Small Business Labs

Each Year a Lot of Americans Start and Stop Being Freelancers

One of the more interesting findings from the 9 years of data from the MBO Partners State of Independence study series is how many Americans enter and exit independent work.

As the study chart below shows (click to enlarge), the number of new full-time independent workers/freelancers entrants has stayed steady at around 1.5 million annually since 2011.

But the number of people exiting has varied widely. In 2012, only about 800,000 exited, but in 2016 2.4 million did. And since 2016 the number of exits has steadily declined.

The main reason the entrants' data is consistent is the aspirational nature of self-employment. Simply put, millions of Americans want to be self-employed.

Every year MBO Partners has done this survey between 12%-14% of Americans who aren't self-employed said they plan on becoming self-employed over the next couple of years. 

And while most won't, each year about 1.5 million take the plunge and become self-employed full-time.

The reasons people exit independent work is more complex and tied to cyclical economic forces and the state of the traditional job market.  

Early in the economic recovery, relatively few independent workers exited. This was because there were few alternatives since the traditional job market was relatively weak.

But as the job market gain strengthed, a growing number of independent workers returned to traditional employment.

This was especially true for the group we call "reluctant independents", which are independent workers who report preferring a traditional job. 

In fact, over the past five years, our research has found that four out of five independents who left the full-time independent workforce were reluctant independents. This resulted in the percentage of reluctants falling from 34% of full-time independent workers in 2012 to just 19% in 2019. 

The declining number of reluctants is also why the number of exits peaked in 2016 and has declined since. There are simply fewer reluctants left to exit. 

Going forward we anticipate the number of new full-time entrants to continue to run in the 1.5 million range. 

We also expect the number of exits to continue to decline and drop below 1 million per year by 2021. 

This forecast assumes the economy continues to slow (2020 GDP in the 1.5% range and 2021 in the 2% range), but doesn't all into a recession. 

We'll have our recession outlook in another article in the near future.

The Pros and Cons of Working Remotely

Recode's How remote work is quietly remaking our lives provides a deep dive on the growing impacts of the shift towards working remotely. Key quote:

"The changes remote work has introduced have happened so gradually you may not have noticed. But its growing popularity is remaking how we work, the tools we use to work, how we communicate at work, and even the hours we work ... What was once a rarity among a select set of workers is quickly becoming a defining feature of the future of work."

The pros and cons of remote work are well known, but the article chart below nicely summarizes them. The underlying data comes from a remote worker study done by the social media marketing firm Buffer.

The big pro is, of course, flexibility.

We cover the importance of flexibility a lot (if you do a Google search on "flexibility "Small Business Labs"" you will find 3400 citations).

But it still needs reinforcing -  it's a key driver of both the shift to remote work and the rise of independent work.  

We also certainly agree remote and distributed work is a defining feature of the future of work.

And to better understand this trend, we closely follow two remote work edge groups - digital nomads and fully remote organizations.

Digital nomads can be thought of as remote workers on steroids. Because they're both remote and nomadic, they tend to have advanced methods for work remotely - including how they use technology. 

Fully remote organizations are also on the leading edge of remote work because, well, all of their employees are remote. 

While reading the Recode article we were struck that remote work is a great example of Amara's Law, which is:

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Back during the first Internet boom in the 1990s one of the most common forecasts was that very soon everyone would work remotely. This, obviously, didn't happen. 

But 2 decades later, it's starting to happen.

Upwork Study: Freelancing Providing Opportunities to Those Unable to Work in Traditional Jobs

Upwork released their 2019 Freelancing in America study. It's the 6th year Upwork has conducted this study. 

The study found about 57 million Americans are freelancing. This equates to 35% of the workforce. 

One of the most interesting study findings is that almost half of all freelancers report they are freelancing because their personal circumstances don't allow them to hold down a traditional job.

As the study chart below shows (click to enlarge), health issues and family obligations are the two main reasons people report not being able to work in a traditional job.

These findings illustrate the importance of the "low friction, highly flexible" work options freelancing provides. 

Low friction means it's quick and easy to start earning money as a freelancer, especially with the advent of online marketplaces like Upwork, Airbnb, Etsy and Uber. 

Highly flexible means freelancers can work as little or as much as they want or need and when they want or need.  This means freelancers can fit work in around other activities, including schedule limitations due to health or caregiving responsibilities. 

We've long pointed out that many people need greater levels of schedule flexibility than is provided by traditional jobs. 

This is especially true for those needing to work part-time to supplement their income. 

More broadly, flexibility is almost always the top reason people become and like being a freelancer. And Upwork's study again found this, with over 3 out of 4 freelancers listing this as a major reason they are freelancing.

Many critics of freelancing say flexibility is overrated or doesn't really exist, especially for gig workers who get their work via online platforms and marketplaces.

We tend to believe freelancers and gig workers over these critics.  And they consistently tell us work flexibility is both important to them and real. 

