Small Business Labs

Independent Workers and Their Life Goals

Since the pandemic, people have been reevaluating work's role in their lives. And for many, work-life balance, the ability to pursue passions, and health and wellness are taking center stage as top priorities.

MBO Partners' study Life Goals: Exploring the Great Realization in Depth explores the life goals of independent workers (freelancers, gig workers, self-employed, etc.) and how successful they are at achieving them.

The key finding of this study is that independent workers outperform traditional jobholders in achieving their life goals.

The study chart below (click to enlarge) illustrates the top 3 life goals reported by a survey of traditional and independent workers.

As the chart shows, independent workers outperform traditional workers in all 3 of the top categories.

Independent workers scored higher in all areas except financial goals. They scored lower than traditional workers in earning a steady income and being on track for retirement.  

Interestingly, they scored statistically the same for the goal of creating wealth. This is likely due to both types of workers scoring low on this achieving this goal.

One goal that caught our attention was continued personal growth. Almost two-thirds (64%) of independent workers reported achieving this goal versus 54% of traditional workers.

Based on our interviews with independent workers, the need to continue to upskill and adapt to changing demand associated with independent work is likely why independents score higher in this area.

Of course, not all independent workers are successful at achieving their life goals.

The study found that about one-third of independent workers score poorly regarding life goal achievement. In most cases, this group reports not having the work/life flexibility, autonomy, and control that more successful independent workers have.

MBO Partners collaborated with future of work expert Connie Steele and her firm, Flywheel Associates, on this study. Flywheel Associates provided input, guidance, and survey questions from their annual State of Work and Career Success study.

Emergent Research (that's us) also collaborated on this study.

See the report for more information.  

The Lifestyle Employment Contract Versus Freelancing

Mercer's study, Rethinking what we need from work, found that "employees are more focused on securing their financial, physical, and emotional health and well-being than by achievement and climbing the ladder."

Because of this, they are proposing firms shift to a lifestyle contract to attract and retain talent (click on the Mercer report chart below to enlarge).

The new contract suggests 6 areas employers should focus on if they want to win the war for talent:

1. Step up efforts on retention
2. Align to shifting workforce needs
3. Focus on financial health
4. Reimagine well-being at work
5. Accelerate diversity, equity, and inclusion
6. Build a more flexible future

When you look under the hood at most of these areas, Mercer suggests employers offer greater work flexibility, autonomy, and control.  

These are, of course, key reasons workers choose to pursue independent work and freelancing.  

We've long viewed the choice between having a traditional job and freelancing as a competition.  

And most traditional jobs offer much less work flexibility, autonomy, and control than freelancing does. And we've long wondered why more firms don't provide at least some of the flexibility, autonomy, and control freelancing offers.  

And perhaps, they will.  

One of Mercer's focus areas, financial health, is where traditional employment has always had an advantage over independent work.

And because of this, it's a good area for employers to double down on in their competition with freelancing for talent (and their competition with other firms).  

Before the pandemic, we were seeing a trend of employers offering more flexibility, greater work/life balance, higher pay, and better overall financial support.

However, there is much talk - especially in the tech industry - about cutting back on these changes. And if we have a recession, there will be more talk.

Our hope is that more companies will adopt some form of the lifestyle employee contract.

Either way, we think the appeal of freelancing and independent work will be sufficient for their numbers to continue to grow.

Skift's Travel Industry Megatrends

Skift is a travel industry analyst firm and one of our favorite sources on travel trends. Much of their content is behind a paywall, but they also produce free content (we subscribe to several of their newsletters).  

We follow travel trends because of our interest in remote work and digital nomads. We're also active travelers, so we like travel trends.  

They recently released their 2023 Travel Megatrends report. It covers 22 travel and travel industry trends.

Two trends jumped out at us. 

Blended Travel Comes of Age covers the growth of travel that includes work and leisure. Key quote:

"The pandemic has led to a permanent change in how we live our lives between work and the personal. No longer just a trite category called "bleisure," the idea of blended traveling is front and center for every major travel company now. How new strategies focused on the blended traveler will emerge more clearly in 2023, as the industry recognizes the whole traveler holistically." 

As the Skift chart below shows (click to enlarge), the share of business travel that includes a weekend has increased substantially since the start of the pandemic.

Because of the growth of blended travel, the entire travel industry is trying to figure out how to serve this market segment better.

The other trend that caught our eye is The Anywhere Traveler Puts New Destinations on the Map. Key quote:

"Millennials now surpass Boomers as the largest sector of the U.S. population, giving rise to a new class of "anywhere travelers." This group has a strong passion for experiences that take them to less obvious destinations. These habits, in their own way a new form of balancing overtourism, will put new destinations in focus."

We like this trend for several reasons.  

First, It illustrates one set of impacts due to the aging of baby boomers. Aging boomers will have many economic and societal impacts, and these, in our opinion, are being underestimated.

And second, the Anywhere Traveler will increasingly be a remote worker or digital nomad.  

The other 20 trends are also interesting, and the report is well worth reading for anyone interested in shifts and trends.

