Joe Fuller: It’s hard to pin down the size of the gig or freelance workforce. Most observers agree that it’s growing in absolute size and gradually extending into new domains, including high value-added white-collar jobs. Workers are attracted to the flexibility and sense of control that gig work provides. A growing array of digital platforms offer professionals a degree of convenience. Today, the digital platforms that offer professionals access to gig opportunities charge as much as 20 percent in fees. Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. I’m joined today by Adam Jackson and Gabriel Luna-Ostaseski, co-founders of the Braintrust Network. They characterize Braintrust as the next-generation talent platform, linking highly skilled technical workers with clients in both public and private sectors. They believe their network design will eliminate some of the perverse incentives that they believe have inhibited the growth of gig platforms and discouraged talented workers from relying on them. Braintrust is a not-for-profit that offers its members price transparency. It simply takes the bids submitted by professionals on the network and marks them up 10 percent in setting a final price to their end customer. The platform relies on its members for much of its growth. For example, members vet the skills of new professionals trying to enroll on Braintrust. It also issues a form of cryptocurrency—blockchain tokens—that have no economic value but that bestow governance rights on its members. That allows the professionals on Braintrust to exercise significant influence over its strategy and policies. Well, welcome, Adam and Gabe.

Gabriel Luna-Ostaseski: Great to be here.

Adam Jackson: Thanks for having us.

Fuller: There are an increasing number of platforms for freelance workers and many are well known. They've cultivated good brands. Tell us about the Braintrust Network and, why does the world need another freelancer platform?

Luna-Ostaseski: Yeah. Great question, Joe. So just for a little bit of context, Adam and I have spent our entire careers, both building and investing in marketplaces here in Silicon Valley. So we've, together, we've done over 50 marketplaces. So we've had a front row seat to see like how dominant these marketplace and platform business models can become. But also, we also saw how they start to unravel as a result of extracting huge fees from the users and having really misaligned incentives. So our fundamental belief is that while a lot of the marketplaces that you see today—we call those second wave marketplaces, like after the first wave of Craigslist—and we believe that the third wave of marketplaces will actually be user owned and controlled. And that's what we set out to do in 2018. I'll let Adam talk to some of the details of it.

Jackson: So we connect technical talent—these are designers, developers, product managers with generally US fortune 500 companies that need them on the enterprise side, on the demand side. There was a war for talent before the Covid pandemic hit. This is technical talent. After Covid hit, these companies couldn't even use their office spaces anymore. We're talking here in the summer of 2020, when we've been on lockdown here for a few months and the issue is, innovation needs haven't stopped. And, so these folks have development centers in places like Omaha, or Nevada, or Florida. And, there is just not the technical talent there. So, this forced work-from-home situation has made these enterprises really have to consider other options. And so, we solve this access problem for enterprises. And then we solve a different problem for talent. The talent had been—in classic marketplaces—been paying somewhere between 30- and 60 percent fees, so giving up a lot of the value they create just for the privilege of working on a marketplace. And what happens is these exorbitant fees end up repelling large projects and ongoing innovation. And so, we change that by dropping the fees down to zero for the talent side and charging a flat 10 percent to clients. And, what this does is it realigns incentives between the supply side and the demand side of the network.

Fuller: So, Adam, say a little bit more about that. What is it that’s structurally part of Braintrust that makes that market be more equitable and be more attractive?

Jackson: As Gabe alluded to, normal marketplaces that connect people with other people, those marketplace operators—whether it's Amazon connecting buyers and sellers or Uber connecting riders and drivers—their business model is to extract as high a fee as possible from each of those transactions. The innovation with Braintrust is that instead of being completely owned and controlled by a couple of founders and a couple investors trying to extract profits, Braintrust is actually owned and controlled by the users that make a living on that network. The incentives completely invert. All of a sudden, why would I want, as a talent on the marketplace, why would I want to charge myself exorbitant fees to go to a middleman because I am now kind of part of the middleman?

