Small Business Labs

The Rise of Intermarriage and Cultural Fusion

In 2015 one-in-six U.S. newlyweds (17%) were married to someone of a different race or ethnicity. 

This is up from just 3% in 1967. The reason 1967 is the comparison date is that's the year the U.S. Supreme Court ruled that interracial marriages were legal. 

These stats comes from Pew Research's In U.S. metro areas, huge variation in intermarriage rates. 

Not surprising given the sharp increase in intermarriage, the U.S. Census is projecting that the "two or more races" population will grow the fastest of any demographic cohort over the next 40 years. 

And while we are on the topic of the changing racial and ethnic make-up of the U.S., here are several more interesting stats from the U.S. Census:

• Babies of color already outnumber non-Hispanic white babies (1 year or younger)
• By 2020, more than half of the nation's children are expected to be part of a minority race or ethnic group
• Sometime around 2040 America will be a minority majority nation
• By 2060 the minority population is projected to rise to 56 percent of the total, compared with 38 percent in 2014.
• By 2060, the nation's foreign-born population will reach nearly 19 percent of the total population, up from 13 percent in 2014.

The shifting racial and ethnic make-up of the U.S. is driving the trend towards cultural fusion. This is the blending and mixing of different cultures and their practices. 

A simple example of cultural fusion is the nationwide popularity of Korean Tacos, which were introduced in 2008 by LA's Kogi BBQ food truck. 

The numbers presented above make it clear the racial,ethnic and cultural blending of America will continue - as will cultural fusion. 

Yes, there will be friction and push-back from those who feel threatened by these shifts. But the reality is the blurring of cultural, ethnic, social and racial lines is too far along and powerful to stop. 

Small businesses who embrace cultural fusion will find a variety of market opportunities. 

Most American consumers are embracing innovative products and services that are inspired by the mesh of cultures. Small businesses who can create these products and services will - like the Kogi Barbecue truck - benefit. 

Digital Nomad Services Creating "Temporary Locals"

One of the first things you hear when you talk to digital nomads is how their approach to travel allows them to be much more than just tourists.

Being a digital nomad lets them get to know people from other countries and participate in local cultures.

The New York Time's article The Digital Nomad Life: Combining Work and Travel covers the growing number of support services that help digital nomads do this. 

Examples in the article range from Unsettled, a firm that organizes 30-day international coworking experiences for groups of digital nomads, to Nomad Cruise, which run two-week networking cruises for digital nomads twice a year.

The article's key quote comes from Copenhagen's Economic Development Director Signe Jungersted:

“Travel has changed,” Ms. Jungersted said. “Everyone wants to be a temporary local.”

But breaking into local cultures and being a temporary local is not easy. Which is why demand for services that help people better integrate into foreign countries and cultures is growing rapidly.

These services create places and experiences where digital nomads meet and interact with local residents. 

Coworking facilities in Bali and Chiang Mai were some of first to recognize this need. Now these types of spaces, places and services are sprouting up around the world.

Roam, for example, is a network of co-living/coworking properties in Miami, Bali, Madrid, Tokyo and London. They plan to have eight more locations by the end of the year. 

Key quote on their appeal:

Roam is geared to remote workers “who need a reliable base in different cities,” said Bruno Haid, the company’s chief executive. Each location has communal living areas, with meeting rooms, a co-working space and fast Wi-Fi, and offers social activities, often unique to the locale.

“It offers a much deeper sense of the local experience and is more affordable than most traditional hotels and apartments,”

South African digital nomad Tyrone Niland added:

“The opportunity to go live in a foreign city for a month and interact with the local people and experience their culture — that’s priceless to me."

We expect the digital nomad trend to continue to gain strength. The opportunity to combine work with experiencing local cultures is simply too appealing - especially for travel oriented millennials and baby boomers - for it not to.

The Rise of Coworking and the Variable Cost Economy

A key reason we started following coworking back in 2007 was it provided a flexible alternative to the traditional long term commercial office lease.

Coworking turned a fixed cost (long term lease) into a variable cost (month to month membership). 