Digital Nomad Programs for Families

Digital nomads traveling with children are not unheard of. But because of the challenges of traveling long-term with kids, there are relatively few digital nomad families.  

That's why we found The Florentine's Digital nomad community Boundless Life expands to Tuscany. It covers the firm Boundless Life, which describes itself as "Your family's complete solution to living around the world."

This includes, according to Boundless Life, "Forward-thinking education, furnished homes, coworking space and a wonderful community of like-minded families."

Their education program jumped out at us.  

As far as we know, they're the only organization that provides schooling for kids (ages 1-12) as part of their remote work/digital nomad service offering.  

Boundless Life offers 3-month summer and 6-month programs in Portugal, Greece, and Italy. The picture below (click to enlarge) is from their website. It provides more details on their locations.

The schools are taught in English, with the programs based on the Finnish curriculum, which Boundless Life describes as "world-renowned." Not knowing anything about Finnish schools, we checked with several local school officials. They confirmed that Finnish schools are highly regarded.  

Boundless Life is another example of the rapidly growing array of programs and services targeted at digital nomads.  

These services aim to reduce the challenges associated with being a digital nomad. This makes it easier to become a digital nomad - which is what Boundless Life does for nomads with kids.

The growth of these services is one of the reasons we are forecasting the number of digital nomads to continue to grow over the next 2-3 years.  

See our Digital Nomad section for more on this topic.  

Wunderman Thompson's 100 Trends to Watch in the Coming Year

Wunderman Thompson's Future 100: 2023, which is one of our favorite annual trend reports, was released this week.

It's one of our favorites for several reasons.

First, since a global marketing agency produces it, the production values are outstanding. It's well-written, and the pictures and illustrations are fun and often intriguing.

Second, who else puts out a report with 100 trends? It's almost too much to go through.

And finally, the report includes 10 consumer trend categories covering everything from beauty to work. Click to enlarge the chart below.

We always have our favorite trends from this report.

This year they include The Artisan Wave, Situationships, Non-Linear Work, and Deepsea Tourism. See the report for descriptions.

And we're always interested in their top 3 destinations. This year they are Morocco, Kyoto, and Tanzania. We've been to all three and they're great places to visit.

If you're interested in consumer trends, this report should be on your reading list. It's free.

Accounting Rules Favor the Use of Freelancers by Corporations

According to The Harvard Business Review's February magazine article How Financial Accounting Screws Up HR, accounting rules and practices mistakenly favor using nonemployee labor instead of employees.  

The main reason is the treatment of employees as a fixed cost. Key  quote: 

"...a number of rules have been prompting a major effort by companies to move work to nonemployees. One involves treating wages and salaries as fixed costs. Such costs are a big worry for investors because if business and revenue decline and those costs can't be cut, the profitability and value of the business collapse in a hurry ...

Why wages and salaries are ever considered fixed costs in the United States is a puzzle given that virtually all employment there is "at will," which allows companies to end it unilaterally for any business-related reason. 

The other accounting rules favoring the use of nonemployee labor the article points to are:

• Using per-employee statistics as key performance metrics: Using nonemployer labor reduces the number of employees, which improves per-employee metrics like sales per employee, profitability per employee, etc. 
• The use of nonemployee labor can increase a firm's reported gross margins: Direct labor costs are included in a firm's cost of goods sold. This reduces a firm's gross margin, a metric investors closely scrutinize. Nonemployee labor is much easier to categorize so it's not included in the gross margin calculation than employee labor costs are.
• It's generally harder to get approval to hire an employee than it is a contractor: This is not an accounting rule, but a common financial practice at most corporations.

Based on our corporate consulting work, our work with investors, and our experiences working at corporations, we agree that accounting rules and practices are tilted towards the use of nonemployee labor.

And many corporate decision-makers do not fully understand the impacts of these rules and practices on resource allocation and hiring decisions.

So shining a light on these issues is important.   

But even if the accounting rules and practices are changed - and we think they should - the use of freelancers and nonemployee labor by corporations will likely continue to grow.

The reason is simple.

The main trends driving the use of nonemployer labor - the need for greater business agility and flexibility, the challenges of hiring in-demand labor, the greater productivity and efficiency of nonemployee labor in some instances, and the desire by many skilled workers to be independent - significantly outweigh the accounting impacts.  

What is Nature Tech?

PWC's A surge in nature tech investing defines nature tech as:

...  nature-related technologies that help companies understand, mitigate and adapt to the twin climate and biodiversity crises ...

The World Economic Forum's 5 ways nature tech can bring integrity and scale to nature-based solutions defines nature tech more broadly as technology that supports nature-based solutions (NbS).

Which begs the question, what are nature-based solutions? The World Bank defines these as:

"Nature-based solutions are actions to protect, sustainably manage, or restore natural ecosystems that address societal challenges such as climate change, human health, food, and water security, and disaster risk reduction effectively and adaptively, simultaneously providing human well-being and biodiversity benefits."

The PWC article uses as an example various technologies that help honeybees thrive despite pollution and climate change.

