What the jobs report isn't telling you about AI & the workforce, with Upwork’s Hayden Brown Transcript from https://podmenti.com/t/30e155f24ba2ecbd The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet When it comes to their own wealth. Most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them. Creative planning was built to fix exactly that. One integrated team of tax professionals, state planners, investment specialists, all coordinated by a dedicated wealth manager who sees your full financial picture and keeps every piece working together. Proactive tax efficiency, state strategy, investments all under one roof. Creative planning where wealth works together. Learn more at creative planning dot com slash masters of scale. Hey folks, Jeff Berman here. I am thrilled to share some of the new names who will be joining us at this year's Masters of Scale summit. This may be our biggest stage yet. Reed Hastings, Meredith Whitaker, Van Jones, Amjad Masad, and more. Will be there with us October 20th through 22nd in San Francisco. If you're building something great, or you want to build something great, We want you there with us too. Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. The future of work is arriving and it's arriving on our shores right now, right here, whether we want it to or not. The urgency and the need for all of us to become, you know, fluent in using AI for our jobs, I mean, that is something none of us can escape. You can't learn to ride a bike. in a seminar. And I think the same is true for AI. Until you're using these tools day in and day out, you know, really integrating and pushing what's the boundaries of what they can do, that's when I think people become extremely capable. Will humans win or machines win. I think that is distracting us from, in some cases, putting our collective societal energy towards building a future where everyone wins. That's Hayden Brown, CEO of Upwork, the global tech platform for freelance workers. As AI radically resets expectations across the workforce, Upwork has a critical vantage point on how the job market is actually evolving. I wanted to talk to Hayden about the on-the-ground reality beyond government job numbers and the dreamy predictions of AI cheerleaders. Hayden is forthright about the pressures facing organizations and their teams, including her own decision to lay off Upwork staffers earlier this year. She shares which jobs are most in demand, the good and bad of AI agents, and where she sees the future of work moving. Plus she talks about the challenges of leading when even a one year planning horizon is too far. Revealing her specific practices for resetting strategy on the fly. So let's get to it. I'm Bob Sapian and this is Rapid Response. I'm Bob Safian. I'm here with Hayden Brown, president and CEO of Upwork. Hayden, uh, great to see you. Great to see you, Bob. Thanks for having me. You were last a guest on the show. We were talking geopolitics Russia Ukraine. It was Pre-great resignation, pre-return to office controversies, pre-Gaza and Iran. Now of course AI anxiety dominates workforce discussions. It's like we've been through decades of change all piled together. How are you doing? I mean, it's been a challenging time to be a CEO. Okay. You know, um it definitely feels like there's a lot happening. I have a kind of running joke with some friends. who've run other companies, we all say, you know, what's gonna be the Black Swan event of this quarter? Because it just feels like there is so much happening in the ecosystem and things are moving faster and faster. But I think that also is very exciting. It's a dynamic time. I was gonna say black swan every quarter or maybe black swan every week. Like it you sort of don't even you don't even know if it's a black swan until it's already moved on, right? Exactly. You're on the front lines of changing work habits. And and I find myself wondering a lot if sort of traditional assessments capture the realities of the US labor market in twenty twenty six. Like the most recent monthly jobs report showed twenty three thousand jobs lost, but at the same time unemployment Numbers went down also. How do you make sense of this data? How much do you focus on it to Does it reflect what you see on the upwork? Yeah, there are a lot of competing dynamics. It certainly doesn't tell the whole story. We do see kind of consistent with the jobs report data. The labor market is very subdued. It has been for several quarters it continues to be sluggish. I would say we particularly hear about um kind of macroeconomic and labor. Slowdown with our very small business customers. You know, those are the guys who are out on the front lines of the economy without a lot of resourcing without a you know deep pockets and financial reserves and I think they're the ones who are feeling quite pinched right now. And what they tell us is they have pulled back hiring across all channels. You guys recently released the a Future of Work Index. Is that what encapsulates this? Are there other things in that index that business news headlines maybe aren't capturing? Yeah. You know While the picture overall is of this kind of slow moving market, there are pockets within it that are Incredibly vibrant. We really see the growth in