Small Business Labs

Cities, Freelancers and the Paradox of Place

The Paradox of Place is one of the more interesting trends we follow.

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

What's happening San Francisco is an obvious example. There's almost a land grab frenzy of companies and people moving into the city. But it's not just San Francisco nor just places with a lot of tech companies.  All over the world, people are moving to cities and near-in suburbs.

This paradox is happening because in our knowledge-intensive world, industries and people cluster in order to share information, generate ideas and cut deals. These activities are all still better done face to face.  

Companies also cluster to access talent, which is attracted to urban areas due to job opportunities and the amenites urban or near-in suburban living provide.

This paradox extends to freelancers and other independent workers.

Given how expensive cities tend to be relative to small towns or rural areas and how easy it is to telework, why do the so many independent workers choose to live in urban areas - and especially places like SF and New York? 

We've been exploring this issue and the quick answer appears to be the same reasons companies and traditional employees are clustering - place matters to freelancers too.

This is, of course, not exclusively true. Growing numbers of Digital Nomads are wandering the earth and teleworking from the remotest of locations.  And telecommuting is on the rise, especially for independent workers.

But for most independent workers, place matters.

The Brookings Institute has been doing a lot of work on clusters and cities.  The very brief video below does a nice job of summarizing their point of view.

 

A Step Towards Designer Babies

OK, the title is a bit strong and potentially misleading.  But it lets me use my 2nd favorite baby picture in the article.  

The FDA is deciding whether or not to approve an invitro fertilization technique that combines genetic material from 3 parents.  

The goal is prevent certain inheritable diseases - such as muscular dystrophy - by replacing bad genetic material from one parent with good material from a 3rd party.  

The UK recent approved this technique, which technically isn't genetic engineering in that genes are not modified.  

So is this the next step down the road towards designer babies?  Some think so. Key quote on this from CNN's FDA considering 3 parent embryos:

"The big issue over the next 5 to 10 years is going to become how far do we go in pursuit of the perfect baby," said Caplan. "Do I think we're going down that road? Yes. Does it creep me out? Yes. Are you going to be able to draw a clear line? I don't think so."

It's hard to argue against a technique that doesn't modify DNA and eliminates the risk that a child will get a disease like muscular dystrophy. So I think the FDA should approve the procedure.

But this raises a lot of ethical issues.  For example, a similar technique could potentially be used to make a child taller, or stronger or even smarter.  Should this be allowed?

At what point do we stop going down this road?

A Facebook for Dogs

The quantified dog startup Whistle is expanding its product line to include a Facebook-like social network offering for dogs.

OK, the dogs won't be doing the networking. Their owners will.  

Whistle's main product is a doggy version of Nike Fuel or Fitbit - a small device that attaches to a dog's collar and tracks the dog's activity and health.  The broader category is called the quantified self, or in this case the quantified dog.

According to GigaOm's Quantified Canine startup Whistle starts building a dog-centered social network, Whistle is:

"tapping into that pent-up demand we dog owners have to obsessively record, catalog and share our pets’ daily lives."

The Pet Humanization trend continues to build strength - creating more opportunities for pet-preneurs.

Millennials, Adulthood, Work and Families

Several good, recent studies and articles on Millennials and how they view kids, families and work.  These include:

Pew Research - Millennials in Adulthood: Pew consistently does excellent research and this report is another example.  

It covers a wide range of topics related to how Millennials are behaving now that they are adults.

Key quote:

Now ranging in age from 18 to 33, they are relatively unattached to organized politics and religion, linked by social media, burdened by debt, distrustful of people, in no rush to marry— and optimistic about the future.

What is Work to a Millennial: Great article in Chief Learning Officer on how Millennials view work compared to other generations.  Key quote on how this cohort views work:

Work is a means to an end. Work-life balance is their mantra. Millennials therefore (also called Gen Y) work to play. Not only will the millennials job- and industry-hop, but they will career hop, too. Millennials approach work as an experience. The end game of a career is that they made a difference in the world. Jobs are merely opportunities to learn, experiment, gain experience and become more well-rounded.