These include measurement, reporting and verification (MRV) technologies that help beekeepers better understand hive conditions and site their hives away from pollution sources, bee hive heaters for cold weather, and even robotic queen bees to direct drone activity.

As the PWC chart below shows (click to enlarge), while not huge by VC standards, nature tech funding is growing.

 

Its clear nature needs help these days. So it's good to see nature tech funding is increasing.

Crypto's Winter and Generative A.I.'s Spring

The Washington Post's 'Crypto winter' has come. And it's looking more like an ice age starts with:

A year ago, the crypto world was booming, with prices for Bitcoin and Ethereum at all-time highs, celebrities stumbling over each other to promote expensive digital art, and logos from blockchain companies gracing sports stadiums and Super Bowl ads. That era is over.

And it's true. 

Thanks to a long list of frauds and criminal schemes - topped off by FTX's collapse - the crypto hype cycle is over. For now.

And replacing it is a major new hype cycle for generative A.I. 

Generative A.I. - an umbrella term for A.I. that doesn't just analyze existing data but creates new text, images, videos, code snippets, and more - had already established itself as tech's latest big thing.

But with the launch of ChatGPT, the hype around generative A.I. has reached a fevered pitch.

The Guardian's What is A.I. chatbot phenomenon ChatGPT and could it replace humans? does an excellent job explaining what ChatGPT is. Key quote:

ChatGPT is a prototype dialogue-based A.I. chatbot capable of understanding natural human language and generating impressively detailed human-like written text.

In addition to answering questions in a human-like way, ChatGPT also scans the Internet for information and data related to the topic.

For example, we asked ChatGPT what a technology winter is. Here's its answer:

A technology winter, also sometimes referred to as a "tech winter" or a "capital winter," is a period of time when investment in, and enthusiasm for, new technologies and startups cools off ... Technology winters can have significant impacts on the technology industry, including reduced innovation and slower adoption of new technologies. However, they can also be followed by a "technology spring" or a period of renewed growth and innovation.

Not a bad answer.

A.I. has gone through multiple technology winters, with the first happening in the 1980s and an extended winter running from the mid-1990s to the mid-2000s or so.  

Yet now, A.I. is widely used in business and science - and it's experiencing yet another technology spring.  

We expect Crypto, despite it's current problems, will also eventually have its own new spring.

VC Firm Forerunner on Consumer Trends

Forerunner Ventures is one of the most successful consumer industry-focused venture capital firms.  

They were early-stage investors in many well-known consumer brands, including Warby Parker, Bonobos, Dollar Shave Club, Jet (now owned by Walmart), and others.  

Forerunner recently released a consumer trends report they call The Dinner Party.  

Their premise is that the past several years dislocations have resulted in consumers needing to deal with mounting uncertainty and personal and societal adversities. 

Key quote from the report:

"The consumer has been upended by the change in every aspect of life and is facing mounting adversity. We are all searching for varying degrees of purpose, direction, and resilience to get back to solid footing and a path towards a brighter future."

The study identified eight psychographic consumer personas, which Forerunner calls "consumer archetypes". 

They also identify six broad consumer trends. These are:

1. Sick-care Evolves to Well-care
2. Money Matters
3. Choice is The Future of Work
4. New Age Activism
5. The Need for Community is Real
6. Sustainability Moves from Transition to Table Stakes

All are supported by interesting data from their consumer survey and well worth reviewing.

But one set of data jumped out at us.  

As the report chart below shows (click to enlarge), 61% of their survey respondents said they prioritize money over convenience, and 66% said they prefer DIY vs. paying to outsource.

       

This is a significant consumer shift away from the past decade's on-demand service revolution that provided consumers - for a price - the ability to outsource many aspects of their lives.

Key report quote on this shift:

We imagine this marks the beginning of a pendulum swing to a place of balancing price and value with urgency and convenience ... opportunity exists to provide relevant tools and resources for people who are now actively looking to do more with less, or re-engage in activities and experiences that help harken back to a simpler life.

While we like most any trend description that includes the word "harken," this trend is a major shift in consumer thinking - and a trend we fully agree with.

Forerunner has a strong track record of spotting, and successfully monetizing, shifts in consumer behavior. Because of this, we pay attention to their trends' work.

See the report for more details on the consumer archetypes and trends.

The Atlantic's 2022 10 Breakthroughs of the Year.

It's future trends season, and we'll be covering some  of the many 2023 future trend lists and related forecasts in the coming weeks.

We're starting with The Atlantic's recently released its inaugural edition of their 10 Breakthroughs for the Year.

The list is below and quite interesting.

It contains "breakthroughs" that are nearly or already commercialized (generative A.I., vaccines, lab-grown meat).  

The list also contains breakthroughs that are likely years or decades away from practical applications (reversing death, synthesizing life, small nuclear reactors).

But all of the breakthroughs are potentially society-changing, and most get little attention from the media.