Fuller: So let's talk about what user controlled means. We think about the governance, the control rights at places like the Harvard Business School, in terms of things like decision rights, do the people with those rights have influence over major management decisions; information rights, do they have the right—in a colloquial phrase, “to look at the books”—consultative rights, where they have a right to be queried as to what they think, but ultimately the decision rights rest with a management team? And there are also economic rights to dividends or profits to the proceeds for liquidity event. How does control manifest itself in Braintrust?

Jackson: When we say control and ownership, Braintrust is on its path to becoming an open source, nonprofit, what we call “public good.” And so, what that means is, anyone can join. There's no sort of information rights, because most of it will be transparent, with some exceptions. We have a token instead of a share of stock. It does not represent any financial claims, any dividends or profit sharing, simply because there is no profit. The network is meant to run sustainably. It's meant to sustain itself. And so, it charges just enough fees to get by on, paying for hosting and maintenance and upgrades and that sort of thing. So then we roll to what does control actually mean? And so, we have a one-token-equals-one-vote model and, and those votes can be delegated out to other entities, just like you see in normal corporate governance. But those voters—token holders—they will vote on the rules of the network. And so, rules like, “Hey, how many fees should we charge ourselves,” or “which category should the marketplace conduct business in,” or “what should our screening standards be for letting people in?” Let me give you an example where in a marketplace that connects people—buyers, and sellers—together where voting might matter: egregious profiteering by the middleman. Voting and in control over financial terms of a network matter a lot. And that's our core innovation of Braintrust.

Fuller: So when I listened to you, Adam, this has echoes of, of a longstanding form of business organization, which is a cooperative. You see that, for example, many people are familiar with Ocean Spray or Land O’ Lakes, as retail brands available at supermarkets. They're actually run by cooperatives of dairy farmers in the latter case and cranberry farmers in the former case. Cooperatives actually don't have a long and successful history because the kind of lack of a focal point for decision making and who articulates the case for taking action. Also, you can get kind of sub-segments of the population who have discreet interests. How do you control for that? Or how do you, have you anticipated those types of problems, and do they worry you?

Jackson: Well, yes, this is part of the grand experiment, I would say. And, so they don't worry me as much as they excite me. What Braintrust brings to the table here is sort of real time decision making. So our decisions can be a new resolution can be proposed by any token holder on the network. We'll find some optimal window where decisions must be voted on and debated. The way we're building the UI, will be made very clear how the proposals will impact the participants economically. Asymmetry of information during the voting process has been weaponized, I would say, in most democratic systems, be they governmental or cooperative companies.

Fuller: Interesting. You mentioned that tokens in a blockchain infrastructure, of course, many of us when we hear the phrase blockchain reach for our Blockchain for Dummies yellow-bound books. How does blockchain underlie the network and how does it allow you to implement the strategy you're describing?

Jackson: The blockchain secures what we call a token. It's used to vote and it's used as an incentive mechanism to reward people who help us build our network. And so it's given out programmatically to people who help us build. And what that means for us is that you can either actually help code the thing for us, which many do, or you can just refer new talent and refer more clients to us. Because the real value of a network is its people, right? It's talent and clients. And so people who refer more talent and refer more clients earn more tokens, and with those more tokens, thus have more influence over the rules of the network, like fees and standards and roadmap. And so people who help build Braintrust have proportionate control to the value they've added to the network. And if you're, if you make a living serving people as a talent on Braintrust, more control is better. This was just not possible before with what we call terrestrial legal frameworks, right? So if I have some sort of a legal framework in the United States, it's probably not enforceable in South America or most of Europe, or certainly in most of Asia. And so if you're going to build a global network where you have millions of participants in dozens of countries, how do you get a standard set of rules that that can be enforced? And that's where blockchain comes in. One of the old adages of blockchain is it makes the phrase “code is law.” It makes that true and enforceable.

Luna-Ostaseski: This is actually a real-world use case that enables a new business model that is a disruptive value proposition, meaning we cut fees by anywhere between 20- and 60 percent. And we create a new incentive mechanism that enables us to grow faster and also in a much more capital-efficient way than traditionally you grow a company in Silicon Valley.

