Joe Fuller: Online platforms have expanded opportunity for people to provide services on the basis of “projects” or “gigs” in a wide range of fields from plumbing to management consulting. But a number of barriers stand in the way of the growth of the gig economy. Basic features of the labor market, ranging from how one obtains health benefits to how one pays their taxes, are rooted in traditional modes of employment. Businesses are emerging to help overcome those barriers and speed the development of the gig economy.

Welcome to the Managing the Future of Work podcast. I’m Harvard Business School professor, and visiting fellow at the American Enterprise Institute, Joe Fuller. Today I’m speaking with Marco Zappacosta, the co-founder and CEO of Thumbtack, the gig platform that focuses on local services. With service providers in over a thousand lines of work, from cosmetology and carpentry to wedding planning and tutoring, Thumbtack’s reach provides unique insight into the challenges facing gig workers and small businesses across the country.

Welcome to Harvard Business School, Marco.

Marco Zappacosta: Thanks for having me, Joe.

Fuller: Marco, I think people have a sense for services in the gig economy from a user perspective, but that doesn’t really give them a full sense of what a company like Thumbtack is and does. Could you lay that out for us?

Zappacosta: Thumbtack makes it easier to get more done. Whether you’re looking to hire a cleaner, a tutor, a carpenter, we’re the easiest way to find and hire local professionals. We now do that all across the country, across 500 different categories, for hundreds of thousands of professionals, and helping millions of customers every year. And the truth is, this stuff is still too hard. In 2019, it is still too hard to find and hire the services that you need. And everybody’s got something on their to-do list that we can help with today.

One way to think about it is, we as a platform, as a company, are replacing what the firm used to do, what the small business used to do, for its technicians. The plumbing franchise in your community 10, 20, 30 years ago was that marketing agency for the journeyman plumbers that worked for it. And they provided the brand, they provided the marketing and some amount of back-office support. But at the end of the day, it was those plumbers working in the homes of their clients that were doing the work. And yet, they were giving up 40, 50, 60 percent of their wages to that franchise for the benefit of finding work. And they had to. There was no better way. You could throw up your business card on the local coffee shop bulletin board, but that was kind of about it. And we are replacing that in a more cost-effective fashion, in a way that gives that individual technician and professional more power, more agency, and more control over what they do with their time. And so, if you have that skill, if you have that talent, if you’re looking to grow but maybe don’t know how to set up your own website, don’t know how to buy ads on Facebook or Google, and often don’t want to learn that—it is not just orthogonal, but it may be counterproductive for you to spend your time doing that when you are in business because you’re a great carpenter or tradesperson. So we try to abstract away the effort from these professionals of finding new clients online, which today is more and more where people are going to hire pros. That is a fast-evolving sector, so it’s hard to keep up with, and it’s one that’s very technically demanding. Doing it well requires having resources and capabilities that are often beyond the resources of a small business or of a service pro. And so we come to them and say, “Hey, we help you get online, we help you find new customers. You pay us for that. You get to do what you do best and grow your business.”

Fuller: Marco, Thumbtack is thought of as a platform for gig workers. And there’s a lot of conversation in the press and among executives and political decision makers about the gig economy. What do you think are the most common misconceptions about gig work in the United States?

Zappacosta: Yeah. It’s a great question. Gig work too often gets associated with labor platforms in ridesharing or delivery, where the labor is really a commodified input into what is being offered. Thumbtack is very different because you come to Thumbtack to hire a unique professional: a caterer, a bartender, a carpenter, a tutor, folks that you’re selecting because they’re right for you and you’re willing to pay a specific price for them. And that is a very different type of arrangement and is actually more representative of the future of work that we see coming, where these automated or these more-commodified labor solutions will be automated away. But this sort of non-routine work that your plumber, say, is doing is something a lot harder to automate.

Fuller: So, talk a little bit about what’s non-routine work. What do you mean by that?

Zappacosta: Non-routine is something that is not cookie-cutter, that is not the same thing over and over and over. And often in this future of work conversation, it gets bifurcated into high skill and low skill. And I actually think that’s an unhelpful distinction. The better distinction is non-routine and routine. Routine could be an assembly line worker, could be the back-of-house in a McDonald’s, but it also could be a radiologist or a tax preparer who are doing the same formulaic work over and over. These are jobs that in their consistency lend themselves to automation either by robots or software or both. And that will probably happen. I think we can debate the timeframe, but the trend is clear in that direction.