The 10 Breakthroughs are:

1. The Generative-AI Eruption: A new dawn in how we build
2. The Power to Reverse Death (Kind Of): Organs revived in dead pigs
3. The Power to Synthesize Life (Kind Of): Mouse embryos "born" without sperm or egg
4. The Vaccine Cavalry Is Coming: Novel therapies for malaria and all influenza strains
5. A Snapshot of the Beginning of Time: Images of the first galaxies in the universe
6. 'Unheard of' Advances in Fighting Cancer: Miraculous treatments and an at-home test
7. The Obesity-Therapy Surge: Weight-loss medication that actually works
8. Cracking the Case of Multiple Sclerosis: And learning something important about the phenomenon of "long viruses."
9. Legal Lab Meat: A regulatory first
10. New Toys for the Green-Energy Revolution: Smaller nuclear reactors and bigger geothermal breakthroughs

In case you were wondering, the reason the recent fusion announcement by the Lawrence Livermore National Laboratory is not included is the news was released after this article was written. Otherwise, it would have been a shoe in the make the list.

They also have an accompanying podcast on the Plain English podcast with Derek Thompson (the article's author) for those who'd rather listen to the story.

There's way too much here to cover in a blog. So read the article or listen to the podcast (we did both) for more information.  

One-Third of U.S. Business Use independent Contractors

The U.S. Government Accountability Office (GAO) recently released Nonstandard and Contracted Work Arrangements, a study looking at nonstandard work arrangements by U.S. companies.

As the study chart below shows, 33% of firms responding to the 2020 Annual Business Survey reported they used contractors, subcontractors, independent contractors, or outside consultants.

These results are not surprising.

IRS data shows that there's been a long-term shift to contract labor by small businesses. And many studies show that a majority of big companies use contingent labor.

Echoing those studies, the GAO also sampled annual financial reports submitted by S&P 500 companies in 2021.

They found that 89% of the companies in their sample mentioned using contractors in their annual reports.

The shift to nonemployee labor by firms large and small has been going on for years. It's a trend we are forecasting to continue.

Why Firms are Adding Digital Nomad Policies

According to the 2022 MBO Partners Digital Nomad Study, the number of digital nomads in the American workforce surged 131%, to 16.9 million people between 2019 and 2022.

And as the study chart below shows (click to enlarge), the biggest surge in digital nomads came from traditional job holders.

The shift to remote work unleashed employees from their offices and desks, allowing many to become nomadic.

Unlike regular remote workers, who tend to stay in one place or shuttle back and forth between their home and a vacation retreat or a relative's house, digital nomads travel and explore while working.

This, unfortunately, can lead to legal issues, cybersecurity challenges, and tax problems.

And these issues can be expensive for firms and their employees.  

Fortune's 'Stealth workers' lying to their bosses about where they work are costing companies tons of money provides multiple examples of how firms can get into trouble by allowing their employees to work anywhere they want.

The biggest issue is that digital nomads can easily and accidentally create a new "permanent establishment" for their employer in the state or country where they're working.

That exposes the employer and the employee to the new jurisdiction's tax, regulatory, and employee compliance rules and laws.

In addition, since many digital nomads travel without their firm's knowledge, their employers may wind up breaking employment laws and regulations without any awareness that they are doing so.

The answer to these issues is to create a digital nomad policy. And all firms with digital nomads - which is most larger firms - should have such a policy.  

The Wall Street Journal's Work From Anywhere! (Well, Not Really) covers several companies that have added digital nomad policies. Key quote on Airbnb:

"Airbnb, which has as much skin in the free-range game as anyone, touts employees' license to "live and work anywhere." In practice, company policies keep roughly two dozen countries off limits. Stays in foreign countries can last no more than three months, and employees still need permanent addresses. So, not anywhere."

The Staffing Stream's Implement a Successful Digital Nomad Policy with These Best Practices provides a good starting point for creating a digital nomad policy.

And our Harvard Business Review article Your Company Needs a Digital Nomad Program goes into more detail on why they are important.  

The digital nomad trend will likely continue to grow. 

Because of this, firms of all sizes need to be aware of the risks associated with digital nomads - and have policies to mitigate these risks.

Deloitte on the Canadian Gig Economy

Deloitte's The Gig Economy is Here to Stay provides an overview of the Canadian gig economy.  

The chart below (click to enlarge) contains the key data: about one in three Canadian workers use the gig economy to generate income.

This is similar to the workforce share of gig economy workers in other developed economies.  

Deloitte provides four broad trends driving participation in the gig economy. These are:

1. Older workers are delaying their retirement.
2. Younger workers (Gen Z and Millennials) are seeking more flexible work arrangements.
3. Worker perceptions around long-term employment are changing.
4. More people are looking to supplement their income with alternative work.

We certainly agree that these trends are helping to drive the growth of independent work and the gig economy.

See Deloitte's report for more information on the Canadian gig economy.

The Creator Economy has a Middle Class - Thanks to Traditional Jobs

If you read about, participate in, or study the creator economy, you'll quickly learn that while a small share of independent creators earn a lot of money, most earn very little. 

Harvard Business Review's The Creator Economy Needs a Middle Class nicely covers this.

