Take employment. GPS-enabled smartphones and lax regulation enabled a model of engaging labor that explicitly relied on classifying workers as contractors and not employees to escape obligations for safety, equity, and fair pay. Uber is the most visible example of this tech-enabled, employee-lite model, but many others exist. According to its most recent annual report, the food delivery platform DoorDash has more than seven million “dashers” (non-employee delivery drivers) but only 19,300 employees globally – its labor force includes 350 contractors for every employee. Of course, the business model requires excluding contractors as “stakeholders,” so the circle of obligation is fairly narrow. More traditional employers have adopted a similar approach to limiting headcount. In 2019, the New York Times reported that Google had 102,000 employees but 121,000 temps, vendors, and contractors (TVCs). In other words, most of those who worked at Google were contractors and not employees, and the compensation, benefits, and basic efforts at inclusion were notably lower, with TVCs prevented from accessing the internal jobs board. Lax disclosure requirements in the US do not allow us to report just how widely this core/periphery employment model has spread, but the economic benefits are clear. According to the New York Times: “OnContracting estimates that a technology company can save $100,000 a year on average per American job by using a contractor instead of a full-time employee.”
The same technologies enabled the astounding growth of geographically dispersed distribution channels such as Amazon at the expense of local retailers. At the time we were writing, Amazon was a fledgling endeavor and not the globe-straddling behemoth of today – at the start of 2005, the company reported just 9,000 full-time and part-time employees. It has since grown to become a universal distribution method for physical products, enabling companies like the maker of the Instant Pot to contract out all aspects of production, marketing, sales, and delivery. Today, Amazon has over 1.5 million employees and countless contractors, making it the world’s second-largest company (behind Walmart). The pandemic substantially boosted delivery-based retail and encouraged the proliferation of online-first enterprises. Meanwhile, Main Street stores and mall anchors such as Sears, JC Penney, Toys R Us, and dozens of others slipped into bankruptcy or liquidation. Retail has become increasingly placeless, too.
Smartphones and other mobile technologies changed finance, from touch-free payments and Venmo to stock trading apps like Robin Hood. Regulatory changes enabled businesses to raise capital online without going to a bank or a CDFI – again, challenging the locavore model of the community bank. Lastly, in the capital markets, we have seen the rise to dominance of giant index funds such as BlackRock and Vanguard, while campaigns by activist hedge funds bent on enforcing shareholder value have multiplied.
We have arrived at a place where enterprises can snap together the parts needed to do business without making permanent commitments to any particular community or set of employees. Traditional notions of stakeholders appear poorly suited to the contemporary business enterprise. What’s a leader to do?