AI related skills, AI related jobs, that is the place where energy and money is flowing. And we see that in our platform with our own AI category growing over 22% year over year. And just All of the data is telling us that the demand from both small businesses all the way up through large enterprises. For talent who really know and can help them navigate. this new world of work and bring in these relevant skill sets and knowledge of how to use AI tools. Um, that is really where the energy is going and the Dynamics are moving from full time towards fractional work, which is a really fascinating trend. Uh our most recent survey showed A 10 point increase in freelancing in the US within knowledge workers. It's at thirty-eight percent of the population today. It was at twenty eight percent just a year ago. So There has been a huge step up in in both workers moving into the freelance economy for a variety of reasons, but also businesses saying, you know, we want to find these workers who are out there doing contingent work because we don't necessarily need the same number of full-time employees we needed before. We can approach this work differently. And also we can't access these folks maybe through kind of full-time employment channels. There's so much. talk about AI potentially taking jobs, and there are some layoffs that companies to AI and yet you have other CEOs claim that AI is allowing them to add staffing because each AI enabled person is more productive. It sounds like both. fit in what you're seeing, but like it seems early to know what AI's impact is gonna be. Or is there something clearer that you see through all of this? You know I think it's sixty percent of jobs that exist today did not exist in nineteen forty and I think that's helpful context for us as we look at what's happening with AI. Technology and other forces have You know, destroyed and created jobs again and again through so many cycles. This is kind of a version of that. But happening just bigger and faster. More destructive on the negatives, but also more creative on the positives. It's a very binary picture. You know, there's the camp of AI is gonna take all the jobs and humans and the companies that serve humans and do human solutions are doomed. And then there's the other side. Um, the reality is has to be somewhere in the middle. We do not see mass job destruction as the future. There is really, I think, a balance to be struck. And you know, there again, there's creation and destruction, but at the end of the day, it's not all destruction. It actually is a lot of new jobs and roles and businesses that are being born because of this exciting technology. Hm. You announced in May that you had to cut a a quarter of Upworks corporate staff yourselves. You published a pretty frank statement about it owning the decision. And you talked about AI, but didn't blame AI. Why was that Necessary. Yeah. I made that decision um earlier this year because we really did see that with the market conditions that were changing. This was the right time for us to Expand the profitability of the business, which was already part of our our long term goals. At the same time, Bob, we've seen that Because work is changing Uh, our own work needs to change. And what we did for that was not you know, really just automating and replacing work or workers with AI. Instead, we looked across the entire business and asked ourselves in every team and every department. What would this look like if we really were doing this function from the ground up today, using the best technology and tools that are available? Uh we also looked at You know, newer uh operating organizational models where we could flatten the teams. Get more leverage for managers with broader spans of control, fewer layers in the organization, you know, some of these things that. are kind of evergreen opportunities to refine how we operate. I mean there are uh contentions, I guess, that some CEOs do. AI washing. They ascribe to AI the reason why they have to make changes as opposed to owning that maybe they didn't have the right strategy in the first place. But by blaming it on AI, like They get credit for that. you know, their stock price goes up. It's like it's a positive. And I I wonder whether when you as you were thinking about this, you're like, Well, do I lean into that part of the messaging? Because maybe you know that that helps. The story. You know It was so important to me. That our messaging around this be really true and authentic, because frankly, of course, AI is helping us, and it is a contributor to our efficiency and our productivity. But Um, that is not the biggest reason, A, that we made the changes, nor the biggest benefit um that we were able to get from and kind of driving these changes. So You know, we're actually seeing the opposite trend on our platform in the sense that the AI washing that you're talking about has been happening. But also a lot of folks are now reconsidering and coming back. because they're seeing that the humans they let go Actually, they still need, and the AI can't do all the things that they hoped that it could do. Uh, a recent survey we did showed that twenty three percent of our own clients Have actually already moved work back to humans from AI or are