Uber Enters the Staffing Business

Last week Uber announced Uber Works, a platform that connects workers with businesses that need to fill available shifts in hourly jobs such as cooks, warehouse workers, commercial cleaners and events staffing. 

Uber's chart below (click to enlarge) provides their quick description of the service.

Uber is partnering with staffing firms for this effort. The staffing firm partners will employ, pay and handle worker benefits.

This, of course, means Uber will not have to deal with the employee classification or other legal issues they faces in their ride hailing business.

Uber betting that their technology will provide value to workers, the companies that employ them and the staffing agencies that place them. 

They point out in their blog post announcing the service that temp workers currently struggle with rigid scheduling and a lack of information on what jobs are available and how much they pay. They claim Uber Works will fix these problems. 

For businesses, Uber says they can provide a broader pool of potential temp workers and simplify the hiring and payment of these workers. Staffing firms benefit from more placements and better information flow.

Uber's obviously not the only company offering this type of platform.

Wonolo, Snag and Moonlighting all have similar platforms in the sense that they offer businesses access to shift workers. 

Also, Shfitgig, which recently pivoted away from connecting workers to jobs, now offers staffing firms a technology platform that claims to provide many of the features Uber is offering. 

And, of course, several of the large staffing firms are trying to provide similar online staffing platforms.

This includes Uber's first staffing firm partner, True Blue. Their platform, Job Stack, seems to be quite similar to Uber Works. 

So there's a lot of competition for Uber Works.

But the market is also huge. According to the Staffing Industry Analysts, the global staffing industry generated $490 billion in revenue in 2018. 

This, coupled with Uber's brand recognition and technology skills, means they could easily be successful.

Uber Works is currently only available in the Chicago area. Uber says they will roll it out to more cities in the near future. 

MetLife Study: 45 Million U.S. Gig Workers and 85% of them interested in Continuing as Gig Workers

MetLife recently released The Gig Economy: Opportunities, Challenges, and Employer Strategies. Key quote from the study press release:

The report’s findings demonstrate the fundamental impact gig work is having on the American workforce in the changing work-life world, as employees are increasingly drawn to the allure of flexibility, autonomy and desire for purpose in their work.

The study is well done and found, like almost every other study of independent work, that the independent workforce (freelancers, self-employed, gig workers, etc.) is large and most independent workers want to continue as independent workers.

Key quote from the study report:

Today, almost 30 million Americans get their primary income from gig work, constituting nearly a fifth of the total workforce. An additional 15 million workers supplement “traditional” full-time work with “gigging/freelancing.” This number keeps growing, as many of the best and brightest workers turn to gig for their primary employment.

Another key quote is on why people like independent work:

“Our research shows that workers are turning to gig in the pursuit of creating the ultimate work-life blend where their careers meet income needs, provide a flexible schedule, and also give them a sense of purpose”

At this point, we think we've reported on well over 100 studies showing that the independent workforce is large and most independent workers are satisfied with being independent.

These studies have come from a wide variety of sources - government agencies, academics, think tanks, consulting firms, and companies. 

And despite the roughly 14 years we've been researching the independent workforce, we are not aware of a single, reputable study not showing that the independent workforce is large and most independent workers are satisfied with being independent.

So, you may ask, why are we bothering to repeat ourselves and report on these results?

The reason is we regularly read in the press and have people tell us the independent workforce is small and most independent workers would prefer a traditional job.

This despite the overwhelming evidence this isn't true. 

So we'll keep pointing to these studies until this changes.

The Economic Impact of Craft Brewing

The Brewers Association recently released their small and craft brewing economic impact report for 2018. 

The study found that the craft brewing industry contributed $79.1 Billion to the U.S. Economy in 2018 and provided directly and indirectly about 550,000 jobs. 

These numbers are based on what are called economic multipliers, which are used to measure both the direct and indirect impact of economic activity.

For example, the employment multiplier for auto factory workers is about 7. This means for every auto factory job gained or lost, 7 other jobs are gained or lost. These occur in suppliers to the plant as well as places where auto workers spend their money. 

As the chart below shows (click to enlarge), the number of actual jobs at breweries has grown quite rapidly, to 77,902 in 2018 from just 24,864 in 2010. 

This means brewing was one of the fastest-growing sources of employment during that time.

We've long used craft brewing as an example of the rise of niche businesses. We even featured the industry in a 2008 research report, The New Artisan Economy, which we did with Intuit.

And the three broad trends we laid out in the New Artisan Economy report as driving the growth of niche businesses continue to do so:

1. Growing numbers of customers are looking for unique, unusual, personalized or locally produced products.  

2. The Internet and online marketing have made it much easier to find or be found by people interested in buying niche products.  

3.  Technology is lowering the costs of serving niche markets and making artisans able to compete with even the largest of firms.  

7.3 million Americans Describe Themselves as Digital Nomads

MBO Partners this week released Digital Nomads: Leading the Shift to Remote and Distributed Work. The key finding of this study is 7.3 million Americans identify as digital nomads. 