The HBR article's author, venture capitalist Li Jin, was also recently quoted in Fast Company's Web3 investor Li Jin thinks a Universal Creative Income can help bolster the 'passion economy' on this topic. Key quote:

"The creator economy follows this extreme power law curve where a very small sliver of creators were able to make a living ... Most creators exist in this state of precarity and are barely earning anything ... the vast majority of creators were just kind of scraping by earning a little bit of income here and there."

And data from the 2022 MBO Partners State of Independence study backs this up.

This study asked independent digital content creators (freelancers, self-employed, etc.) about their creator economy earnings.

The results fit with Jin's assessment of creator economy income. Key quote from the study:

"32% of Independent Creators make less than $5,000 annually, while only 10% make more than $100,000. About one-third (36%) report making between $5,000 and $30,000, while 22% make $30,000-$100,000."

In other words, about two-thirds of independent content creators (68%) report earning $30,000 or less from their creator economy work.

But the MBO Partners study also surveys Americans with traditional jobs.

And it turns out that about 17% of traditional job holders report they work in the creator economy. This equates to about 25 million Americans.

About half (47%) of this group report working full-time in the creator economy, with the other half (53%) saying they work part-time.

The chart below shows the reported income distribution for full-time creators with traditional jobs.

There isn't a standard definition of the middle class. But Pew Research defines "middle class" households as those earning $52,000 to $156,000 annually in 2020 dollars for a household of three.

This is not a perfect comparator with the MBO Partners data above. The MBO Partners data is for a single job, and the Pew data is for a household of 3 (many of which have two incomes). But it's a good enough comp for a blog post.

And according to Pew, in 2021, 29% of American households were lower income, 50% middle income, and 21% upper income.

After adjusting for the two income issue with the Pew data, this is similar to the MBO Partners data on full-time creators.

So there is a creator economy middle class. But its members mostly have traditional jobs.

We'll have more on the creator economy in the near future.  Emergent Research (that's us) worked with MBO Partners on this study.

The Number of U.S. Independent Workers Continued to Surge in 2022

MBO Partners released the 2022 edition of their ongoing State of Independence study series. Emergent Research (that's us) works with MBO Partners on this study.

The key finding is that the number of independent workers (freelancers, gig workers, independent contractors, etc.) reached 64.6 million, up 26% over 2021's 51.1 million.

As the study chart below shows (click to enlarge), the number of U.S. independent workers is up 57% since before the pandemic. This is despite a pandemic-induced decline in 2021.

What is also quite noticeable in this chart is that the total number of independent workers grew relatively slowly between 2015 and 2019.

This raises the question, has the pandemic - and the related shift to remote work - resulted in a growth inflection point for independent work?

We believe the answer to that question is yes. And there are both supply and demand reasons why.

On the supply side, workers are seeking to take greater control of their destiny, exercise a sense of agency, and build strong connections between their work and personal purpose.

On all these fronts, working as an independent - either part or full-time - can be a path to empowerment and self-realization. And more Americans are choosing this path.

On the demand side, firms of all sizes are increasing their use of independent talent to access specialized skills and improve business flexibility and agility.

But while we think we've reached an inflection point, independent worker growth will likely not continue at the torrid pace of the past two years.

We're forecasting that the growth rate will slow to 5%-7% next year. This is still quite fast by labor market standards.

We'll be covering other key findings in the coming weeks.

See the study microsite for more information. And click here to download the 2022 MBO Partners State of Independence report.

Why Being Anti-Fragile is Important for an Entrepreneurial Mindset

MIT Management's 3 traits of an entrepreneurial mindset covers the key traits that define an entrepreneurial mindset, no matter the environment.

Key quote on an entrepreneurial mindset:

An entrepreneurial mindset helps leaders create value by "recognizing and acting on opportunities, making decisions with limited information, and remaining adaptable and resilient in conditions that are uncertain and complex," said Rowena Barrett, pro-vice-chancellor for entrepreneurship at the Queensland University of Technology.

The three traits are:

1. Solutions-oriented
2. Adaptable
3. Anti-fragile

We liked their description of anti-fragile, which is spelled out in the chart below (click to enlarge).

We've studied and worked with start-up founders, small business owners, and other types of entrepreneurs for over 20 years.  

And what we've learned is that the one trait that almost all of them have is being anti-fragile.  

What the Crypto Winter Means for Web3

Crypto has had fraud and scam problems from its beginning. We covered these in-depth earlier this year.

Also, crypto markets crashed last spring, with Bitcoin prices falling to their lowest levels since 2020. Other crypto coins and token prices fell even more.

But the FTX cryptocurrency exchange's implosion and bankruptcy is an even more significant blow to crypto than prior acts of fraud and price volatility. 

This is because FTX was seen as a source of stability in the uncertain world of cryptocurrencies.  

Key quote from the New York Times article Here's the Latest on the FTX Collapse:

FTX's implosion sent shock waves through the crypto and financial communities. Numerous funds and crypto start-ups were entangled with FTX, which extended lifelines to other firms after the crypto market crashed in the spring.

So what does the crypto winter (some are calling it a crypto ice age) mean for Web3?