Fuller: Yes.

Zappacosta: Non-routine, again, has both high skill and low skill or cognitive and manual: an arthroscopic surgeon certainly doing non-routine work. But so is your plumber, so is your caterer, so is your kid’s math tutor. And those are the jobs of the future, which in their non-routine uniqueness will be hard to automate and will be where we, as talented workers and professionals, will gravitate. That’s where the future of work is.

Fuller: Well, talk a little bit about the evolution of Thumbtack. Did you envision it as this platform for non-routine workers to offer local services? What was your thought process as a founder and then as it has evolved?

Zappacosta: If you go all the way back to the inception of Thumbtack, the motivating force was: Why is it so hard to find a plumber? Right? In a world that has made buying almost anything easy and effortless, why do you still have to work hard to spend money to hire a local professional? And it wasn’t geographically specific, it wasn’t categorically specific, it was this entire sector. And to us, that sort of potential energy between somebody wanting to spend money and somebody having the talent and time to offer a service to capture that felt broken. And that was an opportunity. And when we looked around, we didn’t see anybody building anything that was really changing that game, that was making it much, much easier. There were a lot of directories that had ported over an offline product like the Yellow Pages online or classified sites, but no one had reimagined what the sector could be like. When you think about the sharing economy, it’s all about liberating these underutilized assets—cars, homes—but human talent and the time that we have to express that is by far the biggest resource this country has. And it is too hard to access. It is too hard to find.

Fuller: Talk to me a little bit about the outcomes for the pros. One thing that one has a strong impression of, certainly from the press, is if you’re a gig worker and you’re driving for a ridesharing company or you’re being a concierge for an Airbnb company, you’re not making much money. Or this is, if you really start calculating income per hour, it’s poor, or particularly when you factor in, for example, for a driver the amortization of their car and their gas and whatnot. How does this work out in terms of earnings for your pros, numbers of hours worked, even their personal satisfaction? What do you know about that?

Zappacosta: The things that we know precisely is the hours that they’re working and the amount of money that they’re making. So the average pro on Thumbtack is making about $70 an hour, and that is a great wage, one that can support a middle-class lifestyle, support a family. And it is high, relative to people’s expectations, because they don’t appreciate the nature of this work: that it is truly custom, that it has real talent behind it, and it is in categories where customers have unique preferences. This isn’t simply getting a ride to the airport where, basically, as long as they get you there safely, you’re happy. This is catering your wedding, tutoring your child, painting your home, things that you’re very invested in, and through that, are willing to pay it to get the right person to do that job. And when you talk to them about what brings them pride and satisfaction, ownership over their schedules, ownership over their business, serving their clients is something that comes through in all of our surveys. There is really something to being a small business owner that brings a lot of pride and purpose. It comes with risk, comes with income volatility, comes with income insecurity, and these folks are willing to make that trade-off, but our job is to try and mitigate the risks such that more and more people can enjoy the benefits, both monetary and also just in life satisfaction.

Fuller: As you’ve engaged pros and consumers, what have you learned about what’s needed to make the market work more efficiently? What are the things you’ve added to Thumbtack—or what do you think needs to be added to Thumbtack in the future—to make it more effective?

Zappacosta: I think one helpful metaphor to use in thinking about Thumbtack is: We’re a search engine. We’re helping you find, identify, and hire the pros that you need. But historically, there was no database that you could easily search over. When you picked up the Yellow Pages, what you were doing is just calling down a list of plumbers and asking them the same question over and over and over.

Fuller: Yeah.

Zappacosta: That’s very inefficient. So the arc of Thumbtack is all about building a deeper relationship, a deeper integration with our pros, such that we can get them to pre-answer all those questions—Where do you work? What are the exact jobs that you do? How do you price those jobs? When are you available? Why should a customer hire you? Why are you the right pro for the job?—such that when you come to Thumbtack we can instantly reveal all of that data and more to give you the ability of making an instant hiring decision as quickly as possible. And that road is one we’re going to traverse forever. Something we’ve worked very hard on is job preferences and location; now availability is the next frontier; pricing is something we’ve invested enormously in. But that never ends. The deeper we can integrate into the back office of these businesses, the more we can reveal to you as a customer about the true state of availability of the pros in your area, right now, for exactly what you want, when you want it, at the price that meets your budget. And that’s what everybody’s after. At the end of the day, our consumer insight is very simple. Customers are lazy. They want what they want faster. We’re all like that. That’s why we like shopping on Amazon. It’s fast, it’s easy.

