Thank you, Charles Moldow | General Partner | Foundation Capital
(asst: Judy Manning : judy@foundationcap.com)

However, I seem to not have the same fear of this nebulous “alternative” that you do.

Any negatives of this “alternative” seem to mostly be the fears of politicians desiring defined interest groups that can contribute votes and contributions, regulators seeking expansion of their authority, and other “stakeholders”, which appear to mostly be the shrouded voices of people who fear that their position, influence, wealth, and stability are threatened by the changes in the status quo.

And more importantly, the intelligent and energetic very poor people who’s lives are being bettered far far more they they ever would or could ever be by your impulse to be an “organizer” do not seem to be one the “stakeholders” of which you desire to champion, because flatly you want to tell them “all this money that you are making now, we need to slow it down, and slow it’s growth, while we wise and enlightened and smarter and richer than you people get a handle on how to control it”.

You seem also overly concerned with Americans, and not at all concerned with the people who utterly depend on this growing stream of money for their eat-or-die livelihoods.

Color me unimpressed with your “good intentions”.

First, I’m not sure how you’re defining “market improvement.” You could be talking about growth, or efficiency, or, I suppose, transparency and fairness. In any case, market improvement is only one among several possible regulatory objectives. I’m not arguing that we need regulation to make the crowd labor market more efficient, or more fair. I’m arguing that we need regulation in order to make it legible and sustainable, two attributes that I believe are necessary preconditions for a market to be “good” for society, whether or not the positive effects stem from maximum efficiency or complete equity.

One of the (perhaps regrettable) truths of organized societies is that regulation begets regulation. As crowdsourcing develops, it’s going to make less and less sense for it to remain nebulous and uncharted legal territory, when the rest of the map has such detail. One approach would be to define this type of work and then affirmatively exempt it from all potentially applicable laws. I don’t agree with that approach, for the reasons I stated, but it would certainly be valid and would address the broader problem of uncertainty. But without any “fiddling,” huge numbers of people are going to continue to operate without any clear sense of their obligations (if any) to one another.

Second, your critique presumes that regulation will necessarily create a burden. Regulation does not have to strangle. In some cases, it exists to a create a backstop, rarely if ever utilized, existing primarily to avoid conduct that might have arisen in its absence. Regulation can also loosen restrictions imposed by uncertainty. Even where regulation does create burdens, those burdens can be balanced or adjusted over time without the threat of “strangulation” ever genuinely arising. Things like reporting/disclosure requirements and organizing rights can add minimal burdens, for most employers, while creating the necessary structure for addressing problems if they do arise (e.g. child labor, which seems to come up often). Coverage thresholds and exemptions could be employed to prevent small enterprises or non-profits from being prohibitively restricted.

The problem is that stakeholders can always argue that one particular regulation or another will strangle the golden goose. The threat should be credible, and it should be evaluated not in the context of whether to intervene, but of how and to what degree. What bothers me, and I’m not saying that you necessarily endorse this viewpoint, is the idea that because a threat may exist, we shouldn’t even consider touching the goose.

Third, I readily agree that lawmakers could screw this up big time, through lack of familiarity, improper political influences, etc. The first part of the post acknowledges as much, in stating that the argument—like many regulatory arguments—requires some suspended disbelief. But saying that you object to regulation because you don’t trust the process, or the regulators themselves, doesn’t do much to address the actual question.

Fourth, just because crowd labor doesn’t fit existing categories does not mean that we don’t “understand” it, in the legal sense. That’s what I was trying to address in the post. For example, the categories regarding what employment law chooses to cover and exempt are based on policy judgments about the nature of the employment relationship: who has control, who’s independent in various ways, etc. Our “test” doesn’t cover crowd workers, but those same judgments (and the underlying priorities that shape our policy) should still apply. That’s why I referenced agricultural and domestic workers, as well as day laborers.

However, you did raise an important point about the amount of information currently available. We could certainly wait until we understand the industry better, until we have more to go on. That is a valid and popular regulatory approach. But I believe, in this context, that the risk of intervening too early is smaller than the risk of intervening too late. (Context is crucial, as I was trying to indicate with my analogy to virtual property).

