Matt Barrie's outsourcing website is hastening the export of jobs from rich countries to poor, which is bad news for Australia's high-skilled, white-collar professionals. Greg Bearup of Good Weekend Magazine meets the man behind Freelancer.com.
In a plain little office with views of Sydney Harbour, a couple of dozen very smart people are hunkered over an island of computers. There are two women in a corner of the L-shaped space; the rest are young geeky guys, and a whiff of boyish odours hangs in the air. All are working to improve the functionality of the website Freelancer.com, which connects businesses and individuals with freelance workers worldwide. In effect, they are exporting jobs from rich countries to poor. They are part of the offshoring tsunami rising off the coast of the First World - when it hits, it will profoundly change our economy and wash away the careers of many of the people reading this article.
The man behind Freelancer, Matt Barrie, strides in past the geeks, fizzing with energy. He's a tall, solid, bald man of 38, and several friends gleefully point out to me his resemblance to the Mike Myers character Dr Evil. Barrie has been on the international conference circuit "keynoting" and, as we sit in the meeting room, I get his spiel. "A tectonic shift to society is under way and this shift is going to be so significant it is going to change the way that we live our lives, the way we do business," he says in a spitfire delivery. "It is going to change everything. I will tell you why. The reason is that 70 per cent of the world is about to join the internet. They are poor. They are hungry. They are driven. They are self-skilled. They are self-motivated. They want a job."
This is really, really scary. You think of the next generation. There is going to be far less job security, maybe reduced conditions and pay and a casualisation of the workplace. This has huge implications for our children and even for us now.
Barrie's mission is to connect these poor and self-skilled with the rich and time-poor - trousering a hefty 20 per cent, in commissions and fees, in the process. Big business has been at this caper for years, sending call centres and accounts departments offshore. Barrie's genius was to realise the huge potential for individuals and small businesses to do the same. In less than three years, and with start-up funds of just a few million, he has built Freelancer into one of the world's leading outsourcing websites, with more than three million users; it has turned over more than $110 million since its inception, and last year transactions worth over $35 million passed through the site, of which Freelancer took $6.5 million. Barrie estimates that last figure will increase to between $10 million and $13 million this year. It's been near 100 per cent growth, year on year, and it doesn't look like slowing.
In business lingo, Freelancer is "highly scalable" - the business, and its profits, are expanding rapidly but its costs remain relatively stable. Industry analysts put the value of the company at between $100 million and $250 million. Not that Barrie wants to sell, not yet. He wants Freelancer to become the eBay of services. He's won a host of awards, including being named BRW's inaugural entrepreneur of the year in 2011. But that won't satisfy him. He's aiming to become Australia's first tech billionaire.
The respected US economist and former presidential adviser Alan Blinder says we have "barely seen the tip of the offshoring iceberg, the eventual dimension of which may be staggering". He likens the changes that will come to the upheaval of the Industrial Revolution. Countries have always traded with each other to exploit their natural advantages, and in the past it was goods that could be put in a box and shipped. This meant it was generally low-paid and low-skilled jobs in areas such as manufacturing that were lost offshore.
Not any more. Now anything that can be digitised can be traded and the competitive advantage for places like China and India is their cheap, educated labour. If you work in a factory in Geelong and the pay office is in Shepparton and the company accounts are done in Melbourne, all that information can just as easily be processed in Kolkata or Beijing. According to Blinder, it is now architects, accountants, lawyers, web designers, analysts, geologists, engineers and computer programmers - the knowledge workers - whose jobs are at risk. It's not as though we'll have no architects or accountants, it's just that we won't need as many. As one architect explains, "the doodling" and conceptual work will still be done in Australia, but the detailed drawings and plans will be done cheaply overseas. It's already happening, but the rate of change is building at a staggering pace.
A recent report by Macquarie University, The State of Offshoring in Australia: Preparing for Take Off, revealed that 36 per cent of the Australian businesses surveyed were already sending work offshore and a further 21 per cent were in the process of moving some activities overseas. Another 12 per cent were discussing it. Predictions about the effect of this on our overall economy vary. Some economists say workers who lose their jobs will simply find work in other areas. Others are concerned it may lead to overall job losses. Business, of course, loves it. As Matt Barrie points out, you can now start a small business with nothing more than a credit card - where it used to cost $50 an hour for someone to do the books, you can find a qualified accountant in Asia for $5 an hour. The website that once cost $20,000 to build can be done for $500. It opens up all sorts of opportunities.