Fuller: You make me feel better about myself.

Zappacosta: You are not alone. And it’s why to-do lists go undone. It’s not because people don’t want it, it’s not because they don’t have the budget to do it. It’s because the time, effort, and anxiety in doing it well is too high. And so it gets put aside. But once you make that easier and you give customers a vehicle to do it, you see a flowering of demand. You realize, “Oh, wow! There are people in my community who could help with all sorts of stuff!” And that gets them to use it more and more.

Fuller: Sounds like you’re getting beyond the basic two-sided marketplace that we think about in terms of the market-making gig economy jobs. Where do you think we are on the evolution of the gig economy? Are we at 2.0? And if we’re at 2.0, what’s 3.0?

Zappacosta: I think we are solidly into 2.0, which is that these commodified labor platforms have reached mass scale, and they are making a real impact on consumers’ lives and also on the supply side of their networks. I think we are still, though, in the early innings of bringing to market—bringing online—the skilled professionals of this country. They’re the folks, the tens of millions of Americans, who make their living offering a service to somebody in their community on an episodic basis.

Fuller: Can you give me an illustration or two?

Zappacosta: Think of a plumber, think of a caterer, think of a tutor. There are tens of millions of these folks. Lawyers. Not a corporate attorney working at a white-shoe law firm, but somebody who helps do trust and estates, somebody who helps with a DUI incident. Things like that.

Fuller: Yup.

Zappacosta: These folks are still very hard to discover, even harder to evaluate, and still basically impossible to transact with digitally and online. And all of that will be revealed. The history of the web is to basically reveal more of this information and then offer interactions on top of it to consumers to make their lives easier, and through that, to deliver more value to these professionals and these participants in these marketplaces. So, we’re in the early days on that front. And, in fact, I think we under-appreciate what’s going to come because there’s no offline sort of corollary. So if you think of e-commerce, we’ve long had Macy’s and Walmart. And so it was easy to think, “Wow, if you move this online, it will be a very big thing.” Taxis, similarly, I think surprised people in how big Uber could be because there had never been a national-wide or worldwide scale transportation company, and when it happened, look how big it could be. I think people have even less of an appreciation of how big this sector is. Roughly, a trillion dollars a year is spent on the categories of service that we support: home, home improvement, home maintenance, events, wellness. And most of that, the vast majority of that, is still transacted offline.

Fuller: I know that you’ve been surveying small businesses and, of course, you represent them, they are your pros. What are the big issues for small businesses that you’re finding, and what does that imply as to what the gig economy could evolve into?

Zappacosta: One of our consistent findings year over year is that small businesses are more concerned with the state of regulation that they face rather than level of taxation. Taxation is something that is more salient in the press and more salient as a PR issue. But actually, when you survey these folks, they’re interested in the quality of the service that they’re getting from their governments, how easy the employment law code is to navigate, how much confidence do they have that they are following the rules and regulations. And when you talk to these folks, they’re all very motivated to do the right thing. What they get frustrated by is when it’s hard to do so, when the laws are opaque, when there isn’t proper training, when there isn’t support when they have questions. That’s what really frustrates our pros. We had this interesting finding—I think it was in 2018—where in our annual survey of state friendliness toward small business, Jacksonville, Florida, came out as one of the highest-rated cities in its sentiment. And we were wondering, what were they doing? One of the things that got called out was their services, their support to their small business community. So we went and checked out their website and thought we were going to see some magical thing. In reality, it was a pretty regular city website with one key feature. To schedule a call with a city agent, you could put in your number and the time that you wanted to call back and they’d call you.

Fuller: Interesting.

Zappacosta: It was a customer service innovation. It was Jacksonville making it easier for the small businesses in that community to get help and doing it on their time and their terms. That little thing had an enormous impact on the sentiment of these small businesses toward their city. I mentioned that to highlight that it is the service component—this interface with these governments—that is really what people feel and what they want improved upon.