Digital nomads are people who choose to embrace a location-independent, technology-enabled lifestyle that allows them to travel and work remotely, anywhere in the world.

There are many kinds of digital nomads. Some are nomadic for relatively short periods of time. Others travel for many years.

Some regularly move across countries and continents.

And yes, some really do sip Mai Tai's on the beach in Bali while banging away on their laptops.

But others never cross a border, choosing instead to live and work while exploring a single location or country (#VanLifers, for example).

What unites them is their passion for travel and new experiences and their commitment to working remotely. 

One of the more interesting study findings is 44% (3.1 million) of the digital nomads report having a traditional job. This is a clear signal that employers, at least in some cases, are willing to allow traditional employees to be digital nomads. 

Other findings include:

• Digital nomads tend to be younger and male, but all age groups are represented: 39 percent are female and 41 percent are 40 years old or older.
• Most digital nomads report being highly satisfied (79 percent) or satisfied (9 percent) with their work and lifestyle.
• Most also report either being very satisfied (35 percent) or satisfied (44 percent) with their income.
• Digital nomads work in a wide variety of fields, ranging from consulting, coaching, and research (13%) to sales, marketing, and PR (also 13%) to other remote-friendly fields like information technology (11%) and creative services (9%). 

As we've found in the past, a lot of Americans would like to be digital nomads. 16.1 million said they plan on becoming digital nomads over the next 2-3 years and 41 million said they may become one.

Of course, relatively few of these people will do so.

The vast majority will continue to be what we call "armchair digital nomads" - folks that follow the many blogs, Instagram accounts and related digital nomad media but don't become one themselves.

We're interested in digital nomads (we worked with MBO Partners on this study) because they are on the leading edge of remote work. This makes them an ideal group to study to better understand the future of distributed work and the technologies that support it.  

See the report for more details. 

See our digital nomad section for more coverage of digital nomads.

Is AB5 the End of the Gig Economy? The Quick Answer: No

California recently passed AB5, a law that changes how workers are classified.

AB5 establishes an “ABC” test to decide whether or not a worker is an employee or a contractor. The law starts with the assumption that everyone is an employee. To be considered an independent worker, a worker must:

1. Be free of the hirer’s control; and
2. Do work that is “outside the usual course of the hiring entity’s business”; and
3. Be established in a trade similar to the work being performed.

This is a more stringent set of rules than was in place prior to AB5 (for those interested in legal geekery, the prior rules are referred to as the Borello factors).

Many are suggesting that AB5 will result in the end of the gig economy and gig work.

This is not correct.

First, AB5 has a long list of professions that are exempt from the law (see the end of the article for the list). 

We’re still crunching the numbers, but based on the work we’ve done so far we think well over 50% of all independent workers in California fall under the exemptions.

Second, many gig economy companies (Uber is a good example) are claiming their independent contractors pass the ABC test. So until the courts say otherwise, independent workers associated with these firms will remain contractors.

Also, many industries and professions are still clamoring for exemptions. And since both the California legislature and Governor have said they’re open to making changes in the law, we expect the number of exemptions to increase.

And finally, the legislation is quite vague in places. This means the courts will be required to decide exactly who is and is not an independent worker. This will take time.

The bottom line is we won’t know the full impact of AB5 for some time – maybe even a couple of years.

But we do know it won’t kill independent work or the gig economy.

In case we haven't convinced you, we suggest you look at Massachusetts and New Jersy. They've had worker classification laws in place using the ABC test for years.

Despite that, the gig economy is doing just fine in those states.

We’ll have more on AB5 in the near future.

AB5 Exemptions

The fully exempted professions include:

A physician and surgeon, dentist, podiatrist, psychologist, or veterinarian licensed by the State of California.

A lawyer, architect, engineer, private investigator, or accountant.

A securities broker-dealer or investment adviser or their agents and representatives

A direct sales salesperson (includes those involved in multi-level marketing and social selling)

A commercial fisherman

Sub-contractors in the construction industry  

Subcontractors providing construction trucking services

Real estate agents

Additionally, many “professional services” providers are exempted if they meet certain requirements (see the actual bill if you’re interested in these details). These include:

Marketing services, broadly defined

Human resources services

Travel agent services

Graphic design services

Grant writers

Fine artists

Services provided by an enrolled agent

Payment processing agents

Services provided by a still photographer or photojournalist (does not include TV or motion picture industries or professions)

freelance writers, editors, or newspaper cartoonists

estheticians, licensed electrologists, licensed manicurists, licensed barbers, or licensed cosmetologists

Business service providers that contract to provide services to another such business are also exempt.  

The legislation is quite vague in its definition of “business service provider,” so the courts will have to sort out exactly who is exempt. But it seems likely most independent workers who provide a service to a business will be exempt from AB5.

What WeWork's Troubles Mean for the Coworking industry

WeWork's troubles seem to be going from bad to worse.

They lowered their target IPO valuation from their last private funding round value of $47 billion to under $20 billion - and maybe as low as $10 billion.