One thing is certain: there is going to be a lot of pain for those caught in the rip - people who studied for years and were paid well but who find their job no longer exits; not in Australia, at least. Several economists I spoke to also say it could lead to a "flattening out" of Australian wages. Associate Professor Julie Cogin, of the UNSW Australian School of Business, warns, "This is really, really scary. You think of the next generation. There is going to be far less job security, maybe reduced conditions and pay and a casualisation of the workplace. This has huge implications for our children and even for us now."
It's a drizzly summer night in the weeks before Christmas 2011 and 100 or more of Matt Barrie's mates and employees have gathered in a trendy basement nightclub in Darlinghurst, Sydney, to celebrate the year's phenomenal successes. Barrie is legendary for his parties - he plans each one meticulously, as though he were preparing a company for a public float. And there is always a theme - tonight it's the 1920s and everyone has dressed up. A saxophonist wanders through the club, playing in harmony with the DJ. One of Barrie's employees, an earnest Bangladeshi guy in his 30s, dressed as a mobster, tells me that Freelancer is an "amazing place to work" and that Barrie is an inspirational boss. "It is rare to get someone who is so smart to have personality," he says in a South Asian lilt.
The music stops and a burlesque dancer appears. Barrie is front and centre, dressed in a top hat - the ringmaster. His current girlfriend, Justine Selby, a model, is at his side dressed as a flapper. The dancer skilfully works the room from behind two enormous pink fans, building to a finale where she whips off her bra to reveal tassels dangling from her nipples. The crowd goes wild. Matt Barrie beams, lapping up the adulation.
His mother, Margaret, tells me later that her son has always been a show-off. Margaret was a teacher and says she realised when Matt was young that he was "very bright". He learnt to recognise letters when he was two, watching Sesame Street, and was reading books well before he went to school. But as well as being bright, he was hyperactive, and she, like several of his friends, believes he may have some form of ADHD. "I recognised it very early and always kept him busy with books, puzzles or Lego," she says. "Anything. If he was busy, he wasn't naughty."
His father, Rob, worked in sales for the computer company NCR. His job took the family from Adelaide, where Matt and his younger sister were born, to Jakarta for a stint, before they settled on Sydney's north shore for his later primary schooling. His father's job gave him access to computers, and this curious, hyperactive kid would spend hours at the screen, writing programs, inventing games and learning how computers work.
When it came to high school, Barrie sat entrance exams for several private schools and won scholarships to three. He and his parents chose Sydney Grammar. Competition was fierce and every student's ranking was posted on a public noticeboard. Some of his classmates had study coaches. "I had no concept of what study was," Barrie tells me. "I'd just sit the exam." His grades slid.
He was up against people like Sydney University astronomer Bryan Gaensler - who, among other things, went on to discover that the Milky Way is twice as big as previously thought. Gaensler says he remembers Barrie as being a bit mischievous and "a very smart guy. But being smart wasn't enough. You had to do the work and Matt wasn't prepared to do that."
One of his ex-girlfriends, Kylie Vitale, who was with Barrie for almost five years, says she thinks part of Barrie's intense drive to succeed dates back to these early high school years. "Matt hates losing," Vitale tells me. "He has a massive, massive ego. It must have been a searing experience for him - his name wasn't on the top of those lists on the noticeboard and he wanted it to be."
Barrie tells me he realised at the end of year 10 that unless "I pulled my finger out", his options would be limited. He's never been near the bottom again. He got into Sydney University and thrived, doing a double degree in computer science and electrical engineering - passing both with first-class honours. He went on to do his master's at Stanford University in the US, and has collected other tertiary gongs. He is a great believer in education and will only employ the brightest graduates - preferably with PhDs, ideally university medallists. He teaches a couple of subjects at Sydney University, in entrepreneurship and cryptography, partly because he enjoys it and partly to find employees. "I hire the hackers," he tells me. "Lecturing gives me access to ... the best of the best."
Barrie and his mates were also hackers at Sydney Uni, although they are now coy about what it was they hacked into. "I just don't know how much I can say," says one university mate, Tony Jreige. "Most of it was troublesome." Another friend, now Barrie's partner in Freelancer, Darren Williams, tells me there's "still not much we would admit to ... we vaguely knew Julian [Assange], back in the day." Barrie says it was "harmless fun".
Apart from studying, hacking, chasing girls and developing a reputation as a man you couldn't kill with a keg at an engineers' party, he was always looking for ways to turn a buck. His parents set up an art and craft supply business, and in his last year of school Barrie, using his parents' presses, started making mouse pads printed with com-pany logos. He sold tens of thousands and continued the business through university. He also ran supervised underage discos in nightclubs with the city's hottest DJs. "He made money out of it," says Tony Jreige, "but he just loved to be the centre of attention - to be the king of things."