Fuller: Certainly, as we’ve talked to other companies, we also hear about the difficulty of reconciling local, county, state, federal; that there’s an overlay that is just overwhelmingly complicated. If you’re an owner-operator, two or three people, you’re owning, you’re managing, and you’re doing the work. You literally just don’t have the time to figure all this out. And as Thomas Dewey said, even the most upright citizens are always in technical violation of some law at all times. Does Thumbtack help companies figure that out? And do you see that problem in your surveying data?

Zappacosta: We definitely see that problem, and we’d love to help more. Today, there’s not anything that we’ve built for that problem explicitly, but we would love to help them navigate these things and offer support, ourselves, in helping them create a new business, hire their first employees. We do it through the community today, where they can ask each other for help. But we have not yet introduced our own playbook. One thing that I think people need to keep in mind is, as we move to this future of work that has more independent contractors, more small businesses, a broader array of work arrangements, the burden of regulation is going to fall on a smaller and smaller business. General Motors, General Electric—they have a whole department, an army of folks, to help them be in compliance and follow their regulatory requirements. A small business like you just described is busy serving their customers or hustling for new customers. It falls very heavy on them. In thinking about the laws and regulations that we think are appropriate, we need to think not just in terms of what is the goal of that law and the sort of protection it’s offering, but how hard is it to comply with? How intuitive is it? How obvious is it? How much burden will it place on these small businesses to understand and navigate? That is as key of a factor as the ultimate effect of that law.

Fuller: When you think across geographies—states, let’s say—what are the three or four things that really distinguish a state, which seems to have a favorable business environment from one that has a less favor one, according to your pros?

Zappacosta: Yeah. Utah does very well in our state friendliness surveys. And it’s often the predictability and time cost of compliance. If you know it’s going to be very quick to file your paperwork, to get a business registration, to do things around employment law, that builds confidence. It’s less about, is it more or less burdensome? But if you know, “Hey, this will take three days, and I’ve got to fill out this paperwork, and then I’m done, and there’s no questions asked,” that gives you confidence. Compliance and the burden of that is something that is as key as anything else. California and San Francisco do a lot worse. That is both due to the level of regulation that is put on these small businesses …

Fuller: … by “level,” you mean specificity or degree …

Zappacosta: The number of rule.

Fuller: ... or details.

Zappacosta: The number of rules that they’re asked to follow. That could cover an occupational licensing regime, it could cover employment law, it could cover environmental law, there could be health-care‒related things. It really spans the gamut. These small businesses touch every aspect of all sorts of regulatory regimes. The challenge for them is their time is very, very limited.

Fuller: Right. One thing that is alarming to many of us who study the economy and also work is that the biggest single engine for job creation in the U.S. economy historically has been new businesses. Not necessarily new high-tech unicorns, but just routine everyday normal new businesses. And the rate of business formation has been falling in the United States, which is a bit unprecedented. What’s your insight into what might be causing that?

Zappacosta: That trend is real, it is scary, and it is something that we need to be grappling with. I think as much as I am a proponent of tech-driven venture-backed innovation and job creation, which I’m a part of, it is not going to be the main creator of jobs in this country. What is going to be is your local restaurant, your local hardware store, your plumbing company, your roofing company. Those are the folks that are going to employ the vast majority of Americans. It is scary that that engine has sputtered. I don’t have an answer for you. I wish I did. The one thing that we do see in our data is access to benefits. The ability to go out on your own is hindered when you are tied to a health insurance plan, say, that is only provided through your employer. The Affordable Care Act changed that, and in our numbers of new pro signups, we saw that a third of new pros that year cited the availability of healthcare on an exchange as the reason why they were able to go into business for themselves.

Fuller: That was the year after the ACA came into effect?

Zappacosta: Correct.

Fuller: Interesting.

Zappacosta: We see benefits portability as being a key issue in leveling the playing field between traditional salaried W-2 employees and folks setting out on their own, participating in these new platforms, being independent contractors, being small business owners, such that they are not hindered and that they can move forward with confidence.

