Monday, July 11, 2016

Upwork: A (Costly) Piece of Work to Be Avoided

While crowdsourcing in general has proven to be ineffective in both broad and specific terms, Upwork is turning out to be a particularly costly and frustrating example of the concept. Upwork was created by the merger of Elance and oDesk — and this is a huge part of the problem. For both clients and freelancers, Elance had a relatively “good” reputation while oDesk was typically viewed at the other end of the spectrum with low quality and low costs usually found together.

The First Upwork Mistake: Adopting oDesk Instead of Elance Philosophies

The initial troubling sign with Upwork was the adoption of oDesk fees and procedures. For example, oDesk charged a standard 10 per cent fee while Elance used 8.75 per cent. The standard Upwork fee was quickly fixed at the higher oDesk rate of 10 per cent.

With Elance, payments to freelancers were made immediately upon project approval by the client. Upwork has decided that is much too fast and has slowed freelancer payments to a glacial speed of 6-7 days after work is accepted by the client.

The Second Upwork Mistake: Greedy (and Greedier) Fees

As if 10 per cent was not enough to take off the top of each and every project, Upwork has recently (May 2016) chosen to double the fees for the first $500 of every client’s work with a specific freelancer — that’s 20 per cent for every single project to start with and then 10 per cent for amounts from $500 to $10,000.

What does Upwork do for this 20 per cent? I would argue that they are largely acting as a glorified Craigslist of jobs listings and freelancers and facilitating payments to be made from clients to freelancers — and they charge a separate fee (about 3 per cent) to cover credit card processing expenses, so that’s not even covered in the 20 per cent! Quality control is still the responsibility of clients, so quality is something else that is not covered by the 20 per cent fee.

The Third Upwork Mistake: A Name That Everyone Seems to Hate

While Elance was a popular brand that also happened to be a name that perfectly reflected the combination of e-commerce and freelancing, the name was ditched in favor of a new name: Upwork. It was a dumb move by all accounts — on a par with “New Coke” in the annals of marketing failures.

Other than the Upwork employees and investors who are seemingly required to say that they like the brand name of Upwork, who actually thinks it is an effective and appealing brand?

The Fourth Upwork Mistake: Inability to Retain Quality Freelancers

The Upwork team supposedly placed an early priority on retaining the “best” freelancers in their large community — and then proceeded to ignore this important goal at virtually every turn.

First (and very quickly), fees were increased by 15 per cent (for those previously using Elance) and then by another 100 per cent a few months later. Second, the time to be paid for completed projects was increased from immediate to a week or so — and during the past couple of weeks, there were periods when payments via PayPal were not functioning at all (even after patiently waiting for a week). Third, there were feeble internal attempts to create “higher quality” assignments for “high quality” freelancers, with little to show for the meager efforts by Upwork. Most of the high quality freelancers are still waiting for even one assignment that makes any economic sense.

What Can Be Learned from This Upwork Overview?

One lesson: Avoid Crowdsorcing — Clients and freelance consultants should probably avoid crowdsourcing websites (and Upwork in particular) for anything but low-quality and low-cost assignments. In fact, this is probably already occurring on Upwork, as many argue that the move to double fees to 20 per cent for projects under $500 was a direct indication that is where almost all of Upwork’s current business is (i.e., small projects under $500).

Another lesson: The Return of Legitimate Consulting — In many respects, attempts to crowdsource projects was an attempt to use the internet to replace business consultants hired directly via other means (like talking to them first by phone). The anonymity of crowdsourcing has a long list of painful and costly disadvantages, and Upwork is performing a valuable service by illustrating almost all of them.

Tuesday, June 16, 2015

Books About Banking: Why Did We Bailout the Banks?

A surprising number of bank books have been published during the past 10 years. Why is this and what does it mean for most of us who are not closely involved with the banking industry?

Certain books frequently become relevant and popular because of problems in society at large. Other books become "must read" because they address specific issues that directly impact our daily lives. A third category of books becomes popular because they entertain us, often dealing with gripping drama that makes us wonder how the story will end.

While bank problems often qualify for the first or second category, banking stories have rarely entailed much in the way of entertainment value. However, the financial and banking chaos that emerged during the past decade has not only made it clear that these problems can change our lives forever but has also left us with a dramatic plot that keeps changing before our eyes. Here are some books that will help unravel at least some of the underlying mysteries.

Yes, these books about banking are all based on true stories and actual events.

Will Banks Survive?

Banking problems have surprised many people because for a number of decades bankers were viewed as the last individuals who would ever take unnecessary financial risks. To a very large extent banks were not legally permitted to take risks as a direct result of the Glass-Steagall Act that was passed during the Great Depression era banking reforms of President Franklin D. Roosevelt. This legislation was intended to stop excessive bank risks that were one of the major contributing factors to the financial chaos that led to the Depression.