HBR's Is Work-Family Conflict Reaching a Tipping Point.  I rarely listen to podcasts lasting more than a few minutes, but this 15 minute interview with the author of Baby Bust was more than worth making an exception for.

Excellent discussion of how Millennials view families and kids.  The quick summary is Millennials are just as interested as prior generations in having kids, but they aren't sure they have the time and money to raise them.  

What I really liked about all of these is the information is presented without the hype, drama and complaining usually associated with articles on Millennials.  

Deloitte on Industrialized Crowdsourcing

Deloitte University's Industrialized Crowdsourcing is one of the best, relatively short descriptions of crowdsourcing I've read.  

The key quote is the summary:

Enterprise adoption of the power of the crowd allows specialized skills to be dynamically sourced from anyone, anywhere, and only as needed. Companies can use the collective knowledge of the masses to help with tasks from data entry and coding to advanced analytics and product development. The potential for disruptive impact on cost alone likely makes early experimentation worthwhile, but there are also broader implications for innovation in the enterprise.

The article goes on to describe the major applications of crowdsourcing:

1.  Simple, Task Oriented Crowdsourcing: Shot, transactional units of work where the workloads can split across large numbers of remote workers.  Examples include data entry and picture tagging. Also includes routine tasks requiring physical presence such as performing store pricing checks. 

2.  Complex, Experienced Based Crowdsourcing: Work that requires abstract thinking, specialized skill sets, and sophisticated problem solving. Examples includes solving scientific or business problems.

3.  Open Ended, Idea Generating Crowdsourcing: These usually involve challenges oriented around invention, idea generation, and product and brand innovation. Examples include crowdsourced TV commercials.

4.  Crowdfunding and other Crowd Contribution Crowdsourcing: In these types of crowdsourcing the crowd contributes something of value.  Examples include crowdfunding as well as the contribution of information or other items of value.  

The article goes into more detail and has lists of companies providing crowdsourcing services in each of the categories.

With the exception of crowdfunding, most users of crowdsourcing services are larger firms. But use is spreading to smaller firms as they realize the benefits of crowdsourced work - low costs, speed, scale - also appy to small business tasks.

Meetings a Huge Industry

According to a report by the "Big 4" accounting firm PriceWaterhouseCoopers (PWC), in 2012there were "1.83 million corporate and business meetings, trade shows, conventions, congresses, incentive events and other meetings in the U.S."

I love their definition of a meeting:

A meeting is defined as “a gathering of 10 or more participants for a minimum of four hours in a contracted venue.” 

I have no idea how they track this data. But the good folks at PWC are good at their jobs, so I believe them when report these meetings had the following economic impact:

• $280B in direct spending
• 1.78M U.S. jobs
• $115B contribution to GDP
• $28B in federal, state and local tax revenue
• $66.8B in U.S. labor income

Based on these numbers, the meetings industry contribution to U.S. GDP is greater than the motion picture/recording industry ($113B), performing arts/spectator sports/museums ($87B) and information and data processing services ($80B).  

Futurists have long predicted the end of this these types of events due to replacement by virtual meetings and trade shows.  So far, this forecast has been very wrong.

This is another example of the paradox of place, which is despite the growing use of virtual systems and connective technologies place continues to be very important.  So does face to face communications.

Internships and the Tryout Economy

The Tryout Economy is what we call the shift from offering people traditional jobs to offering them internships or temporary assignments as "tryouts" where they are evaluated in-depth prior to getting a premanent job offer. 

This shift to tryouts is part of the broader shift away from traditional jobs and towards contingent work.

The reasons for this are straight forward. Firms are trying their best not expand their full time workforce unless absolutely necessary, and when they do add traditional employees they want to make sure they are getting capable workers with the skills to do a good job.  

The growth of internships - both in numbers and importance - is a good example of the tryout economy in action.  They are pretty much the only way college students can get full time jobs in some fields - investment banking, for example.  

