employees and paid huge sums for medallions, etc., or Airbnb… Read more »

Man
Man

Thank you so much for including the phrase “While for some … people with mobility issues — these helpers provide crucial support to procure goods” in your article. I know that is far from the main point you are making but to an aging generation of baby boomers, the word “crucial” is probably not even strong enough.

Chris
Chris

I challenge you to spend some time doing some gig delivery work, if you haven’t already. I spent two years doing it and it gave me the opportunity to earn flexibly whilst building my own business. Without it, I would still be slogging away in a 9-5 that I wouldn’t be enjoying struggling to find the time to build a business on the side. Whilst doing it, I actually really enjoyed it. It gave me a chance to meet and talk with various walks of life. I would urge you to speak with a diverse sample size of riders or… Read more »

John
John

As my first experience with your publication, this article was a huge turn off. If I wanted to hear thinly veiled marxism being used in attempt to create division and hatred I wouldn’t be reading a publication about entrepreneurialism, I would be in a university lecture hall. This is not “grown up reporting” in the slightest bit.

Jason
Jason

Maybe you should reflect on the systemic component of being in business for yourself. All the wealth in the world isn’t worth a hill of beans when society is at war with itself.

Freewilly
Freewilly

For decades, countries in the East (especially high population countries like India) have been using so-called servants for their daily needs, albeit without a fancy tech solution. This model has been looked down upon in the West, until now that they have the means (and the migration) to do so. Who’s having the last laugh I wonder. Just an observation.

Theobaldo
Theobaldo

This article feels super misinformed, especially for someone supposedly doing research on this topic. Most countries have already banned the gig-model. Riders earn more than minimum wage + tips, get all their equipment provided, have protected jobs, paid sick leave, holidays etc. Most quickcommerce models were started despite this. They do not have worse working conditions than any other unskilled labor roles. Of course it is still hard, manual labor, but so is working in a factory, restaurant or construction site. At no point do you explain, how these models reinforce class divides. Just because richer people order goods/services that… Read more »

Tee
Tee

“Most countries have already banned the gig-model”.

Nonsense. Maybe legally, but practically not much has changed.

I think you’re the one missing the thrust of the article.

Victor
Victor

obviously not from US. Because wealthy people in the us are worshipped because rather than being lucky (by skin color, by birthrite, by the right school etc) they are thought to be superior in ways that those worshipping cannot justify so they poo poo any notion that doesn’t fit what they were told. That anyone with enough hard work can be successful and be better off than their parents were. Bullcrap. I am worse off than my parents. I’ve had 4 business’s and each one’s failure showed me that it’s not that I didn’t try hard, work hard, spend enough… Read more »

Niks
Niks

I have worked part time as a waiter in the past (currently I’m a software engineer). While it’s true that it’s a menial job, I don’t think this was oppressive to me in any way. I might have worked for one of these delivery jobs if they were around then. If you stop supporting the “servant economy”, the folks like old me who are employed at these places end up being jobless, and unable to support themselves while studying and upskilling themselves for better opportunities. If these businesses are not sustainable long term, either the VCs who invest in them,… Read more »

Misha Iasinskyi
Misha Iasinskyi

oh not this leftist equality-centred bull***t again… couriers are not “more servant economy” than waiters in a restaurant, do we need to abandon the services’ sector altogether?
let the market decide what goods/services are welcomed by customers. do not worry about the bubble – it will explode as soon as the conditions for that align.

Diego
Diego

Well said!

Dave
Dave

+1

Morgan Johnson
Morgan Johnson

Bull, what protections do these jobs have? In the US at least there are basically none. Why strawman the point by saying “why not just abandon the service sector?” It took a pandemic for these companies to profit, if I remember correctly, and that’s pretty embarrassing. How is expecting a certain stability in work a “leftist equality-centered” point? Are we that far into the “tech-bro meritocratic Kool-aid” that unless you have an advanced degree you deserve a second-class existence?

Heidi Perez
Heidi Perez

Have you ever talked to a food delivery person to learn how these companies are building their business model? A waiter and a receptionist in a hotel gets a proper salary in high income countries , breaks, vacation, not to mention society supports them by tipping 10% at least making the point mentioned in the article more valid: could the service be cheaper than doing it yourself? Bikers working at Lieferando have to pay for the backpack they use, get their own bikes, get paid poorly, bike endlessly for hours, the algorithm doesn’t even optimize the routes it leaves them… Read more »

Pedro
Pedro

I make the words of this gentleman my own. Thanks.

Achyuth
Achyuth

Why take all ideas and conversations to the extreme? It’s not black or white, our world. Most of reality is grey. Pls avoid jumping to extremes on all conversations (“should we abolish the entire services industry” type rhetoric), since it makes it tough to actually have a critically thought out, constructive dialog. The author just puts forth very valid points about what this “gig” economy is doing to an already increasing wealth inequality and class separation. Even if what you say happens, if this bubble bursts, who is going to get impacted the worst? The same poor gig workers, which… Read more »