But after reading about WeWork's huge losses and highly questionable corporate governance practices in their S-!,  even that wasn't enough to attract investors. So they postponed their IPO. 

And this weekend various media outlets are reporting WeWork's board is considering replacing their flamboyant CEO, Adam Neumann. 

But despite WeWork's woes, the coworking industry is doing just fine.

As we pointed out a few months ago, the coworking industry continues to surge and WeWork's problems won't change this. 

Coworking rapid growth has been driven by 3 waves of customers. The first wave consisted of freelancers and independent workers who were coworking's first customer base. Quickly following them were startups and micro-businesses. More recently large corporations have embraced coworking.

In other words, firms of all sizes and shapes are increasingly using coworking spaces. And going forward we also see a fourth wave emerging. This wave will be driven by niche and vertical market growth and geographic expansion. 

And despite coworking's recent rapid growth, it still has a lot of room to expand.

According to a recently released CBRE study, there currently is 71 million square feet of flexible office space in the 40 U.S. markets it studied.

This is just 1.8% of the office space in these markets.

CBRE is forecasting that this will grow to roughly 600 million square feet, which is about 13% of total office space, by 2030. 

Having said all that, WeWork's problems will impact the coworking industry. 

In the short run, there will be a lot of negative press and coworking's naysayers (and there are quite a few) will suggest the industry is not sustainable.

This will result in potential customers becoming hesitant about committing to coworking. This will be especially true for large corporations. 

But this will pass and WeWork's current struggles mean it will likely have to focus on profitability, which will be good for the industry in the long run.

It's also important to point out that while WeWork is the industry's largest firm, it is only 1 of over 700 coworking and flexible office space companies operating the U.S. 

So even in the unlikely event that WeWork fails, there are plenty of coworking firms ready to pick up the pieces.

Liza On-Demand, a Gig Economy Comedy

Liza On-Demand is a TV show that, according to its description: 

... follows the chaotic misadventures of Liza, a young woman in Los Angeles who is trying to make a career out of juggling various gig economy jobs — for lack of a better idea of what to do with her life.

We've only watched a few episodes, but we've seen Liza drive for Lyft, get hired via TaskRabbit to bake cookies, help someone move and kill a cat (she didn't do it). 

The show is on YouTube Premium and is free. The 2nd season of the show starts at the end of September. The show's trailer is below.

Liza On-Demand stars Liza Koshy, who is a comedian, actress, and YouTube star who boasts more than 17 million subscribers on her main channel. 

Ths show is produced by Above Average Productions, a digital-first entertainment studio. Their tagline is "slightly better".

We find the show interesting on several levels.

First, of course, is it's about the gig economy. You know a trend has entered the mainstream when their starts to be movies and TV shows about it.

Second is the rise of digital-first entertainment. 

The world of entertainment has changed and the traditional channels (TV, big-screen movies, radio) no longer control the industry. Digital and online entertainment are now near-equal partners to traditional channels.

And the 3rd reason is the rise of Internet stars. Koshy is an excellent example, having turned her YouTube celebrity into broader entertainment success.

All interesting cultural shifts and trends.

BTW, despite being well outside of the target demographic we liked the show.

 

Gig Economy an Important Income Source for Military Service Members

According to a survey from the National Foundation for Credit Counseling, military service members and their spouses are turning turn to the gig economy to supplement their income. 

Key quote from the study site:

The findings of this year’s survey are a clear indication that military households are turning to the private sector for supplemental income ... About half of active service members and their spouses have turned to the gig economy for additional income.

The exact numbers are 54% of active service members and 48% of military spouses/partners said they had worked in the gig economy to supplement their income.

A key reason they are turning to the gig economy - as the study chart below (click to enlarge) shows - is it's hard for military members and their spouses to get and hold on to a traditional job. 

Military personal move often and have irregular schedules. These schedule issues make it hard to hold down a traditional job.

However, the gig economy provides low friction, highly flexible work options that work well for those looking to supplement their income. 

In addition to those serving in the military, there are many people who are effectively shut out of the traditional job market due to scheduling issues and flexibility needs. These include caregivers, parents, students, those with chronic illnesses or disabilities and many others. 

As is illustrated by this study, many of these folks are turning to the gig economy to supplement their income.

Freelancers and Financial Well-Being

One of the ongoing questions around independent/gig work is its impact on the financial well-being of independent workers (freelancers, gig workers, self-employed, etc.). 

To better understand this issue, a series of financial well-being questions were added to the MBO Partners State of Independence study survey this year (Emergent Research works with MBO Partners on this ongoing study).

The new questions included a set developed by the U.S. Consumer Financial Protection Bureau (CFPB), which the CFPB uses to create an individual’s financial well-being score.

This score provides a standard metric that allows comparisons of financial well-being across individuals or groups.

The chart below (click to enlarge) is from the study's research brief, The Financial Well-Being of Independent Workers.