Axios' Web3 is in FTX's Blast Radius points out that:

Web3, at its heart, is all about using blockchains and crypto tokens as tools for organizing decision-making, governance, and financial incentives in every realm of human endeavor — from virtual world-building to social networking and from accounting to art-making.

But to accomplish any of this, Web3 and crypto firms will have to show that they can add value while at the same time significantly reducing the industry's fraud and scam problems.

We first covered Bitcoin in 2013 and blockchain in 2015.  

We also covered a wide range of potential blockchain applications in 2017. But it's five years later, and none have come to fruition.

We're not ready to give up on Web3. We continue to think Web3 technologies will eventually produce useful applications.

And just as many other technologies went through "winters" and successfully emerged - the Internet, A.I., etc. - we think Web3 will, eventually, work through the problems.  

But the promises will be less grandiose, and the applications grounded in reality.

Another Strong Month for New Business Applications

The October Business Formation Statistics were released by the U.S. Census last week.

And as the Census chart below shows (click to enlarge), there were 432,934 new business tax I.D. applications in October.  

Business applications took off in Q3 of 2020, and in 2022 they've run at a rate about 43% higher than pre-pandemic.

Retail trade, which includes ecommerce firms, and professional services, continue to be the top two applications categories.

Also continuing is the shift to solopreneur business applications instead of employer business applications. 

We're going repeat ourselves and point out that new business applications ARE NOT the same as new business startups.

Research by the U.S. Census and similar research by our firm indicates that about 18% - 22% of applications result in new businesses. So if you read that 432,000 small businesses were started in October, it's not correct.  

But by historical standards, 20% of 423,000 is still a lot of new businesses.  

The Polycrisis and Doomsday Scenarios

The recent Financial Times article Welcome to the World of the Polycrisis introduces the concept of the polycrisis. Key quote:

A problem becomes a crisis when it challenges our ability to cope and thus threatens our identity. In the polycrisis, the shocks are disparate, but they interact so that the whole is even more overwhelming than the sum of the parts.

The article is written by the noted economic historian Adam Tooze. His earlier article Defining Polycrisis - from crisis pictures to the crisis matrix includes the rather complex polycrisis chart below (click to enlarge). 

It highlights seven crises and a wide variety of sub-crises and how they are linked.

The combination of multiple individual crises, coupled with these crises amplifying each other, leads to a polycrisis.  

Not everyone agrees that the polycrisis is a new thing. 

Quartz's The Case Against Polycrisis points out that throughout history, the world has had many problems simultaneously.

But it's hard to argue with former US Treasury secretary Lawrence Summers who is quoted in the Financial Times article:

"This is the most complex, disparate, and cross-cutting set of challenges I can remember in the 40 years that I have been paying attention to such things."

While on the topic of crisis, the Washington Post's Asteroids! Solar Storms! Nukes! Climate Calamity! Killer Robots! covers doomsday scenarios.

These are even worse than the polycrisis in that doomsday scenarios would likely lead to the extinction of humans.

The article has a list of the top 10 doomsday scenarios:

10. Solar storm or gamma-ray burst.

9. Supervolcano eruption.

8. Asteroid impact.

7. Naturally emergent or maliciously engineered, pandemic plant pathogen affecting staple crops.

6. Naturally emergent or maliciously engineered pandemic human pathogen.

5. Orwellian dystopia. Totalitarianism. Endless war paraded as peace. The human spirit crushed. Not a world you'd want to live in.

4. Cascading technological failures due to cyberattacks, reckless development of artificial intelligence and/or some other example of complex systems failing in complex ways.

3. Nuclear war (may jump soon to No. 1).

2. Environmental catastrophe from climate change and other desecrations of the natural world.

1. Threat X. The unknown unknown. Something dreadful but not even imagined. The creature that lives under the bed.

Since we're forecasters, we don't worry about doomsday scenarios in our work. If one were to happen, we'd be out of business.

But the polycrisis - whether new or not - is something we deal with daily.

And we agree with Larry Summers. This is the most complex set of issues and problems we've seen in our decades of doing forecasts.  

What the Department of Labor's Worker Classification Guidance Means for Independent Work

Last month the  Department of Labor (DOL) announced it's releasing new guidance to help determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.

The announcement got a lot of press coverage, most of it saying the new guidelines will make it much harder for companies to classify workers as independent contractors. Examples include:

• Wall Street Journal's Biden Rule Would Add More Gig Workers to Company Payrolls
• New York Times's Biden Proposal Could Lead to Employee Status for Gig Workers
• NPR's Labor Department proposal could change gig worker and company rules

But - and this is a big but - the new guidance basically returns the guidance to where it was under the Obama administration. Key quote from the Wall Street Journal article on the proposed guidance:

"It would replace a Trump-era rule—completed just days before the Biden administration took office—and return to an approach favored by the Obama administration."

In other words, the guidance is reverting back to what it was between 2008-2019. 

In case you weren't following independent work and the gig economy between 2008 - 2019, it grew dramatically. So going back to an approach favored by the Obama administration is unlikely to have a major impact on independent workers. 