about to do so. So I think this pendulum, you know, it will keep swinging. When we've actually done testing of Um, clients trying to use agents directly to deliver work products through our platform, the failure rate of agents is incredibly high. It it they almost never succeed in delivering even fairly simple. Um tasks from clients end to end. But when you just add a little bit of human expertise and a few back and forths with an expert selling the success rate. goes up more than seventy percent. We have to sharpen our intuition around when to trust AI. And I think increasingly people are realizing, ah, I'm not going to take this at face value. I want to couple that with a valued human expert who can bring a lot more to that equation. AI is Yeah. directly impacting things that happen on your platform. There's been a rise in AI agents Posting job ads, machines. Essentially trying to hire Humans Upwork even has, I think, a specific service for clients that to allow agents to access your freelancer database. It could sound a little spooky. Did it feel that way to you when it first started? I mean it really feels like The future of work is arriving and it's arriving on our shores right now, right here, whether we want it to or not. And that was one of the reasons we launched this what's called the MCP server, but really is a capability. To let Agents authenticate with Upwork. So we know who they are. We know if they're good actors or bad actors. And then based on that authentication, they can Go forward. help post jobs, make h make hires, uh manage projects, et cetera. Now We are definitely doing this because this is where the world is going already. It's not something that we just came up with, you know, out of the box. Um and at the same time, we're seeing a lot of clients who are working inside these AI tools. Claude or Chat GPT. And they're getting stuck. and they're having a deliverable that didn't meet expectations or they need a human expert to finish it. With our MCP now, they can directly connect to Upwork, share that deliverable with a freelancer immediately and get. the on-demand help they need from a human expert in real time, which is a huge advantage because now everyone expects everything in real time, you know, everything's moving so fast. AI has changed expect expectations, and now we too can meet that expectation around truly. real time uh human support inside of any of these AI tools where people need additional resourcing. Hm. Upwork has its own agent. Uma that assists users writing job descriptions and prepping interviews and things like that. For a platform conceived to give humans more freedom. There's some irony in using AI to prepare a job application, so another AI Can review it. Right? Are we entering a um labor market where like the best job applicant is whoever is best at prompting the hiring machine? Or is it more like I don't know, like online dating apps where, you know, algorithms are better at matching us than we are on our own. I mean, these are the big questions and they're the right ones because we are seeing Um, you know, spam job proposals and applications. We really just want to put people's own uh interests and needs on steroids and then have that expressed through the hiring process and the recruitment process that we're supporting them with, including filtering out all of the AI kind of slop and noise that is creeping in now that these tools are so widespread. Right. I guess because if I'm a job applicant I guess I can create a lot of different versions of my application to a lot of different jobs that may or may not be Right for me and I may not even know what I'm doing. And and I guess the same thing can happen on the other side about posting for jobs where if we can find a needle in a haystack, we'll do it, but otherwise we're just sort of testing the water. Yeah, and I I think that's One of the main values that we see being so enduring, even in the AI era, for Upwork specifically, and our customers is You know, the problem we've always solved for them is giving them real tangible accurate data around who can do what. It's it's real data from our platform observing people doing work and delivering for customers with dollars attached. So this is the most verified. work history data really in the world. And it's at scale across, you know, 18 million freelancers that were active in the last year. This type of data is what then gives Customers' confidence. In making that higher, not noise that was created by, you know, an AI agent applying for them, not these empty promises or claims about their expertise. It's actually stripping us back to like what does the data say in terms of who's good at what? And frankly advancing this meritocratic idea of It shouldn't be about who has the best agent or who sounds the most shiny on paper, but really who has the data and the experience to demonstrate that they can do the work that's required. Mm That in the Trenches data Hayden sites illustrates how Human in the Loop is actually unfolding in an AI world. 23% of businesses moving work back to humans from AI. So how does Upwork engage with the big AI companies, including open source players in China? And what does it mean that freelancers with AI skills earn 34% more? Mm. We'll talk about that and more after the break. Stay with us. