"Worker power is a source of demand"
Workonomics interviews Roy Bahat, the unconventionally pro-labor technology investor
This is Workonomics’ first interview, and we’re so happy to welcome guest Roy Bahat. As someone sitting at the intersection of technology and labor, Roy has been a strong supporter of Workonomics since day 1. We’re excited to be talking with him about his personal journey, technology, AI, and the labor movement more broadly.
Before the interview, here’s a little more about Roy.
Roy Bahat is the Head of Bloomberg Beta, an early-stage venture capital firm he founded in 2013, the first of its kind to focus on the future of work and AI. Under Roy’s leadership, Bloomberg Beta has backed companies like Replit, Flexport, Masterclass, and Textio.
On top of investing, Roy has been a tireless advocate of workers through a variety of other initiatives. He currently leads the Aspen Business Roundtable on Organized Labor, which has been recruiting “labor-open” CEOs and investors and developing new ways that businesses can work together with labor.
Roy has also worked closely with the government – most recently on California’s Future of Work Commission, where he was appointed by Governor Gavin Newsom as commissioner. In addition, Roy has been a lecturer at UC Berkeley’s Haas School of Business since 2011, where he is now teaching MBAs about working together with organized labor.
You can follow Roy on Twitter and at RoyBahat.com.
The below interview has been edited for brevity.
Nilesh Kavthekar: Thanks for talking with us, Roy. To kick us off, what got you interested in organized labor, in addition to your technology and investing work?
Roy Bahat: So for the last decade, I've run Bloomberg Beta, Bloomberg's VC firm. We were the first VC to focus on the future of work. And we were also the first VC to focus on AI – over my objection at the time! I was totally wrong.
Our focus drew me to a number of conversations about where work in America is going, and how we make sure it works for more people. Because work, in my belief, does not work for the typical American.
I've looked at government policies. I've looked at voluntary changes by business. But I can't find a single lever that I think could move everything forward faster than more, and different, organized worker power.
And so that's why I became involved in trying to understand organized labor. And now as a business person, I’m trying to be supportive of healthy innovation that I think can make things better.
NK: Your investing work is interesting, because you stand out among other VCs as someone who's particularly focused on the future of work and incorporating labor themes into your investing practice. Could you talk a little bit more about the investment thesis for Bloomberg beta?
RB: We are a very early stage investment firm. We like to be first money into a startup. We also try to be the most transparent investors: If people are curious about us, you can go to our website and see our internal operating manual for our fund.
We define the future of work really broadly. Because when a lot of VCs talk about “the future of work,” what they mean is information tools and collaboration and productivity software and stuff like that. That's certainly part of it.
Our view of the future of work is much deeper and broader. So we think about the whole stack of services that supports work. So everything from data centers, infrastructure, data processing, tooling. We’ve invested in companies as diverse as LaunchDarkly and Replit. We were in the first VC round in Flexport, which is a shipping broker.
We also think more broadly in the sense that we care about the full suite of occupations, not just white collar work. We’ve looked at companies in the skilled trades. So we think about the future of work as deeply and broadly as we can.
NK: As a VC, especially one who's focusing on the future of work, you might be thinking about the trade off between making returns for your fund and supporting workers. Do you see this as an actual trade-off or do you see situations where these two goals aren't at odds?
RB: I do not see it as a trade-off. Of course, there are going to be moments where there are trade offs? Like workers want to get paid more, or a company wants to pay them less. Those are certainly trade offs. But in the aggregate, I think of worker power as a source of demand.
Consider a service like Discord (we're not an investor in Discord, though I wish we were). A lot of people who use Discord are workers organizing. We've invested in companies that try to serve that demand from labor.
Business leaders and leaders in organized labor have spent so little time deeply understanding one another, especially business leaders. I wish a lot more startup founders would focus on companies serving the needs of workers and organized workers because there's a lot of need.
I don't think VC-backed startups are the only way to serve that. In fact, I think it's more of a special tool that's useful under some conditions. I'll give you an example. I went to visit the training center run by the Carpenters Union in Las Vegas, which is the International Training Center, US and Canada. It's a collaboration between the union, carpenters, and businesses. It is maybe the best training facility I've ever seen. It trains people, not just in advanced carpentry skills like underwater welding and robotics, but also leadership skills, self knowledge, like the things you learn in the training programs of a large corporation and management.