Bloomberg's Uber, Lyft Shares Fall on Possible Changes to How Gig Workers Are Classified also points out:

"Companies had anticipated the Biden administration would reinstate the Obama-era guidance on the classification, and the proposal didn't come as a surprise, according to Tom White, an analyst at DA Davidson & Co. "It has no immediate changes to anything related to how companies operate their business," White said. "It's a proposal that in some ways can be viewed more like a conversation starter."

So don't expect significant near term changes in the gig economy based on the new guidance.

But having said that, all the press saying it will have an negative impact on the gig economy, will have an impact.  And that impact will likely be companies - and their lawyers - choosing to be more conservative about the use of nonemployee labor.

But this will be a relatively minor impact.    

The legal issues around worker classification, the DOL's role, and why the new rules aren't going to have a major impact are too long and complicated for this blog post. So we're not going to cover them here.

For those interested in more depth on this topic, we recommend the Independent Contractor, Misclassification, and Compliance blog. 

Their article THE LABOR DEPARTMENT'S INDEPENDENT CONTRACTOR RULE HAS LITTLE IF NO LEGAL IMPACT BUT IS LIKELY TO CAUSE ANXIETY FOR MANY STAKEHOLDERS covers this topic in-depth.

The article's title, in our opinion, also nicely sums up the impact of the new guidance.

Ford Targets VanLifers With Their New Transit Trail Van

Ford recently announced the Transit Trail, a variation of their popular Transit commercial van targeted at VanLifers and others wanting a camper van.

The Ford Transit Trail's design makes it easy to customize and add things like shelving, cabinetry, and beds. 

Car and Driver magazine describes the Transit Trail as:

Essentially a factory-built camper van base, the Transit Trail comes with key elements that vanning aficionados want, such as swiveling front seats, an onboard AC inverter, an over-cab storage compartment, dual alternators, and a fuse panel, all backed by Ford's warranty.

The Transit Trail is also off-road ready with four wheel drive, an uplifted body, and large tires.  

Buyers can customize the Van themselves or get custom conversions via the Ford Pro network of upfitters and interior installers.

The Transit Trail starts at around $65,000, but Ford claims that due to the design and features of the Van, customization is much easier and cheaper than other options.  

As their video below shows, Ford is targeting VanLifers- digital nomads that travel, live and work in RVs, vans, or other vehicles converted into roaming residences.

This is a large and growing market segment.

According to the 2022 MBO Partners study, The Aspirations and Reality for Digital Nomads, there are 3.1 million VanLifers in the U.S.  

This is up from 2.6 million in 2021 and 1.9 million in 2020.

We expect the VanLife segment to continue to grow.  And one reason is the growing support ecosystem for VanLifers, including companies like Ford releasing products making it easier to be a VanLifer.  

See our Digital Nomad section for more on this topic.

Emergent Research (that's us) worked with MBO Partners on the abovementioned study.

There are Millions of Aspiring Digital Nomads

The digital nomad trend has long attracted lots of press and a strong social media following.

Popular digital nomad and #VanLife blogs, videos, and Instagram accounts have created a spectator sport inspired by idyllic pictures and videos of happy digital nomads in exotic locations. 

This media coverage, combined with the shift to remote work, and the desire by many to travel, has resulted in millions aspiring to become digital nomads.

Each year, as part of the MBO Partners digital nomad study series, we ask adult Americans who aren’t digital nomads if they plan on becoming digital nomads over the next 2-3 years.

In 2022 the results project to 25 million saying they will and 48 million saying maybe.

This is a 12% increase compared to 2021 in the number of Americans saying they will or may become digital nomads over the next 2-3 years - and a 33% increase compared to 2019.  

We call this group "armchair digital nomads."  

The reason is our studies indicate only about 8% to 11% of those saying yes or maybe will follow through and become nomadic.

The vast majority will continue to follow the exploits of other digital nomads instead of becoming one themselves. 

However, this data shows how extensive the interest is in this lifestyle.

It also shows how the shift to remote work, especially for traditional jobholders, is making the idea of becoming a digital nomad even more popular.

Which is one reason why we are forecasting continued growth in the number of digital nomads.  See The Aspirations and Realities for Digital Nomads for more on the digital nomad trend.

Emergent Research (that's us) worked with MBO Partners on this study.   

Independent Influencers Driving the Growth of Social Commerce

Social commerce happens when consumers - and business buyers - discover and purchase products through social media and content creation platforms.  

And as McKinsey explains in Social commerce: The future of how consumers interact with brands, it's taking off in the U.S. 

As their chart below shows (click to enlarge), social commerce is expected to grow from $45.7 billion this year to $79.6 billion in 2025.

Social commerce is being driven by social media and content creation platforms such as TikTok, Instagram, Pinterest and others.  

These platforms have added shopping features that allow in-app shopping, including purchases.  

And independent influencers and content creators leverage these platforms to reach and monetize their audiences.  