In the middle of the dotcom boom, in 1997 and 1998, Barrie went to Stanford, the world's leading tech university. It opened up a whole new world. "It was where shit happened," he says. The businesses started by his classmates at Stanford, he estimates, "would now have a market capital-isation of at least three to four billion". One of his mates set up PayPal and sold it to eBay in 2002 for $US1.5 billion.
Barrie saw the future and he wanted a part of it. For a few years he worked for security and investment companies in the US and Australia, "but I figured out pretty early that I had to start my own company, otherwise I'd never be happy". In 2001 he and Darren Williams and a couple of other mates, all aged about 27, set up Sensory Networks in Sydney. They met in a pub, mapped out their idea and, as Williams says, "We raised $4 million when, you know, all we had was the four of us and a PowerPoint presentation." The plan was to manufacture chips to scan network traffic at tremendously high speeds, which had myriad applications in detecting viruses, spam and malware. They would go on to raise almost $30 million in funding, here and overseas.
Williams tells me that while there were four of them, there was never any discussion about who would be CEO: "Matt was the guy who had the drive to pull it all together." Williams reckons there are similarities between Barrie and the Steve Jobs portrayed in Walter Isaacson's biography. "Jobs was this fairly difficult person who wanted things just right. He was prickly and would say, 'Don't give me "no". Let's really push.'
I see a lot of that with Matt."
They employed 70 people in four locations around the world and made a good product. But there were problems, almost from the start, both with the business model and antagonistic investors. In the end, there were nine separate venture capitalists who fought not only with Barrie but with each other. All wanted to have their say about the direction of the company. One conference call lasted for 16 hours - so long that Barrie had to send out twice for pizzas. He was under immense pressure. "I'd walk into the office and every day I was losing money," he says. "And so every day I'd have in my head, 'I'm losing money. When am I going to run out of money and need to start getting more money?' "
He quit at the end of 2006 and the company limped on. He didn't endear himself to the investors when, on the way out the door, he said to one of the venture capitalists he detested, "Thanks for the $30-million MBA." He'd learnt lessons that could never be taught at business school but his reputation, especially in Australia, was as worthless as his founding shares in the company.
"I was heartbroken," Barrie tells me, becoming agitated. "Heartbroken because I was still passionate for the company and I was passionate for the team." He adds, "I'm tempted to send those pricks [some of the venture capitalists] a bouquet with a note saying, 'Thank you very much - if you weren't such arseholes I'd still be working there.''"
"He can be appallingly rude and obnoxious," says Cassandra Nichterlein, who dated Barrie six years ago. The pair are still good friends. "I have told him off about his behaviour and said, 'Don't call me until you get your shit together', then he will do something so nice for somebody else that he redeems himself."
"I would love to hate him," says Kylie Vitale, "but I just can't." The pair split in 2010 and she, like Nichterlein, is acutely aware of his faults but still fond of him. Barrie, she says, is extremely generous and will go to great lengths to help others get ahead. Several young Sydney tech entrepreneurs relayed stories to me of how Barrie had helped with their businesses.
Vitale was the operations manager at Sensory and was with him through his dark days at the company and then when he started working on Freelancer. Some of the employees were frightened of him and she would advise anyone who went into his office to always have two solutions to any problem. When hiring engineers he would put them through such rigorous tests that some of them fled down the fire escape.
"Matt is an eccentric character," Vitale says. "He is very focused on himself and his success and everything else is an afterthought. He appreciates having you there as a partner but you are not going to stand in his way with his eye on the prize." She says that while he is materialistic and loves the trappings of wealth, it is his extreme fear of failure that drives him. "There is just this constant drive to put on the best party, to have the best business, to be the biggest website in the world. He won't be satisfied until Freelancer is number one."
Their time together was a whirlwind. Barrie doesn't cook and eats every meal at a restaurant or cafe - the only thing in his fridge is cat food. He keeps odd hours and will often stay up till four or five in the morning reading or at his computer. He has a constant need to be around people. Vitale describes some of his friends as hangers-on. "They hang on every word he says while Matt always picks up the bill." Still, she says, he is one of the smartest people she's met and she was constantly amazed at the breadth of his knowledge and the fact he lived life at breakneck speed.