It shows that, on average, independent workers and those with traditional jobs report similar levels of financial well-being. The CFPB's 2017 study also had similar findings. 

However, as the research brief points out, "average scores don't tell the whole story."

Although the averages are the same, the score distribution for independent workers is wider than the distribution for traditional jobholders. 

In other words, a greater percentage of independent workers have both relatively higher and relatively lower scores than traditional jobholders. Key quote on what this means:

One of the broader findings of the MBO Partners SOI study series is that independent workers with in-demand skills and a tolerance for the risks associated with independent work are thriving. The well-being scores from this study reinforce this.

But the scores also reinforce the study findings that independent workers without these attributes ... often struggle financially.

See the research brief for more details. 

FROGs, WFA and Remote Work

As we pointed out yesterday, working remotely is increasingly common for both independent workers and those with traditional jobs. 

Two recent articles also point this out and add several new buzzwords to our remote work vocabulary.

The Harvard Business Review's Is It Time to Let Employees Work from Anywhere? points out there is a new form of remote work emerging which they refer to as "WFA" (work from anywhere). Key quote:

Even as working from home (WFH) becomes relatively commonplace, a new form of remote work is emerging: working from anywhere (WFA), in which employees can live and work where they choose, typically within a specific country, but in some cases, anywhere in the world with a reliable internet connection. While many companies are just starting to consider allowing employees to work from anywhere, developed WFA programs can be found at firms such as Akami and SAP.

The article goes on to cover examples of productivity gains associated with remote work. 

The second article, Medium's Here Come the Frogs (Fully Remote Organizations), is from earlier this year. 

This article covers the growing number of organizations that don't have offices or co-located employees. Instead, everyone works remotely. 

Key quote on the advantages of being a FROG from the CEO of Invision, a fully distributed company with over 1,000 employees:

David Fraga, COO of InVision said, “Being a fully distributed company has been a powerful advantage for us at InVision. We’re able to find and work with the best talent in the world, no matter where they are, we have a higher than average retention rate across our team and our products reflect a diversity of perspective and experience that comes from having teammates from all across the country and around the world.”

While there are relatively few large companies that are FROGs, a lot of smaller firms and teams of independent workers are fully distributed. 

Both articles cover the drivers behind the growth of WFA and FROGs, which are pretty much the same as we covered yesterday: 

• improvements in remote work enabling technology
• organizations realizing remote workers are effective
• the desire by many to work remotely

We've just finished up a study on digital nomads. Because of their location independent lifestyle and high levels of mobility, they provide interesting insights into the future of remote work. 

We'll be reporting on the study's findings in the near future.

See our Digital Nomad section for more on this topic. 

Working Remotely the Norm for independent Workers

According to data from the 2019 MBO Partners State of Independence study, 83% of full-time independent workers report working remotely at least some of the time, and 31% report working remotely full-time.

As the study chart below shows (click to enlarge), this is substantially higher than what traditional full-time job holders report. 

That full-time independent workers are more likely to work remotely than full-time traditional job holders is no surprise.

But that almost 1 in 3 three work remotely full-time is a bit surprising and illustrates the growing nomadic nature of work.

This is in large part being driven by improvements in the technology that support remote work.

Online video and chat services make it easy to connect and communicate with customers and partners, online content creation tools and cloud storage enable work to be done and delivered from remote locations, and online marketplaces provide remote access to new customers.

Another driver is the growing acceptance by hiring organizations that remote workers can be highly valuable and productive contributors. 

A 3rd driver is, of course, more people want to work remotely.

What Control Means to the Self-Employed

Our article yesterday covered a study showing how work autonomy and control resulted in mental health benefits for the self-employed. 

As a follow-up, the chart below (click to enlarge) is from the Freshbooks 2019 Self-Employment in America Report. It illustrates how those who are self-employed define control.

It comes down to control over the when, where, what and how of their work. The self-employed often have a lot of control over these factors.

This is why many choose and stay self-employed.

Key quote from the Small Business Trends article on the study 96% of Self-Employed Professionals Don’t Want “Regular Jobs”:

"Why do people ditch the financial and social security of their jobs to be self-employed?

The main reason, as found out in the survey, was control over career. Being self-employed or running a small business allows people to have a better career control."

And more control often leads to better mental health.

The Positive Mental Health Effects of Self-Employment

A recent academic study found that self-employed gig workers in the UK score higher across a range of psychological well-being measures than workers in the mainstream economy.

The study - The Effects of Self and Temporary Employment on Mental Health: The Role of the Gig Economy in the UK - found that gig workers are about 33 percent more likely to self-report positive traits in terms of mental health than those in traditional jobs.

The reason will come as no surprise to regular readers.

It's the autonomy, control and flexibility provided by gig work. 

Key quote from The Mental Health Benefits of Self-Employment, an article written by the study's researchers: 

Our preliminary conclusions point to the importance of autonomy in the workplace. The gig economy offers workers the opportunity for more control in their jobs, which may lead to more self-worth, more confidence and less strain...