McKinsey covers two types of independent influencers that are part of the social commerce sales and marketing mix:

1. Key Opinion Leaders have large numbers of followers and fans and are either celebrities and/or experts in their field. Highly professional, they are also skilled marketers that can sell millions of dollars of products in minutes and make new products trendy overnight. Think Kim Kardashian or Mr. Beast. 
2. Microinfluencers drive social commerce through organic, word-of-mouth recommendations to their networks. Many receive commissions or are paid directly by the brands. But some get free products or early access to new products.  

We first covered social commerce in 2014. Back then, social ecommerce companies, such as Stella & Dot, recruited independent workers to be brand ambassadors and commission salespeople.

In most cases, the business models were similar to multi-level marketing companies such as Tupperware. And these independent salespeople mainly marketed to their friends and families.  

But thanks to the rise of the creator economy, many consumer companies - and a growing number of B2B firms - have influencer programs designed to incent independent influencers to help sell their goods and services.

These programs also allow independent influencers to extend their reach well beyond friends and family. which means they can build larger and more sustainable businesses.  

Walmart, for example, has created the Walmart Creator Program. Key quote from the program's landing page:

Walmart is where you shop to save. Now, it's where you create to earn. Walmart Creator is a platform designed to help you monetize your content, grow your business as a creator, and keep you inspired every step of the way.

Selling merchandise (referred to as "merch" in the creator economy) has become one of the most popular creator economy income streams. And its popularity - both with creators and consumers - will likely continue to grow.

Generative A.I. - Tech's Newest Next Big Thing

Step aside crypto, Web3 and the metaverse. Generative A.I. is being touted as tech's next big thing.  

So what is generative A.I.?

The New York Times article A Coming-Out Party for Generative A.I., Silicon Valley's New Craze defines it as:

"... the wonky umbrella term for A.I. that doesn't just analyze existing data but creates new text, images, videos, code snippets and more."

The venerable venture capital firm Sequoia's excellent white paper Generative A.I.: A Creative New World describes it as:

"Up until recently, machines had no chance of competing with humans at creative work—they were relegated to analysis and rote cognitive labor. But machines are just starting to get good at creating sensical and beautiful things. This new category is called "Generative A.I.," meaning the machine is generating something new rather than analyzing something that already exists."

Image creation is the generative A.I. application that's getting the most attention.  

The New York Times article covers the startup Stability AI. which recently raised $100 million.  

They built Stable Diffusion, a popular open-source image generator - which is software that turns text prompts into images. The image below was developed using Stable Diffusion.

The picture is derivative, but we think it's quite interesting.  

But generative A.I. is not just for art and images.  

According to Sequoia, generative A.I.'s top application areas include writing code, copywriting, gaming, media/advertising, design, and social media.

Sequoia also says that "generative A.I. has the potential to generate trillions of dollars of economic value."

Our firm uses machine learning tools and a few other types of A.I. in our work. But we haven't worked with generative A.I.

However, we're planning to start by becoming a user of one of the generative A.I. text creators - likely Jasper.

We'll let you know how it goes. And maybe with a post written by a generative A.I.  

The Number of American Digital Nomads Increased 131% Since 2019

The 2022 MBO Partners digital nomad report - The Aspirations and Realities for Digital Nomads - reports that 16.9 million Americans describe themselves as digital nomads.

This is an increase of 9% in 2022 and a 131% increase from 2019 (click on the study charts below to enlarge).

The shift to remote work is the primary driver of this growth. This has unleashed traditional jobholders from their offices, more than tripling their numbers since 2019 and reaching 11.1 million in 2022.

In addition to the pandemic-induced shift to remote work, several other factors are driving the growth of digital nomadism:

• Many organizations are allowing their employees to become digital nomads: Corporations have been hesitant to allow their employees to become nomadic. This is changing, and many companies have announced plans and policies that enable employees to become digital nomads. And, as this study's data shows, many are doing it.
• Countries and cities worldwide are vying for digital nomads: Towns and countries have discovered that digital nomads provide more economic benefits than traditional tourists. Because of this, many are creating incentive programs and special visas to attract digital nomads. 
•  A growing support industry is making it easier to be a digital nomad: The size of the digital nomad market has reached the size and scale that a wide variety of products and services are tailored to their needs. Digital nomads also benefit from products and services targeted at remote workers.
• Remote work technology and methods continue to improve: The shift to remote work has resulted in massive investments in remote work tools and technology. Firms are also learning to productively utilize remote workers and effectively include them in their teams. Digital nomads - intensive users of remote work technology - benefit greatly from these advances.

Despite the considerable increase in the number of digital nomads since 2019, growth slowed in 2022 to 9%. 

This was not surprising.

With the pandemic easing, life and work started to return to normal, and more workers were expected to show up at the office - at least a few days a week.

Also, the number of American digital nomads has reached a size where the growth rates of 2020 and 2021 were no longer sustainable.

But the outlook for continued growth is excellent.

People want to travel, awareness and interest in digital nomadism are growing, and the shift to remote work will continue to be a powerful enabler.

See the report for more information, including digital nomad attitudes and motivations, challenges and demographics.

Emergent Research (that's us) worked with MBO Partners on this study.