Vitale says Barrie was devastated by what had happened at Sensory, but the day after he resigned he jumped up and said, "Right, what's next?" After blowing $30 million at Sensory he still had the confidence, she says, to knock on doors and say, " 'Can you give me a few million bucks, because it is going to make you a fortune?' 'How do you know?' 'Because I say so.'
"You got to admire that," Vitale says.
In the doldrums after his exit from Sensory, Barrie was helping his mum with the website for her craft business when he chanced upon some freelance websites. He found that most of the help he needed was out there - in India, China and Bangladesh. "I thought, 'This is going to be huge. I've got to get into this space.' "
At the time of the dotcom boom in 1997 there were 50 million people on the internet; within a few years this number is predicted to grow to four billion. The potential dawned and Barrie sat for weeks trying to build his own outsourcing website but soon realised he was too far behind those already in the market to catch up. He'd have to buy an established site, but was broke and his "thanks for the $30-million MBA" remark had been bandied about investment circles.
Then he met with Simon Clausen, a Sydneysider then in his early 30s who had recently sold his software company, PC Tools, and pocketed a reported $180 million. They had worked together when Barrie was at Sensory and Clausen owned PC Tools. Over coffee, Clausen got the concept straight away - his own business had been built with the help of outsourcing sites. "I saw Matt's failure at Sensory as a plus," Clausen tells me from his home in Switzerland - he also owns an extensive portfolio of harbourside properties in Sydney, which cost $60 million. "There are some things you can only find out when the shit hits the fan."
Barrie says he originally went to Clausen for advice about venture capitalists and after Clausen had looked at the business plan, he said, "F... it, why don't I just give you the money?" Barrie is coy about the figures but it is believed that Clausen tipped in a couple of million to get the ball rolling. "Simon's terms were extremely generous," says Barrie, who retains the majority shareholding.
The best of the websites Barrie could afford was GetAFreelancer.com, run by an eccentric Swede called Magnus Tibell, who was living on a fish farm in Vanuatu and running his website on the side. It had five staff, working as freelancers in Ukraine and the Philippines. Tibell, who sold in May 2009, tells me he was happy with the deal. He says Barrie had the skills and the drive to take the business into the next phase.
The site looked terrible. "It was all in greys and was really badly designed and yet it was crawling with activity," Barrie says. And it was making money. Barrie bought this and a number of other sites and rolled them into Freelancer.com. He and "a guy I paid 20 bucks an hour" sat in a room at the back of his house redesigning and modifying the site. "It was absolutely critical it didn't crash," Barrie says. "People feed their families on the work they get." They then moved into an office, then a larger office, and all the while the business was paying for itself.
The beauty for Barrie is that there are no pesky venture capitalists to deal with. "We don't have board meetings, we just talk over the phone and exchange emails every couple of days," he says.
And, Barrie says, the website has changed the lives of tens of thousands of people who had been living in poverty. The quotes section of his website is filled with thousands of emails like this one from Kenya: "This is the best thing ever happened in my life. I am back to college to complete my studies ... Now I can pay for my fees and for my little sibling in primary school ..."
But what about the turmoil this will create for Australian workers? Barrie says undoubtedly there will be pain for some people and that the internet has already been "terribly disruptive". But it has also created entirely new industries. Overall, he believes, the productivity of our economy will improve as a result.
Barrie can talk about his business for hours but when it comes to talking about himself, he clams up. All his friends, even his mum, say he is a party boy. "Works hard, plays hard," they all say. Yet he tries to play this down when we speak. He is a proud capitalist and loves the trappings of wealth, yet is embarrassed when I ask if we can photograph him with his silver Hummer. I get this terse email in response: "There's no way I'm going to get it taken with the Hummer. You and I both know that will deliberately polarise people."
His friends tell me that he'll probably never be satisfied - he's that kind of guy. There will always be the next thing. What they hope is that he can one day live for something other than business and parties. "I think in many ways he'd make a great dad," says Cassandra Nichterlein. "His kids mightn't learn much emotional intelligence, but hopefully the mother would have that."
Darren Williams reckons it would be good for him to "find a woman of substance. Someone who can hold their own against him and keep him from tipping over."
Kylie Vitale says he will have some plan in his mind to get married and have kids - when he's made the BRW rich list, or Freelancer is the No. 1 website in the world. "There will be a plan," she says. "With Matt, there's always a plan."
Matt Barrie wears Brioni suit from Harrolds Luxury Department Store For Men, Harrolds.com.au.
Globe by Wagner + Fredriksen for Menu, from Top 3 By Design.
This story first appeared in Good Weekend (which has a Facebook page) with "The net worker" as its headline.