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect what you've spent years. Building. Creative planning where wealth works together. Learn more at creative plating dot com slash masters of scale. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely for From Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find. Just search Rapid Response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Humans will never be more intelligent than AI. There's been two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Before the break, Upworks Hayden Brown talked about what's really going on in the job market as AI shifts expectations and needs. Now she talks about dealing with the big AI companies, how to actually build AI skills effectively, and what Hayden calls her crystal ball. Plus her specific strategies for leading in a world where, as she puts it, even a one-year planning horizon is too far out. Let's jump back in. Do you have a philosophy about How you engage with the the big AI players. You know, we're at a moment where everything is in flux. We have this growth of these new channels where customers are suddenly doing work inside of ChatGPT and Claude and all of these third party tools. That is now a new uh origination point for businesses like ours to be referenced, to be advertising, to be showing up. We also know with nine hundred plus million users on ChatGPT, you know, Anthropic uh growing so massively, you know, quarter by quarter. I think we can see that these are the new destinations for work. The momentum there is building and snowballing in such a way that I think. We've taken the approach of building for these uh tools in this future that we see already appearing, even though there is gonna be some ongoing volatility as things kind of mature and play out. Do you have a A differentiation between Places like OpenAI and Anthropic versus Like the open models from China. I mean, you do have a a global business. Like do do you let agents built on those models be on the upwork? Do you have to like Treat them differently? You know, we, you know, look at everything in our authentication layer and do make some judgments about, you know, who is allowed and not allowed to operate in our e ecosystem and certainly those Those rules will continue to change, you know, as new information is available about safety, security, and other aspects of what these actors can do. So I think, you know, our approach today is to create the system, the framework, and the controls. Our customers really have told us they want to be using these things. They want to benefit on both sides, but they need to do so in a place that's not the wild, wild west. I ask us s you know, some COs I Talk to recently have been talking about how, you know, some of the models from China, they're just so much cheaper. They are and even though they're not uh maybe quite as robust, they're robust enough. Absolutely. And I think a lot of those open source models. Can be used. safely and securely with the right controls. It's not a binary of, you know, use Claude or, you know, good luck to you and there's nothing, you know, you can do We personally have our in our business have taken a gateway approach where we are constantly testing, you know, the performance of A variety of different models, including open source models. And now that token costs have been going up so significantly from the major providers here in the US, there are definitely use cases where we know we can get. you know, ten X savings or more. by using open source models and doing it safely inside of our own environments. I think this is also a place where for us as a marketplace creating more of the ecosystem where people can see The pros, the cons, and the costs. of different combinations of AI uh models or agents. with or without human supervision. This this is a fascinating extension of our own business because we've always Provided customers with the value of choice and selection across a huge supplier base to get something done. And they get to choose, do I want to pay more for speed and quality, or am I happy to go a little bit slower and maybe have some savings? You know, these are the decisions businesses always need to make. And now with these AI tools, Now they can kind of get the best of both worlds. Your emphasis on Freelance work and Fractional work as you talk about. Like the there's been a a sort of romantic sentiment uh behind it, you know, the promise of freedom and making your own schedule. In today's economy, how much Of that is a choice. versus a necessity, a sort of a symptom in some ways of companies shifting risk onto individuals. Absolutely both. Uh fifty eight percent of current full time employees. are actually thinking about becoming freelancers. For a lot of the reasons you mentioned around choice and control and deciding when, where, and for who they work, we also hear really loud and clear uh from freelancers that The economics of freelancing have become much more appealing over the last few years before the two thousand eight, two thousand nine uh great recession. People at that time, I think felt they were very secure in a full-time job. And then that recession happened and they realized, wait a