We've long considered the shift to variable costs to be a key megatrend of the new economy. As we pointed out in the 2008 Intuit report The New Artisan Economy:

… by the beginning of the 21^st century, ownership of large-scale infrastructures no longer determined business success in a growing number of industries. Brick and mortar and heavy iron gave way to speed, flexibility and innovation. New technologies, collaborative supply chains and outsourced manufacturing created lightweight infrastructures – smaller, cheaper and more agile.

With the greater need for business flexibility and agility not only are variable cost business models more attractive, in many cases fixed cost models are a liability.

Because of this, a recent article by the CEO of the coworking chain Industrious grabbed our attention.

The Tension that Defines us: Some Thoughts on the Future of Work covers a recent funding round by Industrious.

It also covers two key trends they see driving change in commercial real estate. One of them is "businesses’ rapidly growing need for flexibility". Key quote from the article:

American businesses are finding it increasingly difficult to sign 10-year leases. As the pace of change increases in business, with every passing year the ability to project headcount in a city 10–15 years in the future is becoming more and more difficult, not just for small businesses and startups, but for the Fortune 500. 

The article goes on to describe what corporate customers want from coworking spaces:

... I’ve never heard a customer say “I want coworking.” What they say is, “I want my employees to love coming to work, but I can’t commit to a 10 year lease and create this all myself. Can you help?”

The article closes with a description of the move from fixed cost business models to variable cost ones:

This is starting to look a lot like other outsourcing trajectories, whether it’s manufacturing, customer service, or IT. Businesses are moving a cost line from a fixed obligation they deliver themselves, to a flexible service they consume from a partner: think for example of the transition from companies managing their own servers to using Amazon Web Services.

The shift to variable costs continues to be a megatrend.

It's a driver in the growth of sharing and gig economy firms like Airbnb and Uber, it's a major reason businesses large and small are increasing their use of contingent labor, it's one reason there are more online only businesses, including restaurants and it's the main driver behind the rise of platforms, ecosystems and cloud computing.  

Despite its importance, the shift to variable cost business models get little attention. We think this is because it's a fairly wonky topic. Also, few people get excited about accounting concepts. 

But it's driving a lot of change, and not just business change. 

Consumers are also avoiding fixed costs. They're delaying or not opting for marriage and kids, they're renting instead of buying homes and they're reducing or delaying large purchases of all kinds and they're even choosing pets over children.

We cover the business aspects of this topic in more detail  in our Business Models section and the consumer aspects in our Economic Uncertainty section.

BCG, Sodexo and Mercer on 2017 Global Trends

Somebody forgot to tell BCG, Sodexo and Mercer that trends season runs from November to January.

These three large and influential firms all recently released 2017 global trends reports. 

The "Big 3" strategy consulting giant BCG report is called Twelve Forces That Will Radically Change How Organizations Work. It has the clever tagline "The New New Way of Working".

BCG covers a lot of ground. Their 12 forces are comprised of 60 sub-trends. So there is way too much to cover here. The report chart below (click to enlarge) shows their 12 megatrends.

Sodexo is one of the world's largest corporations, with somewhere between 400,000 and 500,00 employees (they're so big, they're not even sure). 

Their business is focused on what they call "Quality of Life" services. Sodexo is best known for institutional food services. But as their 12 page services brochure shows, there's very little related to facilities management they don't do. 

Because of this, their report - The 2017 Global Workplace Trends Report - focuses on workplace trends. 

They cover 10 trends and, like the BCG report, there's a lot there. But two trends that jumped out at us are:

1. Unlocking the Potential of Millennial Talent: A New Understanding of What Drives this Generation: The report nicely summarizes a lot of information on millennials.

2. Wellness 3.0: The Workplace as a Wellness Destination: Interesting look at wellness, which is clearly an important workplace trend.

See the report for more on these and the other 8 trends.

Mercer is a global consulting firm focused mostly on human resources issues. Not surprisingly, their report is focused on talent trends. Their 2017 Talent Trends report covers 4 broad trends:

1. Growth By Design: Driving a bold change agenda

2. A Shift In What We Value: A new rewards paradigm is needed

3. A Workplace For Me: Personalization of the employee experience

4. The Quest For Insight: Predictive analytics are still out of reach

Between these 3 reports pretty much every work and business trend of note is covered.

All 3 are well worth reading for those interested in trends. They also overlap and cover many of the same or similar trends.

