Small Business Labs

Millennials and the Shift to Apartments

Are millennials (born 1980 to 2000) turning the U.S. into a nation of renters? That is a hotly debated question in the housing industry.  

As the U.S. Census chart below shows, home ownership rates peaked just before the start of the Great Recession and has been falling since.

Most housing analysts expect it to continue falling.

At the same time, the nation is seeing an increase in the number of apartments being built.

The chart below, from the New York Times article Housing is Recovering. Single-Family Homes Aren't shows the steady growth of multifamily housing starts.

Most housing analysts lay much of the blame for this shift to apartments at the feet of millennials. This large generation, which is roughly equal in numbers to baby boomers, so far is not buying homes at the rate of prior generations.  

There are many reasons for this. Lack of savings, less-than-perfect credit and stifling loads of student-loan debt are keeping millennials from home ownership.

Millennials are also waiting longer to get married and have children, life events that often spur home purchases.  And they also tend to like to live in cities, where renting is often cheaper and more accessible than owning.

Most surveys show millennials want to own their home. But they also question whether they will be able to afford to do so.  

Housing is an important economic sector, contributing a bit over 15% of total U.S. GDP in 2013. So what millennials do about housing going forward will have a major impact on the economy.

What Small Businesses Want from their Accountants

The Sleeter Group recently released a study looking at what small businesses want from their accountants.

You need to be registered on the Sleeter site to get the full report.  

But if you're reading this blog, you'll likely find much of interest on the Sleeter site so I recommend you go ahead and register.

A key finding we found interesting is the services small businesses want their accountants to provide beyond tax preparation and bookkeeping:

• 57% want more business planning and strategic advice,
• 30% want more help with tax planning,   
• 22% want better business analytics.
• 20% want help with cash management and forecasting

And a whopping 85% want their accountant to help them be proactive with technology for their business.

These results echo what we found last year in the future of the accounting profession study we partnered with Intuit on.  One of our key findings was:

Successful accounting professionals will take on new roles as consultants and advisors, providing performance management, decision support, IT advice and similar services, with less emphasis on nuts-and-bolts functions such as computation and tax preparation.

It's clear from the Sleeter survey that small businesses are looking towards their accountants to move beyond providing just tax prep and bookkeeping and become trusted business advisors.

The accounting industry is an excellent case of study of what's happening to knowledge work in general. Automation is replacing humans in many routine and low level tasks.

But as with accounting, the growing complexities of the business world is resulting in new, higher level opportunities for knowledge-based services.

Knowledge professionals who can move up the value chain and provide these services will thrive.

MIT Technology Review's 10 Breakthrough Technologies

Each year MIT Technology Review releases their list of 10 Breakthrough Technologies. They describe these as:

"advances from the past year all solve thorny problems or create powerful new ways of using technology. They are breakthroughs that will matter for years to come."

Their 10 are:

Agricultural Drones

Relatively cheap drones with advanced sensors and imaging capabilities are giving farmers new ways to increase yields and reduce crop damage.

Ultraprivate Smartphones

New models built with security and privacy in mind reflect the Zeitgeist of the Snowden era.

Brain Mapping

A new map, a decade in the works, shows structures of the brain in far greater detail than ever before, providing neuroscientists with a guide to its immense complexity.

Neuromorphic Chips

Microprocessors configured more like brains than traditional chips could soon make computers far more astute about what’s going on around them.

Genome Editing

The ability to create primates with intentional mutations could provide powerful new ways to study complex and genetically baffling brain disorders.

Microscale 3-D Printing

Inks made from different types of materials, precisely applied, are greatly expanding the kinds of things that can be printed.

Mobile Collaboration

The smartphone era is finally getting the productivity software it needs.

Oculus Rift

Thirty years after virtual-reality goggles and immersive virtual worlds made their debut, the technology finally seems poised for widespread use.

Agile Robots

Computer scientists have created machines that have the balance and agility to walk and run across rough and uneven terrain, making them far more useful in navigating human environments.

Smart Wind and Solar Power

Big data and artificial intelligence are producing ultra-accurate forecasts that will make it feasible to integrate much more renewable energy into the grid.

The article has much, much more on each of these technologies and is well worth reading.

Millennials' Standard of Living Lower than Parents

Pew Research's article Generational Equity and the "Next America" has a depressing assessment of the economic fortunes of American millennials (roughly aged 21-33):

Today’s young have the unhappy distinction of being the first generation in modern history to have a lower standard of living than their parents’ generation had at the same stage of the life cycle. Despite collecting more college diplomas than any generation in history, Millennials lag behind their same-aged counterparts of yesteryear on virtually all key indicators of economic well-being – including employment, income, wealth, debt and poverty. Half a century ago, the old were by far the poorest age group in America. Today it is the young.

The economic troubles of this generation are resulting in millennials being more frugal shoppers and having lowered overall economic expectations.  Their shifting consumer patterns are impacting everything from auto sales to the housing market.  

Coworking Forecast: 1 Million Coworkers in 2018

We released our 2014 to 2018 global coworking forecast last week at the Global Coworking Unconference Conference (GCUC) in Kansas City.

The number of global coworking facilities has been growing quite rapidly over the last 5 years, basically doubling in number each year. 

While we see this growth slowing, we still expect the number of facilities to increase at a very strong average annual growth rate of about 30% over the next 5 years.  

As the chart below from our GCUC presentation shows, this growth results in over 12,000 global coworking spaces operating in 2018.

The number of coworking members is forecast to grow even faster. The reason is the number of members per coworking space is increasing. This is because:

• new spaces tend to be much larger than the first generation of coworking spaces.
• existing spaces are expanding by adding more space and more members.  
• coworking facility operators have learned to optimize their space use and serve more members per square foot of space.