If we get creative and structure things the right way, we can create new opportunities for both business and labor. Will there be trade-offs? Yes. Is it a trade-off overall? Absolutely not. There's still so much more we can discover if you understand deeply what workers want and work with it, as opposed to treating them as the enemy.
NK: One other side of the investing story is that venture capital has not necessarily been the most supportive of organized labor. Sometimes it has straight-up opposed the objectives of unions. Can you make the case for why more VCs and technologists should support the labor movement and worker power more broadly?
RB: I’ll make a range of cases. First is that it's an opportunity. The naked capitalist case is that workers want things, and those wants are unsatisfied. Unsatisfied wants are opportunities and their opportunities for businesses, for nonprofits, for everybody. So that’s one case – you think about these as markets, they're very big.
Another case is that us VCs make money off of our very most successful companies, and almost every one of those companies in wild success is going to encounter difficult questions about how to relate constructively to its workforce. So the more expert, as a VC or a technologist, we become in this, the better we are able to tackle these hard questions.
I can't tell you how many times these people who are incredible founders are incredible experts at developing SaaS software run into the most basic negotiation issues with their workforce. It’s like they're in seventh grade in this domain. I think we could all stand to get savvier about it.
Business is better off if organized labor is powerful, not weak. Because a good partnership requires a balance of power.
NK: For folks who are reading this and are interested in innovating in this space of technology and workers, what are the big opportunities that you see for them? And are there any common pitfalls that you think they should avoid?
RB: I’ll start with the common pitfalls. They are the same as the pitfalls for tech everywhere. The biggest one though is assuming that just because you have good intentions, that you'll be welcomed by your customers and know what to do. It takes a lot of respect and learning to understand anybody whose life experience differs from yours, let alone if it differs across class, race, gender, etc. It’s really important to start from an attitude of humility and respect.
Of course, you also have to have audacity, since you are proposing things that haven't been done. So the paradox of startup life is you need to bring both respect and audacity at the same time.
In terms of opportunities, I'm always hesitant to answer this, because the best ideas come from founders. One big underserved area is worker communication. How can I help coworkers communicate in a way that's safe, protects them from retaliation, and allows them to organize to get stuff done?
There's also a lot of opportunity in the formation of unions. One issue we have in the US is we have too little formation of new unions. The last time I looked at the numbers, it was something like fewer than 20 new labor unions created every year. That's just wild. The Amazon Labor Union was a notable recent exception to this – but they are the exception, not the rule. So it feels like a real opportunity to make it less expensive, faster, and easier to organize.
There’s also a lot of opportunity to give people advice and support at the right time. AI may help play a role here. I look at nonprofits like EWOC (the Emergency Workplace Organizing Committee) which is basically a help desk for people who are considering organizing. That's really valuable, and much more of that could be great.
NK: You hold such an interesting role mediating between the business and labor worlds. You're serving on the Aspen Business Roundtable on Organized Labor, working on recruiting CEOs and executives to be “labor-open.” This doesn't necessarily strike me as a particularly easy task! What has that experience been like?
RB: I don't think everything can be solved through dialogue and building relationships, but I think a lot more can be than is.
I believe we ought to have more and different organized worker power. In general, the average business person agrees worker organizing should be different, but not more. And the average person who runs a union thinks there should be more worker organizing, but not that different.
And I think both are right and both are wrong. We need integration. We need to take the pieces that work and combine them in creative ways. This way, we can experiment and have things that are completely unanticipated by anyone working on their own.
I want to hear from the founders about that. I want to hear from founders of nonprofits. I want to hear from founders of companies. I want to hear about innovators inside of unions. That's where the real answers are going to come from.
NK: What does it look like recruiting business leaders to the Roundtable? How do you persuade business leaders to become more “labor-open”?
RB: Let me just say that while some of it is persuasion, the main work that I see is actually not persuasion. It's just identifying the people who already are labor open and supporting them. I was just talking to somebody who's a political fundraiser. She knew a business leader who said, in a hushed hushed tone, “I spent the summer at the AFL-CIO and it was awesome.”