Fuller: So it seems like tokens are an important part of not only how you distribute decision rights and influence in the network, but also probably important in attracting and keeping talent. I mean, it’s not like you’ve gamified it, but once people commit to a platform, they like to have more of whatever it is. How do you get a token and do you find that that is—the logic I was just espousing works, that once someone starts collecting them, it gets to be a bit of a compulsion?

Jackson: The only way to get our tokens—we're not going to sell them to our users or to the public—is to help build Braintrust. And that usually means inviting other talent you know or inviting clients. For instance, the first 50 or so talent on Braintrust were just folks that have worked with or for Gabe and I in the past, people we knew were good. We didn't have to vet them too deeply. And then we're at almost 600 now, and here in the summer of 2000—2020, sorry. The next 500 or so that came on were invited by the first 50. We asked them—the first 50—give us your best three people you've ever worked with, whether they're employed or not, and if they join and pass our tests, we'll give you tokens for it. So there's three kinds of users on Braintrust. There's talent that do the work, clients that pay for the work, and then the third type is connectors. And these are folks that are not here to do the work or hire people. They're just here to connect, build the network. And the most valuable aspect of a network, a talent network, are its people and its clients. So these connectors, they have big Rolodexes. They're just coming in and making introductions. They're inviting people with their unique code and they're going to get paid a percentage of the transaction volume they drive in the form of our token.

Fuller: So just focus on the connector for a second, because you mentioned a connector presumably may or may not be someone who also does work. I certainly understand how someone who is selling services to clients has an incentive to get other talent on both to drive more eyeballs to the site, to maybe create an opportunity for them, but also to get people they like to work with and know are really great to be available to them would work in teaming situations. But how would a pure connector benefit if all they’re doing is getting a token on the network that doesn't actually have any economic rights attached to it?

Luna-Ostaseski: They may be people that were recruiters. They may be people that came out of agencies. They may be people that have worked in IT departments, things like that, right? And these people are highly incentivized to help grow the network and invite both more talent and also more clients, because they want to participate in this new economy that we're creating. We refer to it as the user-owned economy. So really for many of them it comes down to I'll say, intrinsic motivation, and also the motivation to help create this new network.

Fuller: And presumably also there, if they're helping other people find a platform to be more successful and make more money, if they've got some other tangential or adjacent business relationship, it may enhance their relationships with that talent.

Luna-Ostaseski: That's right. A good example would be people that are digital transformation consultants that might be doing consulting for large enterprises to help them navigate these challenges. Well, then, those enterprises need to actually build software, right? They need to build digital initiatives. They need to actually do the engineering and the product work. And we're a great solution for that.

Jackson: One great example of that, Joe, is we have a group here in Silicon Valley called Silicon Foundry that has a bunch of great corporate clients and they'll help us connect really great engineering teams or talent that these members of Silicon Foundry could otherwise not access. And so Braintrust plays an important role in that and it's just a win-win.

Fuller: So you've given us a good sense of how Braintrust is different from other platforms and you've even gone beyond that to begin to imply that people really are energized to want to build it, that this is a fundamentally different platform. But it's still putting talent together with institutional interests, corporates, government agencies. Why do you think this matter? And you both said you're off on an adventure together. What's the quest about?

Luna-Ostaseski: Yeah. I mean, the quest for us is about creating a network that aligns the interests of all the parties. So traditionally what you have happening with the kind of legacy marketplaces is that you have an operator sitting in the middle that's extracting disproportionate rents from the talent. And in some cases, some of these marketplaces, they actually mark up the talent to enterprises. And when we think about this market, I mean, the reality is one in three Americans are now freelancers and that number is continuing to grow. So it becomes a larger part of our population. And it's critical that those people are able to run their businesses and not be paying that 30- to 40 percent tax. So our fundamental belief is that user-owned networks will grow faster and become more valuable than investor-owned networks.