Because of these reasons, we're forecasting global coworking membership to grow at about 40% per year over the next 5 years and pass the 1 million member level in 2018.

 

We'll post more details on our coworking forecast in the coming weeks.

A Short Version of Thomas Piketty's "Capital"

Capital in the 21st Century, by French economist Thomas Piketty, is currently the top seller on Amazon and the hottest economics book in many, many years.

So hot that last Sunday's lead article in the New York Times style and fashion section was about Piketty.

In addition to being hot, the book is also long (696 pages), meandering, and at least in my opinion very hard to read.

I did manage to slog through it.  

But my advice is skip the book and instead read Justin Fox's excellent summary over at the Harvard Business Review site. 

I'm going to go a step further and summarize Fox's summary:

The book's thesis: Capital (which by Piketty’s definition is pretty much the same thing as wealth) has tended over time to grow faster than the overall economy. Income from capital is invariably much less evenly distributed than labor income. Together these amount to a powerful force that's increasing economic inequality.

Picketty argues that income inequality is both unfair and bad for overall economic growth.

The book's suggested solution: a global wealth tax on rich people.

This is obviously not practical and the book even describes it as utopian. But increasing income and wealth taxes on a country by country basis is doable and suggested.  

The book's impact: It's helping to drive a global debate about economic inequality.

We'll leave it the reader to decide whether they agree or disagree with Picketty.

But whether or not you agree with Picketty's solutions, it's clear economic inequality is growing. This is leading to major social, economic and consumer shifts.  We're covering these under the topic Economic Uncertainty.

Investment Bank "Kiosks" Take On Big Banks

The New York Times article Goldman, Citi, UBS ... and a Guy in an Office describes a successful one man firm that is currently the world's 11th ranked merger and acquisition adviser.  

The article describes this as the "trend toward merger and acquisition microfirms, or, as in his case, sole practitioners." Key quote:

Bankers have already coined a new catchword for such small firms: “kiosks,” as opposed to the somewhat larger “boutiques,” ... Such arrangements can be fabulously lucrative, since kiosks have little or no overhead but are still paid as a percentage of the total cost of a successful deal. Clients receive the benefit of the undiluted attention of a top merger and acquisition strategist. 

This trend - small, micro and even solo businesses successfully competing head to head with large corporations - is happening across the economy.  

The business models used by small firms to compete with industry giants are often similar. They leverage specialized skills and knowledge, attack niche markets, provide high levels of service and use technology once only available to larger firms.

This recipe is working in a number of service businesses such as consulting, legal services and financial services.

It's also starting to spread to product businesses as small and micro manufacturing companies take advantage of new and cheaper ways of making products such as 3D printers.

We're not suggesting this trend will result in the end of big corporations, at least not anytime soon.

But industry structures comprised of a small number of global giants and a growing number of small and micro businesses (we call these barbell industry structures) are becoming increasingly common.

Cities, Economic Uncertainty and Job Hopping

TechCrunch's How Burrowing Owls Lead to Vomiting Anarchists (or SF's Housing Crisis Explained) is a long and rambling article on why housing has gotten so hard to find and pay for in San Francisco.

The part of the article I found most interesting covers the shift in jobs to cities. San Francisco is an obvious example, but as the article points out cities all over the country (and world) are seeing employers moving in.

They are moving to cities because increasingly that's where the talent is located. 

A key reason for this is jobs are no longer secure, so employees want to work in places where the next job is relatively easy to find.  Key quote from the article:

The concept of lifetime employment also faded. Today, San Francisco’s younger workers derive their job security not from any single employer but instead from a large network of weak ties that lasts from one company to the next. The density of cities favors this job-hopping behavior more than the relative isolation of suburbia.

We often hear this in our research interviews. People want to work not just near their current job, but close to where their next job is likely located. 

This is a huge cultural and social shift brought on by the growth of economic uncertainty.

With job security limited, people are taking action to protect themselves. In addition to living in places with job hopping options, they are adding side gigs and 2nd jobs.  

Economic uncertainty is not going away and its impacts are not yet fully understood. We'll be covering this topic in more detail in the future.

Microbusiness Owners and Second Jobs

A new tracking survey by Sam's Club and Gallup has some interesting data on microbusiness owners and 2nd jobs.  

According to their survey - which defined microbusinesses as having fewer than 5 employees:

"one in three microbusiness owners (31%) depend more on a second job as their main source of personal income than they do on their business".  

The chart below shows that even larger microbusiness owners often depend on a 2nd job as their main source of income.

We've recently written on the growing number of people with side gigs and/or 2nd jobs.  This data is yet more evidence of this important trend.  

The Growing Just-In-Time Workforce

CLASP, a policy shop focused on issues related to  low-income people, has an interesting paper on the impact of nonstandard schedules on workers.

The quick summary is it makes their life more difficult, especially for those with children. Key quote:

Volatile, nonstandard schedules are a becoming characteristic of low-wage employment, increasing the child care challenges of workers who already face significant barriers to accessing affordable, quality child care.

We've been following the shift towards the increasing use of on-call workers, just-in-time workers and nonstandard work schedules and we agree.

But we would add it's not low-wage employment that's increasing facing nonstandard work schedules. Jobs in general are experiencing the same shift.

This is part of a the broader labormetrics trend, which is the use of data and analytical software to optimize the use of labor.

This is leading to the use of advanced scheduling software to create a just-in-time workforce of folks whose schedules change day to day based on expected labor demand.

A side effect of this shift is increased use of part-time employees and contingent workers. These worker are much more easily scheduled than traditional full-time employees.  

Already common in manufacturing and retail, advanced scheduling software and the broader use of labormetrics is quickly spreading to other industries. We expect the just-in-time workforce to continue to grow in the coming years.