It’s as if they're revealing a dirty secret. So some of my work with the Business Roundtable is just reassurance! It's okay to think that labor unions have something good to offer. Let's talk to each other and support each other.
Plenty of people who have good intentions working with organized labor have struggled to make those good intentions come to life. Just having good intentions is not enough. My intention is to create a safe way for business leaders to identify themselves and seek support in innovating around how they relate to organized labor, (and not simply “innovating” by union busting)!
NK: Do you tend to see more business leaders that are on the side of wanting to learn more about it from an educational standpoint? Or do some business leaders want to see a union at their company because they think it's the right thing to do?
RB: The vast majority of businesses kind of ignore it, which kind of makes sense in a way because 90-odd percent of the private sector workforce is not organized with a union or other labor organization. But workers are unsatisfied for understandable and valid reasons. So it's essential for business leaders to understand that dissatisfaction and get curious about it.
Many business leaders don't even know what the standard of living is for their most junior employees. Like they can't picture in their head, what does their apartment look like? Can they afford to have a kid? Stuff like that. That kind of crisis of cluelessness is a thing.
For the businesses who have thought about unionization, there's a whole range. I mean, there's everything from “in theory, I like unions, but then I tried to work with them and they attacked me by name in public. And so what do I do about that?” Or, “I voluntarily recognized the union at my company and then productivity fell off by 80%.” Or, “Hey, it seems like some of these union leaders actually understand my business better than my own middle managers do.”
The unfortunate answer is it depends, and there's a wide range. I really think that organized labor can be a great or a terrible thing for a company, depending on how companies and labor organizations handle it.
Like, there's nothing inevitably, automatically good or bad about any of this. These are people and institutions, and we can make them better if we manage it well.
NK: During your time on California Governor Gavin Newsom's Future of Work Commission, you worked alongside labor leaders like Mary Kay Henry, who was the president of the SEIU. Given your work with these union leaders, what do you see as the major challenges or opportunities for labor in our day and age? You already mentioned the Carpenters Union Training Center in Las Vegas. But I’m curious what you see more broadly as the big opportunities and challenges.
RB: First I'll say I'm not a labor leader, so I can't speak for labor leaders. I can share the things that they tell me. And the things I hear from labor leaders and workers themselves is that there is a unified wall of corporate opposition to organized worker power that makes it very difficult to experiment and try new things.
And the thing about adversarial relationships is it only takes one side. Sometimes it's labor, sometimes it's business, sometimes it's both, but it only takes one side. To be adversarial and you're in an adversarial relationship. Like there is no such thing as a one sided collaborative relationship.
There's a lot of debate over how much is the law responsible for this. I know the law is outdated. On the one hand, I see how the law makes things harder. On the other hand, as one union leader said to me, you think the law was more conducive to worker organizing in the time of like Carnegie and Gould? No, it wasn't.
So again, I can't speak for labor, but I can repeat the things that I've heard. That's some of what I've heard.
NK: Outside of the bucket of forming unions are there other opportunities that you see, workers, businesses, anyone could use to build power and economic prosperity for workers.
RB: So the first thing I'd just say is for me, organized labor and unions are not synonymous. Unions are one particular and, in the US, longstanding and powerful form of organized labor.
But there are so many other ways for workers to organize. When a handful of employees circulate a spreadsheet, sharing their salaries with each other for the purpose of figuring out if anybody's underpaid, that's organized labor. When the 2018 Google walkout happens, that's organized labor. I can't think of techniques for organizing worker power that aren't organized labor, kind of by definition. But I include in that everything from the private conversation between two employees to figure out whether to go together to the boss, to petitions, to work stoppages.
Another big example: Co-determination, which is when workers participate in the governance and management of a company. It can happen at the team level, like Kaiser Permanente, which has a lot of small teams composed of labor and management, solving problems together. It can also happen at the board level, which is what happens in Germany by law. US tech startups like Honeycomb have even put a worker elected representative on their board.
NK: I’m curious about your thoughts on employee ownership. I know in the tech industry, it's pretty standard. Software engineers, designers, product managers typically get equity or stock options in the company that they're working for. But that sort of ownership doesn’t seem to have spread much beyond executives, tech employees, and a small number of worker cooperatives in our country. Do you think that that practice should be more widespread, or do you think there are limits?