If your primary interest is workplace related, start with Sodexo's report. If talent trends are of most interest, start with Mercer's. For broader and/or strategy trends, start with BCG's study. 

IBM Cuts Telecommuting and the Paradox of Place

IBM recently announced a "relocate or leave" program requiring their marketers to work at one of six US locations. Those who have been telecommuting have the choice of moving or leaving the company.

Many appear to be choosing to leave. 

While most of the coverage of this is focused on IBM's marketing department, the new policy is going to be extended to other departments at IBM. 

As Quartz points out, IBM was a pioneer in remote work. Key quote:

As early as the 1980s, the company had installed “remote terminals” in several employees’ homes. And by 2009, when remote work was still, for most, a novelty, 40% of IBM’s 386,000 global employees already worked at home ...

IBM, of course, isn't the only well known example of a company reducing or eliminating telecommuting. Yahoo rather famously did this several years ago and Google and Apple have always tried to limit telecommuting.

These firms believe co-location leads to greater levels of collaboration and innovation. Again from the Quartz article:

What IBM should value most, says John Sullivan, a professor of management at San Francisco State University who specializes in HR strategy, are better ideas. “It turns out the value of innovation is so strong that it trumps any productivity gain,” he says ... “[Remote work] was a great strategy for the 90s and the 80s, but not for 2015.” He thinks that working together in person is one key to innovation.

At the same time, Gallup reports that overall remote work is increasing. Key quote from Gallup:

In 2012, Gallup data showed that 39% of employees worked remotely in some capacity, meaning they spent at least some of their time working in a location different from that of their coworkers. In 2016, that number grew by four percentage points to 43%.

But it's not just the percentage of employees working remotely that has increased: Employees who work off-site are also spending more of their time doing so.

In 2012, 24% of employees were spending 80% or more of their time working remotely. In 2016, 31% were found to be doing the same.

It's not just Gallup that sees remote work growing. Gartner's Predictions 2017: Boosting Business Results Through Personal Choice in the Digital Workplace says that "Employees are more engaged if they have autonomy in how, when and where they get their work done". 

They recommend the greater use of flexible work options, including telecommuting, and are forecasting more firms will do so going forward. 

There's also a rapidly growing number of firms that are wholly or almost wholly made up of remote workers. 

A good example is Zapier, which has gone as far as offering $10,000 to employees to "de-locate" from the SF bay area and telecommute in. 

All this illustrates one of our favorite trends, the paradox of place. 

The paradox is even though the Internet and connective technologies have made working remotely easier than ever, people and companies are increasingly clustering together in fewer locations, mostly in cities.

This means thanks to connective technology location is, in many ways, less important. But at the same time, being co-located is becoming more important. Hence the paradox.

Adding to this paradox is even companies that make tools that help remote workers and teams collaborate (like IBM and Google do) are cutting back on telecommuting and requiring more face to face employee interaction. 

So is this the end of telecommuting, as suggested by the human resources site HRE?

We certainly don't think so. 

We believe the paradox will continue. More jobs and work will become detached from place, but clustering will continue to increase and more firms will reduce remote work options for certain groups of employees.

For more on this trend, see Upwork and the Paradox of Place.

The Growing Importance of Interpersonal Skills Favoring Women in High Wage Jobs

A recent academic study, The End of Men and Rise of Women in the High-Skilled Labor Market, shows that women are rapidly gaining ground in a number of high paying fields.

The reason is success in a growing number of high-skill professions requires more interpersonal skills like collaboration, empathy, and managing others. As the study points out, there's a lot of research showing women, on average, have stronger interpersonal skills than men. 

Key quote from the study abstract:

Since 1980, the probability that a college-educated man was employed in a cognitive/high-wage occupation fell. This contrasts starkly with the experience of college-educated women: their probability of working in these occupations rose, despite a much larger increase in the supply of educated women relative to men during this period.

So not only are women improving in terms of their likelihood of working in high wage occupations relative to men, the number of well educated women has exceeded that of men for several decades.

We've covered the growing education gap between women and men in the past and the gap appears to be increasing.

This education gap, combined with a greater need for social skills, is resulting not just in high skill professions, but the labor market in general.

At the same time, men continue to not do well. 

