Yes, it's a job.

Photographer: Mandel Ngan/AFP/Getty Images

Making an Online Labor Force Work

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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In April, the Silicon-Valley-based freelance talent marketplace Elance-oDesk promoted its head of product and engineering, Stephane Kasriel, to chief executive officer. A couple weeks after that it ditched the unwieldy name it had acquired in a merger a year before and became Upwork. 

That puts Kasriel, a veteran of startups and several stints at eBay’s Paypal division, in a leading role in the transformation of the labor market by online talent platforms for freelancers. This transformation was described in a recent McKinsey report that I wrote about with a touch of skepticism earlier this month. Kasriel also co-authored an ebook last year, “Hire Fast & Build Things,” about how to build a software engineering team using freelancers from around the world. I talked to him at Bloomberg headquarters last week; this is an edited transcript of our conversation.

Question: You had to use your company’s marketplace to build your engineering team, right? 

Answer: Yeah, a lot of the people who’ve joined either eLance or oDesk or more recently Upwork -- and I was definitely one of them -- fell in love with the mission of the company. In Silicon Valley we all have 25 job offers we can go to, but I think a lot of us were really inspired by this idea that this is changing how people work, it’s creating jobs for tens of thousands of people around the world and it is the beginning of a pretty massive change in society.

If you’re a believer, you should put your dollars where your mouth is or your work where your mouth is, and you should build your company around those beliefs. In the company we have 1,000 people total, but it’s 300 employees and 700 freelancers. We have people in 60 different countries, including for incredibly important tasks. Quite often when I hire new engineers and tell them that one of the main guys who is in charge of information security lives in Jakarta, people will be like, “Oh my god, I can’t believe you are trusting a guy in Jakarta.” You know what, he’s just as qualified and just as careful and interested in the greater good of the company than a guy based in Silicon Valley.

Question: And you hire most of these people without meeting them in person, right?

Answer: Yes, we hire people completely based on video interviews. Just like any hiring process, even locally, it’s 100 percent. Sometimes you think somebody interviewed really well, but when it comes to actually working with them you realize that there are interpersonal dynamics that are not working out. Or the type of project that you thought they were going to be working on is much different from the project they end up working on. One of the benefits of hiring people on a freelance contract is that it’s really at will. If it doesn’t work out for either party, people can just end the contract and walk away.

The first couple weeks of the relationship we put people in what we call the boot camp. You’re given access to a small part of the whole environment, you’re being asked to do small, typical projects just to test out your skills and to test out whether there’s a good cultural fit. If you make it through you become part of the core team, and if you don’t then we give you the feedback that you need and you go apply for other jobs on the marketplace.

Question: That idea of the test period does seem to make a lot more sense than relying on chemistry in an interview.

Answer: I’ve interviewed hundreds of engineers over the years, and it’s still pretty hit or miss. Some people are really poor at selling themselves during an interview, and they don’t come off as being knowledgeable or being confident. And then you put them in your team and they shine.

What’s easier about our process, despite that fact that it’s remote, is it is totally understood that you’re going to start on a small project. If it doesn’t work out for either party then we part ways and it’s totally accepted and it’s not that big a deal.

Question: In the macro-level data there isn’t much evidence yet of a massive shift to distributed, freelance work. What are your thoughts about how this is developing?

Answer: There is definitely an exponential curve to many tech companies, and we’re part of that. It’s what people in Silicon Valley call the hockey stick -- it starts slow, and then it goes up. It took us 10 years, from inception to now, to get from zero to a billion dollars of annual billings for freelancers. If our predictions go well, it’s going to take us less than six years to go from $1 billion to $10 billion.

That being said, $10 billion in the overall trillion dollars of contingent work and $10 trillion of total work remains a really small thing. Contingent work, such as staffing agencies, has been around for a long time. If you look at the Fortune 1000 companies, something around 20 to 25 percent of their staff is contingent workforce. That is not growing particularly fast, but it’s massive. Where we have a tiny piece that’s growing really fast they have a big piece that’s growing really slowly, so it kind of hides things. The other thing is around blue-collar work vs. white-collar work. A huge part of staffing today is construction work, hospitality, health-care, more like blue-collar work. Even the McKinsey report confuses things a bit, putting us side by side with TaskRabbit. TaskRabbit is minimum-wage people that are going to go install your Ikea furniture; 75 percent of our user base has a college degree and something like 25 percent has a Ph.D. This is not the average workforce. This is extremely high-end technical skills.

It’s not just IT [information technology]. IT is half of our business. The other half is what we call knowledge work, everything that’s not IT but can be done in front of a PC or a mobile device. Some of the big categories include customer support, translation work and writing. Then there’s a very long tail. In total, we have about 3,000 skills on the marketplace, so the most niche, obscure thing you’ve ever heard of can probably found on the site.

Question: I would imagine that, especially with the IT jobs but also the other categories, a lot of this is pretty good work.

Answer: First of all not everybody’s full time, and a lot of them are doing this for fun or additional income or just to learn new skills. But out of the people doing this full time the vast majority is choosing to do this full time because this is a better career for them. It doesn’t necessarily make them more money, but for the numbers of hours that they decide to work they make a lot more money. A lot of people say, “Hey look, I used to work 60 hours a week, and my life really sucked. Now I can work 30 hours a week and make roughly as much money as before, and by the way I can live where I actually choose.”

Question: So much of what Silicon Valley has produced over the last 30 years should make it easier for people to do exactly what you’re describing, and yet people keep flocking to Silicon Valley. Is that ever going to change?

Answer: I think it's happening already. First of all, there are companies like us that are fully distributed or heavily distributed. A lot of the companies that are built from open-source software -- Mozilla, GitHub, Automattic -- became companies after starting as open-source projects and open-source projects have always been fully distributed. I think there are many more companies that are like this than what the world may think.

Some of the big companies are still run very traditionally, and some of them just have the means to attract the talent. Google pays engineers a huge premium over most of the companies in the Bay area, and as a result they really attract the talent that they want.

We have an engineering team with about 300 people. If I could have all 300 be local, and be the same talents that we have and fit within the same budget that we have, that’d be great. They’d probably be 10 or 20 or even 30 percent more effective. The problem is, that’s impossible. We could not attract as many engineers, they would not stay as long.

A big part of the issue is how long people stay. Hiring people is painful, but the real problem is that when they leave it’s incredibly disruptive for the company. In a super-hot market like Silicon Valley right now, the turnover of engineers is really high, and it hurts the companies a lot.

Compare that to what we do. Out of the first 10 engineers that we hired 10 years ago, eight of them still work at the company. And they’re still some of the most productive people we have, because they know where all the bodies are buried and which part of the code is a little bit more fragile, and how to fix these issues.

Question: And they are all remote?

Answer: They are all over the place, yeah.

Some of the really big tech companies have a lot of people on Upwork too, they just don’t talk about it. Our biggest client is a Silicon-Valley-based company that has 10,000 full-time equivalent people on the platform. Our enterprise business was nonexistent two years ago, and it’s a little over 10 percent of our business today. I fully expect it to be bigger than our traditional small business marketplace within a few years. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net