For employees in the mainstream economy, heavy job requirements plus low autonomy equals a scenario with high occupational stress. 

We've long reported that work flexibility, autonomy and control lead to high levels of satisfaction among the self-employed.  Key quote from our 2013 article on this topic:

... those who create, manage and control their own work assignments, workplace and schedules reported very high levels of satisfaction (86% satisfied or highly satisfied)  ... few (less than 5%) would prefer having a traditional and almost all plan to continue as independent workers.

So it makes sense there are also mental health benefits.

Obviously, not all gig workers have work autonomy, control and flexibility. Those that don't are much less positive about gig work. Again from our 2013 article on those who report they don't have autonomy, control and flexibility:

"They are much less satisfied with independent work and almost half (49%) report being dissatisfied. Most (54%) would prefer having a traditional job and only about one third (35%) plan on continuing as an independent worker."

They also likely don't get the mental health benefits associated with work autonomy.  

But the majority of the self-employed - including those who get work through online platforms - report they have and value the autonomy, control and flexible this type of work provides.

WeWork Files to Go Public

WeWork released its S-1, which is the legal document a company files prior to going public, this week.

WeWork going public is a bit of a watershed moment for the coworking industry. It's the first of the new wave of coworking spaces to do so.

It's also a highly watched and controversial company, particularly due to its high private valuation and steep losses. Because of this interest, the S-1 filing is getting a lot of attention.

Our favorite part of the S-1 is the description of WeWork's mission. Key quote:

Our mission is to elevate the world’s consciousness.

Pretty lofty ambition for a company that rents commercial office space. But we agree the world's consciousness could use some elevating. 

The topline numbers show that WeWork's membership numbers and revenue have doubled every year for the last 3 years.  The S-i reports that:

• Q2 2019 membership of 527,000, up from 268,000 at the end of June 2018 and 401,000 at the end of December 2018.
• Revenue has grown from $436 million in 2016 to $1.82 billion in 2018 and they look to be on track to double revenue again this year.
• WeWork operates 528 spaces in 111 cities across 29 countries (click to enlarge the WeWork S-1 chart below for more details)

Their operating losses have also increased quite impressively, from $396 million in 2016 to $1.69 billion in 2018. They too are on pace to double this year.

But hey, it's not like it's easy or cheap to raise the world's consciousness. 

To help investors swallow the losses and cash burn, WeWork is planning to raise $6 billion in debt prior to going public. This, coupled with their current cash position of $2 billion, would give them a few years of cushion to get to profitability - or at least become cash flow positive. 

See these articles for more details:

Axios: WeWork files for long-awaited IPO

CNBC: WeWork reveals massive $900 million loss in filing to go public

Tech Crunch: WeWork reveals IPO filing

The Axios Pro Rata podcast also has a good review of the S-1.

Small Businesses Worried About Corporate Concentration - and Especially Amazon

The Institute for Local Self-Reliance recently released its 2019 Independent Business Survey. The key finding is small independent businesses see large corporations - and especially Amazon - as their main competitive threat. 

They also feel government policies have not helped. Key quote from their article on the study:

Many public policy decisions in recent years have fueled market concentration and favored their big competitors.

As the study chart below shows (click to enlarge), the survey respondents listed Amazon as their biggest challenge.

Big companies, in general, also came in 2nd and supplier mergers and concentration came in 5th.  So it's clear the respondents consider big firms and industry consolidation a major problem.

But as is shown in the study chart below, they see Amazon as the biggest threat. 91% say Amazon has hurt their business at least a little and over half say it has hurt their business significantly.

It's important to note that retail small businesses, who are in competition with Amazon, are heavily overweighted in the survey sample (it was a non-probability sample).

A sample more reflective of the overall small business sector of the economy would not be as negative on Amazon.

But these numbers are still stunning and show the power and reach of Amazon and its impact on small retailers. 

The BBC's List of 101 Things You Need to Know About the Future of Work

The BBC's The 101 people, ideas and things changing how we work today really does cover 101 different trends, shifts, people and things impacting the future of work.

The long list includes a brief description of each item. For example, item 88 - Soft Skills - is described as:

"Employees need abilities computers and automated systems don’t have – like creativity, adaptability and persuasion. Yet recruiters are struggling to find these kinds of candidates."

They also include a link to a more detailed description that contains other links to even more detailed information (click here for the link to the deeper description of soft skills)

We probably wouldn't include some of the items that are on the list. But with such an extensive list there's bound to be some that are less important than others.

Overall it's an excellent list and a great resource and taxonomy on the future of work.

SafetyPIN: Building Trust in the Gig Economy (and elsewhere)

SafetyPIN Technologies is a startup that has created a background check system and trust badge that lets people see at a glance if someone they met online - or elsewhere - is safe to meet offline.

According to the company's website, SafetyPIN has:

"developed a proprietary algorithm that draws on over 10,000 sources of data – and combines behavioral screening — to identify people you can trust the most – and assure them they can trust you, too."