Jackson: The Braintrust model of inverting the fees, bringing the fees as close to zero as possible, and giving all the ownership and control to the users—this model can theoretically work with any two-sided marketplace. So we picked, Braintrust picked connecting tech talent with Fortune 500. Great, okay, that's a small, admittedly deep category, but a narrow one. What about when this gets rolled out to the gig economy or to e-commerce and all of that disproportionately extracted value from those greedy middlemen, mostly Silicon Valley and Seattle companies, gets eaten. Their margin is our opportunity. And by "our", I don't mean Gabe and I's opportunity. I mean the people who use the network to make a living. We're proving this model out in this small category. Just wait till this thing eats the other categories.

Fuller: Do you see this model being replicated by a third party, or do you see you morphing the Braintrust platform into having other types of trust, driver trust and handyman trust?

Jackson: I think Braintrust could easily extend into other knowledge working categories. But this will happen to ride sharing. It probably won't be us who do it, although I hope I can be a part of it somehow. It won't be an incumbent that does it to themselves. I'm almost positive of that. Same for e-commerce. The incentives to block this new network formation from happening are too strong on the incumbent side.

Fuller: Let's turn to the freelancers themselves. Freelancers, often in these conversations, become rather abstract concepts. It's "talent." It's people that have time on their hands or want to live in a location where it's hard to do the work they're equipped to do. What do you hear from them, especially since you're dealing with a rather rarefied class of trade, you're dealing with highly, highly skilled digital talent?

Luna-Ostaseski: These are people that make their living on our platform, right? Just even a small sample; the top five people have made over $80,000 just so far this year on our platform. So when they think about us and they think about investing in both helping to build and grow the network, they're really investing in themselves because they're the people that get to own and control the network. Also they pay 0 percent fees on our network. So there's really no incentive for them to go around the network, and their only incentive is to do more work on the platform and help the platform grow and succeed. And that's one of the things I think that we've turned the tables on, which is that typically the freelancers use other platforms to get jobs and then as quickly as possible, they try to get them off platform, so they're not having to pay those exorbitant rents.

Jackson: Braintrust, by lowering fees to zero, creates a new market of technical jobs, right, that simply couldn't touch the high fee marketplace, like an Upwork. So that's good for both sides. The gig economy famously created new peer-to-peer labor markets, right? Uber turned a 100 million-dollar taxi business annually in the city of San Francisco to a 250 million-dollar ride sharing business. Okay, great, they expanded the market. But at the same time, and I'm quoting now Georgetown's study from I think it was a year ago around effective national minimum wage. That action of "expanding the market," all that did was push the effective minimum wage from something like $11.80 down to something around $6. So great, you expand a market, but you also just decimated the income potential of an entire class of labor, right, just to the enterprise value of a dozen VCs and founders who became way richer because of this extraction of value. So the point here is what Braintrust is doing in a narrow market—fine, it may not matter to a lot of people—but it is a recipe. It is a playbook and blueprint for how this user-owned economy will apply to the gig economy at some point, and take that value that's being stolen today by these middlemen and give it back to the users, in this case the drivers.

Fuller: Well, the passion is clear in your voice that this is a fundamentally different model. Let's talk about the demand side. Can you give us some examples of who's picked up on your offer on the demand side, and from whence they came? What was their solution to get their work done before they started engaging Braintrust?

Luna-Ostaseski: I think the enterprise really has been taking a wait-and-see approach. And then something started to change. These companies started to go through digital transformation. Which the challenge that they have is that for many of these legacy companies, they're in Omaha, they're in St. Louis, they're in Ann Arbor, they're in places around the US that were great for manufacturing or making physical goods or products, and now they're having to build e-commerce experiences. They're having to build A.I. chat bots, they're having to build digital products. There simply isn't the density of talent in those markets for them to be able to build what they need to build to keep pace with the competition, and also the competitive forces of Silicon Valley eating into every single category. And then what you had happen on top of that, is you had this big forcing function of which forced companies now to all be distributed companies. So now every company is forced to act like a tech company and every company is now a distributed company. What that did is it moved forward these trends that were already happening, it moved it forward by a decade in the last four months. So we saw massive adoption across Fortune 500 from companies like Porsche and Nestlé, Deloitte, just to name a few. And even the government, like NASA is using the platform.