RB: Economic ownership is a good thing and should be spread widely.
Historically, it's not been really clear why it’s in the worker's interest for the company to succeed if they can’t even enjoy the fruits of their own labor. While worker wages have stagnated over the last few decades, executive compensation has gone through the roof. You sometimes hear about these companies that say, "Hey, I've got a labor union and I think they want the company to fail." But it follows from the way the gains are shared.
Sharing the economic gains of the company with workers is critical to align interests. I can't think of any reason why every worker shouldn't have some stake in the economic success of the enterprise in which they work.
What's the structure? Is it equity? Is it a profit share? Is it a bonus program? I think that depends a lot on circumstances, but I think that some type of economic ownership ought to be universal. There's a nonprofit in the private equity space called Ownership Works that's been active in this regard.
So that's the economic side of it. But in addition to economic ownership, you have non-economic ownership. This includes everything from a feeling of autonomy (“I own the result here”), to governance (workers influencing the strategic decisions of the company).
One of the reasons I care about this stuff is that if you get democracy right, participation right at the workplace or occupation level, maybe people will be more effective participating in the biggest democracy of all, which is the nation.
NK: Are you seeing any instances of AI helping workers? Is there a version of the tale where this could be good for workers?
RB: I think that there is, but it requires us to do a lot of things we have yet to start doing. So look, could it empower workers to be more successful in their jobs? For sure. In addition, I think we can find ways people can use it in organizing, educating and training workers, and so on.
But the effect AI has on work in our society is not just about the AI technology itself. It’s also about the way that technology is created. For example, we could have more worker (and broadly, societal) involvement in the creation of AI. Dialogue between organized labor and technologists can shape AI so that it is better: so it takes worker needs into account, so that workers understand it more fully and know how to prepare, and so on.
I’m not sure whether automation is going to accelerate the rate of job loss. There's arguments in all different directions on that. What I definitely believe is things are going to get unpredictable and weird, and we need shock absorbers. A higher floor for all workers is a shock absorber. Healthcare and unemployment insurance are shock absorbers. By the way, when people feel safer, they innovate more, they experiment more, they live more fulfilled lives. The main reason to have a guaranteed income is not because it could boost entrepreneurship. But it could also boost entrepreneurship.
NK: When you're thinking of the ideal future of labor and business working together, what does this look like for you? It could be as tangible as, what's this particular industry or company that has a positive and productive relationship with labor?
RB: I believe that every person should have the opportunity to be represented by a labor organization that functions. That means a labor organization that actually represents their interests, that builds dialogue with them, that's effective in advocating on their behalf.
I hope that the way that that unfolds creates inventive dialogue between business and organized labor that allows companies to create things that delight people more, that allows people to be happier in their jobs and serve customers better. I look at industries like the hospitality industry where the evidence seems to suggest that a unionized workplace actually produces better customer service.
I also hope that work as an identity for people is less central for them, and that they treat it as a thing that they do. If they want to make their work identity central, that's fine. Work is very important to me personally. But I feel like that's a choice.
In this ideal future, we’d have an economy with less corporate concentration, one where it is easier for new startups and other innovators to compete. I'm very pro-markets in the sense that I really believe in a thousand flowers blooming, and seeing what works. We've had this sclerotic environment, both for labor and business. It's a reason why too much corporate concentration of power is a problem: we just don't get as good of ideas as we ought to.
I imagine a future where we see more experimentation by a larger number of strong labor organizations. I think I could see it playing out differently in different occupations and industries, but ultimately we need stronger labor across the board.
NK: Our last question: what book, article, podcast, or any other piece of content made a major impression on you?
RB: First of all, we have a reading list on the Bloomberg Beta website. Embedded in there are my personal books that have changed me.
In general, I think folks should read more fiction about the stories of organizing. Books like The Jungle and Ender's Game really taught me a lot about how to organize. Parable of the Sower is another one of the books on my list, which is a book about emergent religion. (Organizing in religion is another type of organizing!)
When we think about building an economy that helps workers, one of the ingredients we need more of is just creativity. Fiction is a great place to find that.
Thanks for reading Workonomics' first interview! We welcome any suggestions for future people to interview. Please leave us a comment here or email us at workonomicsteam@gmail.com.