The algorithm checks an applicant's criminal and financial history, verifies their ID, and asks them a series of behavioral profiling questions to determine whether or not they qualify for a SafetyPIN.

The chart below from SaftyPIN's website (click to enlarge) illustrates potential SafetyPIN applications. Most are related to the gig economy, but others are use cases where two people who don't know each other are meeting for various reasons.

Most background check companies only target businesses. But because of this mix of use cases, SafetyPIN is targeting both corporations and consumers with their service. 

For corporate users they hope to become a background check service of choice for the hiring of independent workers (they currently are not providing background check services for the hiring of traditional employees). 

For individuals, their pitch is a SafetyPIN will increase the confidence of the people you work with or are meeting with. Youth coaches, for example, are a prime target market. 

And also unlike other background check companies, users receive and can display their SafetyPINs on their social media accounts and websites.

With the growth of the Internet, peer-to-peer commerce, delivery services and the growing online to offline economy, people are increasingly interacting in new ways. This, of course, is leading to all sorts of trust issues. 

Yet so far, most background checks and trust systems focus on only one party in a transaction or meeting - and mostly the sellers. 

It seems like extending background checks to all parties is a logical step. It will be interesting to see if SafetyPIN, or others like it, are able to make a business out of doing this. 

The Democratization of Wealth Work

The Brookings Institute's Who’s employed by the lifestyles of the rich and famous? covers the growth of the personal care and services jobs, which has been one of the fastest growing job segments over the past decade.

They refer to this type of work as "wealth work", a term coined by MIT Economist David Autor which he defined as personal service jobs created by rising incomes.

As the Brookings's chart below shows (click to enlarge), this includes a wide range of occupations.

A key driver of wealth work, not surprisingly, is the the growth of high income earners. Key quote from the Associated Press article Richer US households fueling a hot job sector: ‘wealth work’:

The main driver of growth in these jobs is the expansion of the upper-middle class. Nearly 8% of U.S. households earned $200,000 a year or more in 2017, according to the Census Bureau. That figure is up from just below 6% in 2007, adjusted for inflation, when the recession began.

And we certainly agree that wealthier consumers have been driving this trend.

But we believe there are 4 other drivers: 

1. A Lack of Time: Most Americans with full-time jobs report working more and having a lack of time.  This means outsourcing personal tasks makes a lot of sense.
2. Life's Growing Complexity:  Many tasks have become so complex or specialized that outside help by professionals is simply required.
3. Fear of Falling Behind:  People are increasingly concerned about falling behind, or their children falling behind. This has led to coaching of all kinds. Think sports, academics, arts and music coaching for kids and things like life coaches, career coaches, wealth managers, etc. for adults. 
4. Wealth workers don't just cater to the wealthy. People with even modest incomes increasingly are utilizing personal services.

The last point is very important.

Much of what is called "the on-demand economy" and "sharing economy" falls into the personal services sector. Everything from dog walking to food delivery to running errands can now easily and cheaply be outsourced to personal services companies.

Also, a wide variety of personal services have been productized and/or digitized, which has reduced their cost and made them in reach of middle class consumers - and even low income consumers.

A good example is portfolio management, which not long ago was only available to high wealth individuals. But today firms like Schwab, Vanguard and others provides a variety of personalized portfolio management services to middle class investors. 

A broader example is food delivery, which is being utilized by people up and down the income scale. 

This democratization of personal services means it's not just the rich driving demand. The middle class and even low to moderate income Americans are increasingly turning to these services. 

The growth of personal services and wealth work is not a new trend. We first wrote about this trend in 2008. But it's reached the size and scale where it's starting to get much more attention.

We'll have more on this topic - with a focus on wealth work jobs - in the near future. But a quick summary of our thoughts on wealth work jobs is we are more positive on them than Brookings is.

The Rise of Independent Worker Teams: Fiverr's Studios and Upwork's Agency Experience

Fiverr this week announced a new service offering called "Studios". This service gives freelancers the ability to easily join forces to sell and tackle larger and more complex client assignments than a freelancer could do on their own.

This follows last week's announcement by Upwork of what they are calling the "agency experience". Key quote from their press release:

"Upwork’s newly enhanced agency experience removes the friction that exists with the traditional agency model, making it easier for businesses to find, hire and engage specialized boutique agencies on the platform with just a few clicks."

The boutique agencies Upwork refers to are small service firms, most of which utilize freelancers as part of their project teams. 

Both services illustrate two growing trends:

1. The trend towards independent workers teaming up via online platforms and marketplaces.
2. The trend towards businesses outsourcing work to boutique firms and/or teams of independent workers.

These services also illustrate how the shift to cloud computing is creating new forms, structures and ways of doing business.

The chart below (click to enlarge) is from a 2014 study on the impact of cloud computing we conducted in partnership with Intuit. 

It illustrates how transformative technologies tend to diffuse through the economy and society in 3 broad waves.  