Fuller: “Benefits portability,” meaning that I can leave one employer and still be covered by benefits as I moved on to a different employment situation. What are the big impediments that—this is now a very frequent topic of conversation, but it seems that the solutions being proffered are not very compelling, and a lot of people are defining the problem with greater and greater accuracy but not coming up with a way to cut through it. Because, if I’m moving from working, let’s say, for a large home-building company, and I want to start my own master carpentry business on Thumbtack, I’ve got corporate benefits provided now, and if I leave voluntarily, I have no means for buying that. I can get on an exchange and buy easy. What are your thoughts about how portability might actually work and what have to change to make it move from the “sounds like a great idea” phase into something we actually start seeing in the marketplace?

Zappacosta: I think there’s a couple of things. One, we need to see more innovation in the private sector about ways to fund these benefits. Something that Thumbtack recently did in partnership with the National Domestic Workers Alliance was to create a program to help housecleaners access things around insurance products and paid time off from their clients’ base by asking for a $5 per cleaning donation for the purpose of buying workers’ compensation insurance as well as getting paid time off.

Fuller: I hire a house cleaner on Thumbtack, and I have the option of paying $5 per visit that would support Workers’ Comp and …

Zappacosta: … and paid time off.

Fuller: ... paid time off.

Zappacosta: Paid sick leave. This is one innovation, this is one step, and it’s really an experiment to see how willing are customers to pay to support these benefits, particularly when it is with a professional that you have an ongoing relationship with. These are folks you get to know, they’re in your homes, you care about them. But that won’t do it all by itself. We need more innovations at a platform level. You think of a ridesharing company, finding ways to offer benefits to its drivers to retain them better, which today they’re encumbered by because of the fear of falling afoul of worker classification issues, which today they need to maintain independent contractor status. But it’s also going to be a political question: How is the government going to evolve its regulatory regime to deliver these benefits, not just to workers or W-2 employees, but to all workers. The reality is, the regime that we have today emerged out of an administrative efficiency, that decades ago, in the ’20s and ’30s, as this all came to be, the vast majority of people were paid in these arrangements, and so administering these benefits in this way made a lot of practical sense.

Fuller: One thing we see across all the developed economies is that the basic logic of everything—from how you pay your taxes to how you get health benefits to how you get retired—is related to being an employee of somebody else. And all these systems and all this infrastructure is not really well configured for the owner-operator or the type of work you’re describing.

Zappacosta: That’s exactly right. And the question of how we administer it is actually independent of the question of how much of these benefits do we want to provide. You could keep the level of benefits the same and simply say, “We’re going to change how we administer and the definition of who we provide these to.” That is what benefits portability is all about, is breaking the relationship of these benefits, be they health insurance, historically, or tax-advantage retirement, or disability insurance. There’s really a number of things that we as a society deem important for workers to have access to that are denied to folks who go out on their own, who are independent contractors. And that creates an imbalance. It keeps people from exploring all of the opportunities that they have and leveraging the talents that they have.

Fuller: Now, I know there’ve been a number of bills brought forth by members of Congress—including most recently by Senator Mark Warner of Virginia—on matters like, for example, making it easier to apply for a mortgage if you don’t have a W-2 form, a form that states your income level from your employer issued by the IRS. Also, he is sponsoring a bill for at least an investigation of portable benefits, but it struck me as a rather modest proposal—$20 million or $30 million to look into it. What are your thoughts about steps like that coming out of Washington?

Zappacosta: Yeah. Senator Warner has been a real leader on this issue. What I think he is doing is working within the confines of the machine to bring more awareness to this problem. First, he’s asking the Bureau of Labor Statistics to measure this better. I think today we are operating with a very hodgepodge set of facts. We don’t actually know exactly the number of people in these types of arrangements, and the government needs to study it better such that it can be more aware as to the size of the problem and the opportunity that we need to go address. And Senator Warner sees that and is pushing hard on it, and he’s also offering some things around the edges like you mentioned, with regard to better getting mortgages or spurring companies to invest in workforce-training efforts, all of which are great. But the one that we really see and like right now is, let’s go measure this. Because, once we know the number of people we’re talking about and the trendline over the next five or 10 years, then it becomes a lot easier to say, “Okay, well this is a core feature of the future of work, and we need to solve for it.”