If we intervene now, there’s a decent chance that the entire industry collapses, from fear and uncertainty about the viability of the business model. But that seems unlikely to me, unless the regulations are truly draconian. The potential is just too great, as we’ve both recognized. There’s at least a pretty good chance that some firms will fail, while others figure out how to adjust and reconfigure to work within whatever regulations are imposed. If we intervene later, we may have a better understanding of the problems and regulatory effects. Or we may have the same muddled understanding and scholarly conflict that we have about, say, manufacturing. What we’ll definitely have is millions of dollars invested, and entrenched practices upon which whole chunks of a working population depend. The prospect of imposing any kind of regulation that would substantially change those practices will seem ludicrous. Even if necessary, it won’t happen. You only have to look at financial regulatory reform to see how impossible it is to send an industry back in time and make it transparent, fair, or responsible. So we’ll either get ineffective regulation, or no regulation at all. The best case scenario is that we fix some of the problems that have already been around for far too long.

I would rather risk crowdsourcing growing slower, or only in certain circumstances, or not at all for a while, than deal with the alternative. I recognize that it could come out the other way, and that others might calculate the risks differently. What seems myopic (and naïve) to me is to presume that the only risk is in regulating prematurely.

“Here is something very new, that we don’t really understand, that maps poorly to our existing categories and definitions—and yet despite our lack of knowledge and understanding, we should act *now* to deal with a terrible situation, whose terribleness has not really documented in any systematic way. We don’t know what the effects of our interventions will be, and, of course, these policy interventions will be designed by non-experts who are only dimly aware of the phenomena they are tasked to regulate. However, we have good intentions and good goals, so it should work out.”

Assuming crowdsourcing/online work does reach the political radar, I presume that most politicians would employ some kind of buy-American/ America-first rhetoric and pander to economic insecurities. It’s naive to think they would vigorously protect the interests of non-voting foreigners who will ultimately make up the lion’s share of cloud workers.

The devil is in the details vis-a-vis regulation, but I think it’s more likely than not that in short order, we’d destroy online markets or greatly limit their extent & adoption. This would in turn foreclose the most exciting thing about online labor—the fact that it gives the world’s poor access to global labor markets.

The main asset of the world’s poor is their labor, and yet because of the limits we place on physical migration, they are generally unable to sell that labor to people with the demand and the means to pay. The enormous global dispersion in wages stems directly from this fact. Even minor changes in this basic calculus could have enormous consequences for human welfare. Increasing “virtual” labor mobility by even tiny fractions would dwarf the effects of other development strategies (e.g., see the World Bank reports on remittances).

For this reason alone, before we start fiddling w/ these new, currently very small markets, I’d like a lot more assurance that we will not end up strangling a potentially golden goose—a goose that’s already starting to lay eggs (e.g., the transition of the MTurk workforce to Southeast Asia).

One thing you might take a look at is our open source Transparency Corps platform, through which we might be able to set up a system where any citizen could help make sense of the data and create a useful open database out of it.

With Transparency Corps, we break massive tasks like sorting billions of documents down into short, small actions that make a big difference.

Give it a look http://transparencycorps.org and let me know if we can be helpful!

I think that this is one of the most difficult problems to resolve so that we can have a truly distributed workforce. I’m from Europe (Portugal) and our laws are even more “difficult” to deal with.

The biggest problem is how

José Fernandes

I agree with your assessment of the motivations behind the exclusions that did exist (and that I didn’t discuss, for the purpose of brevity). Although you make it sound more conscious than perhaps it was, to the extent that matters. Work arrangements that didn’t fall within the master-servant construct would have been excluded by default, as we inherited that legal principle more or less whole. The other exclusions were of course more deliberate.

I don’t think I was arguing that the mid-century model fit everyone – just that it was based on a particular conception of employment. As you say, idealized even at the time. Adding some tech-y terms to the FLSA won’t fix anything but the most specific and immediate problems dealing with tech industries. I certainly support a more extensive examination of the exclusions and assumptions, and I’m hopeful that an “update” – however you define it – would involve the deeper kind of reconsiderations you suggest.

In any case, I’ve found that presenting the narrative in this fashion helps folks unfamiliar with employment and labor law to begin to understand the source of the cognitive dissonance they experience when someone starts talking about workers rights in an as-yet unregulated industry.