The Life of the "Microentrepreneur"

There has been plenty written on the failure of microcredit-funded enterprises to grow or achieve more than minimal profitability. If you’re curious why microenterprises don’t grow, I recommend reading a new piece that provides some insight into the life of a microentrepreneur. It’s from an unexpected source: a Fast Company magazine article about the emerging world of task-based “entrepreneurship” in the United States. Companies like Uber, TaskRabbit, Postmates, AirBnB and Amazon (via its Mechanical Turk service) allow people to earn income by doing odd-jobs, renting out a room or running errands. The rosy view that all these companies present is that they are providing an opportunity for people to earn money on their own terms and in the hours that they are not otherwise occupied. And each prominently features stories of individuals who are doing quite well, even quitting regular jobs and substantially profiting from using these tools (not unlike, it should be noted, the stories that emanate from microcredit).

But that is not the experience of the average user as writer Sarah Kessler discovered when she tried to make a living using these services. She is constantly under pressure trying to put together enough odd-jobs in a short enough period of time at low enough direct cost to even turn a profit, much less prosper. It is a telling picture of the life of the microentrepreneur and the barriers to growth and prosperity. It also matches up remarkably well with research on microenterprises in the developing world: the investments necessary to significantly increase income (like buying expensive equipment, spending on marketing, or hiring an employee) are uncertain and risky, require time that is not available and there’s plenty of reason to believe they won’t pay off. After reading it, you may also, like I was, be more convinced of the value of lessons from microfinance research to developed world economic policy.