In the first wave, which occurs after a technology is first commercialized, the impacts are mostly efficiency gains. The new technology makes things cheaper, easier and/or faster. 

The second wave often leads to new types of businesses and new ways of doing business. The 3rd wave results in transformations of business and society.

Railroads are a good example of these waves. 

When first commercialized, most rail lines were built alongside existing canals and roads. They increased efficiency by moving goods and people faster and cheaper than canal boats and wagons.

In the second wave, railroads created new ways to connect distributed resources and producers to customers. This created new forms of businesses (distributed factories, new types of logistics businesses, etc.) and new ways of doing business.

And in the 3rd wave, railroads changed society in a variety of ways including opening up the West, helping to create suburbs and creating economic opportunities for rural areas (they also created standardized time zones).

In 2014 we suggested that cloud computing is a transformational technology that was in stage 2 and helping to create new forms and types of businesses. 

One example we used was what we called at the time "hives", which we described as:

Cloud-adapted small businesses will increasingly be made up of individuals who share talent to form a team. These businesses will operate virtually, with employees (many contractors) working in different locations, and staffing levels increasingly flexible - rising and falling to meet project needs.

Cloud computing is clearly not the only trend driving freelancer teaming and the growth of boutique consulting firms and agencies.

But it is a key enabling technology behind the growth of these types of organizations. 

We still think cloud computing is in stage 2 and will drive more change in organizations and how business is done. 

But one could easily argue stage 3 has also started, with the growing impact - good and bad - of cloud enabled social media an example of societal change.

We think it's too early to make this call, but we're not arguing with those who think otherwise.

On-Demand App for Access to Special Needs and Disability Care

Joshin is a new company that connects specialized caregivers with families with special needs care requirements. 

Their goal is to make it as easy for families to book a caregiver as it is to book a ride with Uber or a dog walker with Roverr. Joshin curates their independent worker caregivers to ensure they have the qualifications to provide the care required.

Joshin's founders are twin sisters who have a special needs brother.  So they understand the challenges facing families who need this type of assistance.

The video below is a TV interview with the founders. It does an excellent job of describing the service.

Joshin is another example of the growing number of niche and/or vertical market gig worker platforms.  

The Growth of Side Gigs

That side gigs - part-time or occasional work to supplement income - have become more common is hardly new news. Nor are the reasons behind the growing number of Americans with side gigs.

Simply put, workers up and down the income ladder are finding that their compensation simply doesn’t keep up with rising costs, especially of education, health care, and housing. 

Because of this, more Americans are turning to side gigs to help them make ends meet.

As the chart below from the 2019 MBO Partners State of Independence study shows, the number of "occasional independent" workers has increased by roughly 50% over the past 4 years.

Occasional independents are are workers who report working independently occasionally or sporadically, but at least once a month on average. 

Most occasionals have other jobs, but many have activities such as care giving, homemaking, school, etc that keep them from having a traditional full or part-time job. 

And, of course, most occasional independents are working side gigs to supplement their income. Other reasons for side gigs are to pursue a passion, build skills and to start or test out a new business opportunity.

Another reason side gigs are growing is that online platforms and marketplaces are making them easier to do. These platforms provide a low friction (meaning it's easy and quick to get started), highly flexible (work when you want or can) work options.

With wage stagnation, the hollowing out of middle skill jobs and the rising costs of housing, healthcare and education showing no signs of abating, we believe the number of Americans with side gigs will continue to grow.

Bain Consulting on Predicting the Next Tech Disruption

Predicting the Next Tech Disruption from Big 3 Strategy Consulting firm Bain and Company discusses 4 forecasting tools (shown below) Bain uses to predict when disruptive technologies will be widely adopted.

Two of the tools - experience curves and adoption curves - have been around a long time and widely used.

For example, we use both - and especially adoption curves - in our forecasts. And much like McKinsey also suggests, Bain suggests using similar technologies to help you develop your adoption curves. 

This is something we've done for many years and have found very useful. 

Bain's Elements of Value tool is focused on consumer technologies. But we think it could be modified to also work with B2B tech. You'd just need to create the equivalent of Maslow's hierarchy for business users.

The tool we found most interesting is what they call barriers and accelerators. 

We spend a lot of time examining potential barriers and countervailing trends that could impact our forecasts. This is because we've observed that most technology forecasts are overly optimistic because they don't include these.

A good example is drone forecasts back in 2014. The vast majority of these forecasts at that time simply ignored the wide range of barriers to broad adoption drones faced. 

Other examples include autonomous car forecasts, Internet of Things forecasts back in the early 2000's and again in 2010 through 2015 and pretty much all the forecasts that A.I. and automation would eliminate huge numbers of jobs by 2020 that were put out 6-8 years ago. 

In all these cases barriers and countervailing forces were either missed or ignored. So we certainly agree with Bain's inclusion of this tool.

Forecasting is obviously not easy and no one can actually predict the future. But using tools like the ones Bain suggests will help your forecasts miss by less.