Fuller: What you’re trying to do is get that trendline to arc up and get to be a more aggressive slope. Other than things like portable benefits, if you could just start waving a magic wand, what would be the three or four things you would do to enable people to pursue their ambitions and realize the type of mobility and fluidity in transactions?

Zappacosta: So benefits portability is certainly important, but it’s not the only one. Another big one for me, and something we think about at Thumbtack, is the ability to be a participant in these cities, locations, geographies that are vibrant. Today, many of the places that have the most job creation and the most vibrant economies are also the most expensive and hardest to live in, and their transit systems don’t make it easy for people to come in from further afield to participate in. But if the future of work is one that we’re doing these sort of non-routine jobs to each other in our communities, you have to be able to live there or at least transit there efficiently to participate in them. So the broad questions of land use and transit, not typically thought of as a worker issue, I think is actually fundamental. And then a third one are things around occupational licensing. An increasingly fraction of the jobs that we cover in terms of these local services in the home or events or in care are covered by occupational licensing regimes, which have a very important role to play, about consumer protection and ensuring that these services are done in a proper way. But there’s certainly cases where that has gone past just consumer protection and has been about creating a guild-like environment that makes barriers to entry unnecessarily high, and particularly high for people moving across state lines. We often see this with the spouses of our veterans.

Fuller: Our military.

Zappacosta: And they get moved around these bases all around the country, their spouses have some great skill, could be as a beautician, could be as an interior decorator, but their licenses don’t carry over. It is an unnecessary burden on these folks that they can’t participate in these communities with their skills, with their talents, that we’ve put on them with these occupational licensing regimes. So it’s not about getting rid of them, it’s about making them more responsive and more appropriate to the needs that people have.

Fuller: Marco, one thing that we frequently discuss with our guests on the Managing the Future Work podcast is the issue of equality of opportunity; that talent is spread evenly, but access to the opportunity to realize the benefits of putting your talents to work is not spread evenly. Can you talk a little bit about Thumbtack’s experience in that and how you might be trying to address that issue?

Zappacosta: One of the things I’m very proud of is that when you look at the demographics of our community of professionals, what you see is that we skew disproportionally toward under-represented minorities than the country as a whole. And that is evidence that the platform is enabling folks from all backgrounds and all walks of life and all cities and states around the country to find demand for their skills. And I think that’s a very encouraging fact. That skill is out there, that hustle is out there. Often, it is too hard to find or struggles to market itself effectively, but once it has an outlet through a platform like ours, or others online, it can find new customers and it can grow. And technology, I think, understandably in this moment has been tarred as a force that is a substitute to labor; that is always labor-saving and through that comes at the expense of workers, their earnings, their time. But I think that’s not the only thing that it can do. It can also be a compliment to labor. It can empower, it can support. And that’s what Thumbtack does. We’re not out there building homes, we’re not out there catering weddings, we are simply helping the talented professionals who do do that find a broader audience for their talents. And that’s fundamentally an empowering thing.

Fuller: It’s really a classic illustration of how we see technology showing up in work, which is, it’s not displacing the worker, it’s taking some of the tasks of the worker, changing the way they’re done. In your case, it’s accessing a lead, contacting that customer, perhaps pricing as you mentioned and other steps that are time-consuming and difficult but don’t really reflect the essence of that pro’s skills or the what the value they want to deliver.

Zappacosta: I think you nailed it.

Fuller: Your pros get a tremendous range of different activities. Can you tell me a little bit about the gender mix?

Zappacosta: Our pros cover about 500 different categories of work in the home, in care, in wellness, in events. And if you look at the population of pros that we have, it skews slightly toward more male—about 55%‒60% male—but the fastest-growing cohort of businesses on the platform is women-owned businesses. And you see that, surprisingly, not just in a traditional category that is dominated by women professionals, like care, but in ones that are traditionally male-dominated, like roofing. And it just goes to show that entrepreneurial talent and hustle is not something any one gender or demographic has any sort of exclusivity over. Often it’s some accident of history that has kept people out of these markets. And as that access gets more democratized, you see that talent flourish.

Fuller: Well, Marco, thanks a million for visiting us here and joining us on the Managing the Future of Work podcast.

Zappacosta: Joe, thanks for having me, and everything that you guys do.

Fuller: From Harvard Business School, I’m professor Joe Fuller. Thanks for joining us on the Managing the Future of Work podcast.