Fuller: I can certainly confirm that geographic problem. There's a governor of a rust belt state that I know I'll leave the jurisdiction and their name out of it, but they did a survey of computer science undergraduates and graduate students that were graduated in their state annually. And what percentage of those graduates stayed in state for their first job, and it was just over 1 percent. So the very sobering analysis for them that it wasn't that none of the local employers needed the talent. It's that the attractiveness of the employment option relative to the next best alternative caused people to leave someplace they already were. Which is a pretty compelling argument that we're going to need new mechanisms to get this type of world-class digital talent accessible to companies that aren't in a preferred industry, aren't in a preferred location, can't afford to employ someone full time at the going rate, whereas they can afford a contingent worker on a project basis.

Fuller: So how are you engaging your freelancers today? And have you had votes on any issues yet?

Jackson: We’ve had many thousands of talent apply and join the wait list. There’s a very high bar to get admitted. Once they're accepted, they've been vetted by the community and by our team, they joined the approved talent population as we call it. Thus far, because we don't have the official blockchain-based voting system completely finished yet, it's not live yet. So we've been doing informal voting, basically just over regular software, to decide... No one's proposing we raise the fee, so that hasn't been an issue, but to decide the roadmap and what should we build next and that sort of thing. So, yeah, informal voting now, but official blockchain-based voting coming soon.

Fuller: So why don't we just walk through what a typical Braintrust transaction looks like. You've got, you mentioned a couple of companies like Porsche, like Nestle, you mentioned NASA. One of those clients is beginning to identify they've got a need. How does that translate into Braintrust talent is retained, the work is done, the payment is made, everyone's happy?

Luna-Ostaseski: What we find is that there's kind of two core paths that companies go down or clients go down. One is they need more, I’ll call “staff augmentation,” right? So they need 10 full-stack developers to augment their team, right? Or they need five designers to augment their existing designing team to give them more capacity or to build new things. Right? So that's use case number one. Second use case is a fully managed project, let's say like an insurance comparison engine where they need software architect, a designer, developers, QA, everything built-in, let's say, like an agency might operate. So they come in with one of those two use cases and essentially post that project. And then essentially we match highly skilled, pre-vetted talent to these opportunities. We've seen in the first 24 hours, 80 percent of the projects get four people matched to them. So we have pretty good liquidity in those categories. So that's step two, is essentially the matching process. And then the third part is they interview them and hire them. And our platform handles all the billing, all the project management and reputation management, also cross-border payments and taxes, as well. Part four is when the... On a normal invoicing cycle, the client pays a flat 10 percent fee on top of what the talent costs. The talent gets to keep a hundred percent of what they earn and the incentives remain aligned. And that's what's enabled us to do large ongoing digital transformation projects with large enterprises.

Fuller: So just make sure I followed you, the job is posted, talent responds, it bids a price, and your customer understands that'll be marked up by 10 percent, like a prix-fixe at a restaurant. And that's the sum total of the negotiation. There's no negotiation between Braintrust and the buyer. Are there thresholds for how much a project have to be to be on Braintrust? Can I buy an hour of somebody's time or do I have to buy in increments? Do I have to buy a minimum amount?

Luna-Ostaseski: When we talked to a lot of the talent, in many cases that have been working on other platforms, one of their, I'll say pain points, is the lack of transparency. They don't actually know how much they're being marked up. They don't know what the take rates are. And so it creates this kind of asymmetry of information between the network operator, the client, and the talent, and the client doesn't know how much they're paying in markup. And it's not in the operator's interest to disclose that. So we actually put all this out in the open. You know exactly the talent earns. They set their own rates and we make it completely transparent, so the talent knows what they're earning, the client knows what they're paying and they know the exact markup. And although that seems like a very simple thing, that's not the way that most of these things have operated in the past. So that's kind of part one to your question. And then part two is how do people use it? And so what I would say is that the companies that are using this platform are typically looking for, again, either a large project, right, like an insurance comparison engine or building a mobile application, something like that. Or they need to hire individuals. The use case where you were saying hiring somebody for a couple hours, it just doesn't make sense for an enterprise to go through all the procurement and signing MSAs [master service agreements] with us and things like that to do those small projects. So I would say the nature of who uses the platform seems to kind of solve for that problem.