minute, I'm actually more secure if I have a portfolio of three to five clients on upwork, they keep coming back to me for repeat work. Maybe I'm also doing a podcast or a book or a creator economy thing on the side. And we really have seen this trend towards these portfolio careers. Gen Z is the biggest one. 42% of Gen Z are freelancing. It's actually them saying, look, I feel more comfortable that I'm not exposed and that I can really both learn and use and build the skills I want, and also have income that is predictable and in my control versus at the whim of an employer. It's just a different conception of what a career is for younger folks, right? Absolutely. And it also reflects, you know, if you think about this AI moment. When everyone is trying to Prove that they have these skills, or if they don't learn them, and then prove like, hey, I've gotten these skills now, I am an AI relevant employee or worker. Freelancing is an amazing way to do that because they're getting on the job experience doing real work. uh proving their skills and if they're on a platform like ours That comes with a verified work history, all of the uh marketing kind of around that that freelancers can do to say, hey, now I can earn more and do more. And we do send that see them earning more. Uh frequents that have AI skills are earning 34% more hour. Than folks who don't have AI skills. And I think that wage gap really speaks to the urgency and the demand from talent. to move into a career where maybe in their full time job They don't have the opportunity to use these tools, or they're not learning them inside of their employer. But here on our platform, they can really demonstrate and flex. their muscles around AI and get paid for it. There's a lot of burden on uh on the individual to keep upgrading those skills as you go I mean when software can learn skills way more quickly than humans can, which is what we're seeing with AI, then it it does put more pressure on humans. I guess whether you're in a freelance economy or anywhere. To keep upgrading your own skills or refining your own skills. That is the reality. The urgency and the need for all of us, I mean, you, me, all of us to become, you know, fluent in using AI for our jobs. I mean, that is something none of us can escape. But what we do see is that freelancers because This actually pays them and puts food on their table. They do it faster. They learn faster. They lean in harder. They move much more quickly to where the new technology is and learning its capabilities and applying those capabilities in real work settings. We see this huge advantage, actually, with the freelance talent pool that's well ahead of full-time employee counterparts in terms of their adoption and facility with AI. And that's another reason why businesses are turning more and more to the freelance economy because they're looking in house. And they're realizing You know, my team doesn't have these skills, and it's gonna cost a lot of time and money to try to get my team up a learning curve. Maybe I can short circuit that by bringing in freelancers who can both add value and do work. but also upskill my team at the same time as a byproduct of sitting side by side with them. And so there's a lot of that. So it becomes a backdoor way to to train my own team at the same time. Exactly. And not have to wait for those, you know, fruits to materialize before you start to actually see some real business benefit. Because a freelancer can be adding value in hours. Yeah. I mean, well, that is one of the big questions. You know, a all of us have is like how Long does it take? What's the best way? Yeah. train people in the AI skills. I was actually talking to one of our clients this morning and he said you can't learn to ride a bike in a seminar. And I think the same is true for AI. You know, you could Watch a YouTube tutorial and get more familiar. But at the end of the day, until you're using these tools. Day in and day out, you know, really integrating and pushing what's the boundaries of what they can do? When are the what are the limitations? Why is that? How do I work around that? You know, that's when I think people become extremely capable. And that's one reason we're seeing the rise of a new. uh generalist called the AI orchestrator. This is becoming extremely popular on our platform because people are looking for someone who can orchestrate and use these AI tools. But also is not necessarily so deep in one domain. Instead, they have the facility to evolve. Adopt new tools, figure them out very quickly, because we know the technology is moving so quickly. In what you do as a CEO. H how are you y using AI? I think AI Obviously, some of its core skill are like data gathering, generation, and synthesis. And so inside of our environment, We've set up uh a very powerful tool, we call it Crystal Ball, and it has access to all of our internal data. And this is wonderful for me because instead of having to go ask someone on my team like, hey, send me the most we recent report on this, or like, you know, what happened on this day with this customer type, I can actually just directly query our database just through natural language, get tons of insights around real time business information, which then We are using