Eventually bankers came to resent the regulations imposed by the Glass-Steagall Act and lobbied unsuccessfully for many years to remove what they considered to be excessive restrictions on how they ran their banks. The banking institutions finally succeeded when this law was deactivated in 1999. However, there was a banking crisis during the 1980s involving the failure of many savings and loan associations (S&Ls) because financial regulations were removed and banking officials promptly assumed excessive risks. Despite that graphic evidence of what happens when banks have less regulation and undertake more risks, the removal of Glass-Steagall proceeded.

One of the best bank books that effectively ties the events of the S&L crisis to recent banking problems is aptly-titled "The Best Way to Rob a Bank Is to Own One" (by William K. Black).

Why Did We Bailout the Banks?

Why do governments save banks from their own mistakes? The most recent bailout of banking institutions occurred during 2008. The best bank book about this troubling financial event is by Neil Barofsky and is simply titled "Bailout," although there is a longer and informative sub-title: "An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street." Like many books about banking, this is stranger than fiction at times. This is a behind-the-scenes accounting of the most recent banking bailout.

Sheila Bair was in charge of the Federal Deposit Insurance Corporation during the recent bank chaos and bailouts. She is one of the few people who accurately identified the subprime mortgage crisis before it brought the banking system to its knees. You should listen carefully to what she has to say in her book, “Bull by the Horns.” By the way, this is what she had to say about the bailout — “The banks should have been let go.”

For a few other relevant perspectives about banking, please visit the following website to view a SlideShare presentation that I prepared —

A Few Candid Comments About Banks

Thursday, February 6, 2014

Small Business Careers

small business career training
Smart Career Choices

The practical need for a new career is an increasing reality for many individuals through no fault of their own. The old career planning methods have not worked for some time, but it frequently takes a severe event to bring the true colors to the forefront of the picture.

For example, banking and real estate were both engaged in excesses that were problematic for a number of years. But most individuals chose to overlook these financial problems as long as they were making money or at least not damaged by the risks and illegal acts. Eventually the banks went too far and caused the house of cards to collapse.

What Could Go Wrong?

As it turns out, the chaos caused by banking institutions has effectively destroyed or severely damaged many careers as a direct result. That is certainly a major reason for thousands of individuals to be examining their career options at this point.

But perhaps more importantly, the banking crisis also helped many of us to see how ineffective some career choices have been. In a booming economy, even ineffective career paths can still work out to everyone's satisfaction.

But what happens when something goes wrong?

Something has indeed gone very wrong with employment, education, politics, and the economy. In a human version of "The Perfect Storm," we are now faced with all kinds of unexpected happenings.
  •     How many thought General Motors would go bankrupt?
  •     Did anyone really expect Merrill Lynch to fail and fall into the hands of Bank of America?
  •     Who thought that our biggest banks would be making payday loans at annualized interest rates of 300 percent and higher?
  •     What were the odds of our biggest banks laying off and firing over 50,000 employees while still paying their CEOs salaries in excess of $10 million?
  •     Is anyone surprised that almost 20 percent of homeowners in the United States are still "underwater" with their mortgage (owes the mortgage company more than their house is worth), while in some states the number is as high as 30 percent to 40 percent?
Yes, the cumulative impact of these and other "financial surprises" has felt like one body blow after another. Having a Plan B for both investments and careers might have been some help, but "The Perfect Storm" will always produce more damage than anyone expects. Most of us are currently evaluating Plan C, Plan D, and beyond.

Do You Have a Plan B and Plan C for Your Career?

One of the career choices that has stalled out and fallen to earth for many individuals involves an expensive college education that literally results in student loan debt bigger than the cost of some houses. Six-figure student loans are increasingly common. As someone who acquired both an undergraduate and graduate degree without accumulating any debt whatsoever, it is impossible for me to imagine how differently my life would have been with a huge debt burden at the very start of my business career.

It is always worthwhile to re-examine the wisdom of spending the amount of money now required for a college degree. Except for those specialties such as medical ones which require that a specific educational path be followed, the time is right to find another path.

Small business careers are clearly not the only alternative available for those who want to consider any and all practical alternatives to an ultra-expensive university sabbatical. But it is a practical career path that I can speak authoritatively about in terms of how to do it effectively and efficiently.

For example, I can train most individuals (in the United States and Canada) in a period typically ranging from three to nine months (depending on both personal schedules and backgrounds) to become a small business finance consultant. The cost for the specialized and individualized career training program to do this usually ranges from $2500 to $5500.

You can do the math:
  •     $5500 or less versus a potential six-figure student loan.
  •     Earning income within a few months versus four years from now.
  •     Working in a field that is diverse and flexible enough to provide a permanent Plan B.
  •     Positions work very well either part-time or as second jobs.
While the way that I portrayed the career choices above was ideally suited for someone contemplating a long-term college period in comparison to individualized and specialized career planning, I do not want anyone to overlook the larger potential and possibilities of this prudent and cost-effective approach to their future career. This particular career solution can work very well for anyone currently involved in a career or one who has just been outsourced by their employer.

Perhaps my proposed Plan B should be your Plan A?