Fuller: You talked about a backlog, a waiting list to be accepted for talent, and the people are vetted by members of the community. Do you do the same for clients? Does a client have to meet certain types of qualifications in order to be a customer of Braintrust?

Luna-Ostaseski: Right now we do vetting, I'll say kind of white glove service, for every single client that comes onto the platform. Especially in the early days of a marketplace, you really want to make sure you have what we call quality liquidity, which is the right mix of supply and demand, because we want to serve the interests of our talent and making sure that they have access to the best projects that are real projects and that have real budgets, et cetera. And, of course, we want to make sure that the clients have a fantastic experience of getting matched within 24 hours to three or four people that could all do the job. And so we do a lot of curation on both sides to ensure that it's a great experience. And as we scale, we'll do more and more of that with software as the marketplace grows.

Fuller: One thing we see in some of the iconic tech companies as the workforce has begun to express more vociferous opinions about who we should serve, like Google and Microsoft having parts of their workforce saying we shouldn't be working with the intelligence agencies, the United States, or we don't want to work for carbon companies. Is that the type of choice you would make at the level of the network, or you just essentially let the talent speak for itself? If someone sees that a carbon company or tobacco company, or an arms company, or something that some part of your population finds objectionable, they're welcome not to bid, but someone who finds that project exciting or has no such qualms is welcome to bid?

Jackson: This is another fun part of our grand experiment here, Joe. This will be a voting topic. People have the right to not bid on things, but others may not want to stand behind a brand that serves organizations that commit violence. Or things like you see happening at Facebook and Google right now, where it becomes a moral argument. Well, right now those employees don't have much of a vote, right? They can quit if they like. On Braintrust, our users will definitely have a vote. They'll have a vote in proportion to how much they've contributed to the network. And if enough of them decide, “you know what? We're not going to work with military organizations,” or whatever, anymore, then they can propose a rule change publicly via the blockchain that says “Braintrust no longer will work with intelligence agencies.” And then it goes up for vote. And if that passes, then Braintrust just changed. And if it turns out there was a big part of the market that wanted to serve those folks, then maybe they'll go fork and they'll create their own Braintrust just to serve military organizations. So the group can really express itself uniquely because of the blockchain governance.

Fuller: Well, besides experiencing all the fun associated with your grand experiment, what do you think is next for Braintrust?

Jackson: Well, what's next here is just doing what we've been doing, but more of it. We're focused on connecting technical talent with this insatiable demand we're seeing from the Fortune 1000. In March, when the lockdown started, we saw in real time the American economy hit the brakes. We saw jobs get pulled, jobs get delayed. We saw the dip within hours and days. And then, after a couple of months into the lockdown, a couple of flat months, we saw companies realize this remote distributed work, these distributed innovation teams, this is not some 2020 Band-Aid we're going to rip off in Q2 and keep moving. This is the new normal, most likely. And so we saw them flood in. That's why we decided to come out of stealth a couple of weeks ago, and were featured in Fortune and the New York Times and other places telling our clients’ and talent’s stories. And so the rest of this year and the upcoming years is just doing more of that, making sure that we can help these clients that are struggling right now to get these innovation projects restarted and keep them moving and scaling without use of their office space, keep help solving that problem for them.

Fuller: Well, Adam and Gabe, thanks so much for joining us on this, Managing the Future of Work podcast, where it's a fascinating story, and we wish you all the best on your excellent adventure.

Jackson: Joe, it was such a pleasure. Thank you for having us.

Luna-Ostaseski: Thank you for having us, Joe. Great to be here.

Fuller: We hope you enjoyed the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you listen to podcasts. You can find out more about the Managing the Future of Work Project at our website at hbs.edu/managing-the-future-of-work/. While you’re there, sign up for our newsletter.