They are also increasingly being offered to those out of school, especially millennials (young adults) trying to break into fields like fashion and entertainment.  

The New York Times For Interns, All Work and No Payoff chronicles the downside of this trend.  Key quote:

Call them members of the permanent intern underclass: educated members of the millennial generation who are locked out of the traditional career ladder and are having to settle for two, three and sometimes more internships after graduating college, all with no end in sight.

There's both a good side and bad side to the increase in internships. The good side is it gives work experience and job skills to people without them. It also provides an opportunity to test different jobs and careers.

The bad side includes potentially abusive internships that provide few if any job skills and little hope of being hired full time. There are other downsides and Propublica covers most of them in their series on internships.  

This is another example of what we've come to think of as the yin and yang of work in the new economy.

Fewer Americans See Themselves as Middle Class

According to a recent study by Pew Research, only 44% of Americans self-identify as being middle class. As the study chart below shows, this is down from 53% prior to the Great Recession.

   

Over the same time frame the percent of Americans saying they are lower or lower-middle class rose 15 points, from 25% to 40%.  The upper class has also taken a hit, dropping from 21% in 2008 to 15% in early 2014.

The decline in the middle class has profound business impacts. At a high level, there are simply fewer opportunities for businesses that serve traditional middle class consumers.  Instead, businesses are increasingly focusing on either high end consumers or those with limited incomes.

The New York Times article The Middle Class is Steadily Eroding. Just Ask the Business World covers this shift. Key quote:

"The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away ... big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers."

A big reason for shift is the increase in job polarization, which is the growth of both high wage and low wage jobs coupled with a decline in middle wage jobs.  See our job polarization category for more on this topic.

Sears, JC Penny and Olive Garden are but a few of the many examples of large firms hurt in this shift.  

Small businesses that serve middle class consumers should not only be aware of this trend, but also think through what it means for their business.  

Book Review: Sharing is Good

The sharing economy is all the rage these days. Sharing companies like Airbnb, Uber and Task Rabbit are regularly in the press and the number of sharing startups seems to grow each day.

But most of the coverage focuses on the industry and relatively little has been written for people who want to start personally benefiting from sharing.

Beth Buczynski's Sharing is Good: How to save money, time and resources through collaborative consumption nicely fills this void.  

"Sharing is Good" explains that although we don't share as much today as in the past, sharing has long been a key component of human society.  

The book also makes a strong case why we should share more - think sustainability and money savings - and provides the information needed to get started in the sharing economy.  

My favorite part of the book is chapter 6, What to Share. It has about 80 pages (almost half the book!) of examples of items to share and companies that provide related sharing services.  

For anyone trying to figure out what to share, this chapter alone is more than worth the cost of the book (which is a modest $9.99 for the Kindle version and $13.45 for the hard copy).  

Sharing is Good is an excellent field guide to the sharing economy and will appeal most to those just starting out.  But even experienced sharers will find nuggets of new and useful information. 

The Staffing Industry Analysts Temp Worker Forecast

The Staffing Industry Analysts (SIA) is a research and industry analyst firm that focuses on contingent work. Their clients are staffing industry firms and corporations that employ contingent and/or temporary workers.

The recently released their 2022 employment projections and U.S. staffing industry forecast.  The full report is only available to their clients, but they publicly released their high level forecast numbers.

The key SIA forecast is that U.S. temporary services employment will grow at a 3.1% annual rate over the decade from 2012 to 2022.  

While 3.1% doesn't sound like much, the U.S. Bureau of Labor Statistics is forecasting that overall employment will grow about 1% per year over the same time frame. And over a 10 year period, growing faster by 2% per year adds up.  

A related forecast data point comes from the 2013 MBO State of Independence study, which forecasts that the independent workforce will grow about 5.7% over this time frame.  

This study defines the independent workforce much more broadly than the segment covered in the SIA forecast (see the study for details). We partner with MBO Partners on this study and forecast.

Both forecasts show the contingent workforce is growing at a faster rate than the overall workforce, something we expect to continue happening well into the future.