The recent New York Times article The Increasing Significance of the Decline of Men provides an in-depth look at the many problems men are facing.  Key quote:

... men of all races and ethnicities are dropping out of the workforce, abusing opiods and falling behind women in both college attendance and graduation rates.

The end of men is another topic we've long covered.

Yes, we're aware that men on average out earn women, hold more senior executive positions, etc. We also know there's still more work to be done on gender equality.

But the trends driving the end of men and the rise of women are powerful and show no signs of turning around. Expect women to continue to gain relative to men across a wide variety of social and economic measures in the coming years. 

Because of this, don't be surprised if in another decade or so we're talking about how to achieve gender equality for men. 

Our section on Women covers both the rise of women and the problems facing men in more detail.

Psychographic Profiles and Working Yourself to Death in the Gig Economy

A recent ad campaign by Fiverr attracted a lot of attention, most of which was negative.

But the ad and reactions to it nicely illustrates the risk and attitudinal profile differences between independent workers (freelancers, self-employed, etc.) and those who aren't. 

Our favorite headline related to the campaign is Tragic Ads Attempt To Glorify Desperate Hell Of Gig Economy.

But the article getting the most attention is The New Yorker's The Gig Economy Celebrates Working Yourself to Death.

Most of the controversy comes from the print ad shown below. 

            

Key quote from the New Yorker article on the ad:

No one wants to eat coffee for lunch or go on a bender of sleep deprivation—or answer a call from a client while having sex, as recommended in the video. It’s a stretch to feel cheerful at all about the Fiverr marketplace, perusing the thousands of listings of people who will record any song, make any happy-birthday video, or design any book cover for five dollars.

There was also a tweet that went viral about this ad. It said "The 'gig economy' is literally killing us. Most depressing ad of the day goes to Fiverr."

Fiverr calls the campaign "In Doers We Trust" and here's how they describe it:

"In Doers We Trust" articulates the ethos of Fiverr's current bootstrapping entrepreneur members -- heroizing them -- with the goal of bringing more into the fold.  The campaign positions Fiverr to seize today's emerging zeitgeist of entrepreneurial flexibility, rapid experimentation, and doing more with less.  It pushes against bureaucratic overthinking, analysis-paralysis, and excessive whiteboarding. 

Our firm spends a lot of time studying the psychographics (motivations, attitudes and behaviors) of independent workers. Because of this, we get why Fiverr released this ad and campaign.

Simply put, most independent workers see themselves as doers who make things happen. They take pride in being hard working and self-reliant. They also know their path entails making sacrifices in exchange for the autonomy, control and flexibility it provides.

The Fiverr ad campaign plays to these attributes.

We also study the psychographics of people who aren't independent workers. We do this to understand why some people choose to become independent while others prefer traditional jobs.

This research shows that most of those who aren't independent workers are substantially different in terms of risk profiles and attitudes about work relative to most independent workers. 

The quick summary is most people who aren't independent see independent work as being much more risky, unstable and demanding than independent workers do.

These large psychographic differences explain why Fiverr released this ad and why the reaction has been so negative. 

The Fiverr folks no doubt liked this ad because it fit the profile of gig workers, which is something they are very familiar with.

What they missed was the ad also triggered and reinforced the negatives many associate with independent work. 

We're finishing up a deep dive research project on the risk and attitude profile differences between independent workers and those with traditional jobs. The results are fascinating.

We'll be releasing the study findings in the near future.

The Future of Fun: All the World's a Shareable Stage

One of the more interesting stats we've seen lately is over 50% of the people who buy the Hasbro game Pie Face make and share a video of them playing it.

Hasbro's Pie Face was the single best-selling item in the games category in 2016.

It's a simple game.

A throwing arm fires whipped cream into the face of someone behind a plastic face cut-out. 

The power of the game comes from the social side.

With the advent of commonly available video recorders (our cell phones) and easy ways to post online, games now become performances we can share with our friends, family and the broader world.

The growing business importance of social sharing and creating performances became very clear to us during our 2012 research project on food trucks. Key quote from an article we later wrote about this:

The growth of food trucks is one of our favorite examples of an industry being impacted by people wanting to share experiences. There's no doubt one of the drivers of the growth of food trucks is the experience they provide and the ability for their customers to share that experience via social media.