in you know real time to make different decisions. As I alluded to at at the beginning, you've been CEO through Uh this extraordinary period, you know, pandemic, Ukraine invasion, which prompted you to shut down operations in Russia and Belarus, a backlash against globalization, which also kinda threatens Upwork's premise. Building a cadence of change inside his organization to, you know, keep it agile. But now the cadence of change is like coming from outside. And I wonder how that impacts How you make decisions, how you know what to focus on. We've worked to try to like remove noise in the organization so that it's very clear the small number of things that we're working on. And then if we need to change one of them. That we can communicate that really clearly once that decision is made. Because I think, you know, the more crus there is in the organization around competing priorities and people moving in different directions, that just makes navigating through these types of environments even harder because it's It's so unstable externally that you need to have like full locked down stability and focus internally. We've also changed our planning horizons, I'd say you know, in the past. You know, I was a product manager for many years before before becoming a CEO and You would have like a one year roadmap and yeah, like it would change and everything else, but it didn't feel unreasonable to have some idea of what you want to be doing for a full year. Now in product, if you have a one year roadmap and really you're executing the same thing in month eleven that you thought we would you would be, you know, when you started, something's probably wrong because You will have learned so much more and the technology will become more capable. So we've shortened some of our planning uh cycles, still setting kind of big ambitious goals out in the future. but not being as committal to, you know, the steps required to get there. It's kind of like, let's take the first step and then reevaluate what is that second step. Let's not presume that from this vantage point today, we know what that is. And when you're trying to focus and prioritize, like do do you have Tools. That you use to do that? I mean I remember talking to Daniel Eckett Spotify at one point and he would say each quarter he'd like create a list of Ten things, but they were ranked. Like you couldn't go to number two until you satisfied number one. We use ranked lists all the time, like Danielle. I think that's a really important one. We also look at kind of what is our portfolio, how much resource we're putting in for things that we have a really high confidence we'll deliver in the near to medium term because it's a road we've gone down before and we know it well. versus where are we putting resourcing in for things that are much more speculative or building for future states that we anticipate or can kind of see coming but may not have arrived yet. And I think it's become even more important in this environment to be very clear and have uh internal alignment around how much of each of those activities you're doing. And also when you make changes, again, maybe something that was out in the future. Six months later, now it's here. It's arrived today, you know, it has to move into the other part of the portfolio. And then you've got to be thinking, okay, where are we investing in that next, next horizon? Uh, once now that we've, you know, accomplished the thing that was that was out there in front of us. What's at stake for the future of work right now. The binary debate that's happening around, you know, will humans win or machines win. I think that is distracting us from in some cases putting, you know, our collective societal energy towards building a future where everyone wins, where humans win with AI and empowered by AI. But not at the loss, uh, you know, of jobs, opportunities and purpose. that people, you know, have and will I think always need from doing meaningful work. Well, Hayden, this was great. Thanks so much for doing it. Thank you so much. Great to see you. There's so many rich insights in Hayden's comments about how to lead in changing environments, about the good and bad of AI agents, about how to build skills today and Gen Z changing perspective on work and career. I keep coming back to her reflection on meritocracy, that Upwork system quantifies and captures what specific human talent actually gets done and the value delivered. When it comes to how AI will change the future of work, so much of the data is essentially guesswork. Of course, gazing into the future has always entail a bunch of guesswork. Whatever crystal ball upwork is built internally, it only reflects the past. But what we do know is that what's valuable to humans can only be determined by humans. Appreciating what we each do and how we do it. That's something that will always stand the test of time. I'm Bob Sathyan. Thanks for listening. Rapid response is a wait what original. I'm Bob Safian, our executive producer is Eve Tro. Our senior producer is Alex Morris, and our associate producer is Masha Makutonina. Mixing and mastering by Aaron Bastanelli and Brian Pew. Our theme music is by Ryan Holiday. Our head of podcasts is Letal Malad. For more, visit Rapid ResponseShow.com.