There's a great quote from a post on the Foodess Files blog on this topic:

"It’s hard to find a cluster of people standing beside a food truck in Los Angeles, who are NOT on their phones. They are tweeting their experience by the minute, instagramming their orders, and if they’re like me, blogging on the go."

 

The key quote from the Washington Post article is:

 

“It connects to the core of where kids are today,” Loerzel said. “Back in the day, I’d get a new pair of Nike Jordans to look cool and get people liking me at school. Now it’s, ‘I want to post cool stuff on YouTube.’ ”

 

The idea of an experience economy is not new. The 1999 book The Experience Economy covered it nicely. 

 

The book's tagline is "Work is Theater and Every Business a Stage". In our opinion few book taglines have matched this in terms of predictive accuracy. 

 

The shift to experiences is gaining strength and is being amplified by online social sharing. Small businesses that can figure out how to add shareable experiences to their product/service lines will accrue substantial benefits.

2017 TrendsWatch from the Center for the Future of Museums

The Center for the Future of Museums released their annual trends report, TrendsWatch 2017. 

This is one of our favorite trends publications and we read it front to back.

This year's report has 5 chapters:

• A Mile in My Shoes: closing the empathy deficit
• Let Justice Roll Down: the next horizon of civil rights
• The Rise of the Intelligent Machine
• Reshaping the World: migration, refugees, and forced displacement
• Failing Toward Success: the ascendance of agile design

The report is targeted at museums, but anyone interested in trends and the future will find it valuable. 

The Center does a great job at trend spotting and reporting. We think this is because a big part of this work is the curation of news and information. And who's better trained at curation than the folks working at museums. They're even called curators.

The Center for the Future of Museums has other useful trends resources, including:

The Center for the Future of Museums Blog

Their weekly newsletter Dispatches from the Future of Museums (a must subscribe to for those interested in trends)

Their Pinterest site, which contains interesting visuals and links.

And, of course, you can follow them on Twitter

Automation Helping the Self-Employed With Their Taxes - And Making Them More Productive

There's been a lot of discussion about automation and technology replacing jobs. But there's been much less discussion about the positive sides of automation and in particular how automation can improve productivity. 

A good example are the various tools that help the self-employed do their taxes. 

Most any self-employed person will tell you keeping detailed tax records - and especially expense records - is a time consuming, tedious process. 

They'll also tell you it's easy to miss, not know about, or forget to record tax deductible expenses. 

Intuit's TurboTax Self-Employed, for example, has a nifty feature that greatly helps with this (disclosure: Intuit is an Emergent Research client). 

It's an automated tool called ExpenseFinder. It proactively uncovers business expenses by gathering and automatically scanning bank accounts and credit card transactions. It then separates work and personal transactions and organizes them by category.

ExpenseFinder then recommends potential deductible business expenses. Users confirm which expenses apply to their business to help them get every deduction they deserve. 

This tool is especially useful for those who mix business and personal expenses on credit cards, something most independent workers, freelancers and part-time self-employed workers do.

It's also very useful for those who aren't familiar with business expenses or aren't sure what they can and cannot deduct. 

As mentioned above, there's much angst these days about the potential impact of automation technologies on jobs. 

For example, a widely cited study from Oxford University suggests 47% of all workers in America could lose their jobs to automation over the next decade or so.

Even more alarming, physicist Stephen Hawking says:

"the automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining."

He predicts that in the long term automation and artificial intelligence will will bring radical increases in efficiency resulting in mass unemployment as humans are replaced by machines.

The potential endgame according to Hawking is that automation and A.I. "could spell the end of the human race".

Since Dr. Hawking is clearly one of the smartest living humans, we're not going to dismiss his concerns. But we do think he may be a bit pessimistic. We also think he's ignoring the productivity gains automation tools provide.

For those of us who are self-employed, automation tools like ExpenseFinder give us more time to spend on higher value added activities. This increases both our productivity and the value of our services. Because of this, we become less susceptible to job loss due to automation. 

We've been exploring how automation and A.I. are impacting knowledge work. We'll have much more on this in the coming months.

But based on our early research, we are far less pessimistic about automation and jobs than folks like Dr. Hawking are.