Small Business Labs

"Vertiports" and Air Taxis Getting Closer

According to the Axios article Meet the "vertiport," where you'll go to hail an air taxi, the Federal Aviation Administration (FAA) is releasing "vertiport" design guidelines.  

A vertiport is where vertical takeoff and landing (VTOL) vehicles will take off and land. This is a necessary step for air taxis to become operational.

Several electric VTOL (eVTOL) manufacturers are already working on plans to build vertiports in several U.S. cities.

Two leading air taxi manufacturers, Archer Aviation and Joby Aviation have partnered with Reef, the U.S.'s largest parking management company, to build vertiports atop existing parking garages (click to enlarge image below).

After a very long gestation period - the first flying car prototypes were produced over 100 years ago - we seem on the verge of flying taxis becoming a reality.

Test flights are happening, and plans to start operating commercial air taxi services are just 2-3 years away. 

Even the big airlines are getting on board. United Airlines, for example, recently put down a $10 million deposit on 100 Archer's eVTOLs.

We're certainly looking forward to our first ride.

McKinsey's 2022 Technology Trends

Last month the global consulting firm McKinsey released its 2022 Technology Trends Outlook.  

We pay attention to McKinsey because they advise leadership teams from a wide range of organizations, including Fortune 500 firms, government agencies, foundations, nonprofits, and tech startups.

So their tech trends influence a large number of decision-makers around the world.  

McKinsey groups their trends into two broad themes, which they describe as:

"two thematic groups: Silicon Age, which encompasses digital and IT technologies, and Engineering Tomorrow, which encompasses physical technologies in domains such as energy and mobility."

They rank the trends on three metrics:

• Innovation: based on related patents and research efforts
• Interest in the technology: based on recent news and web searches.  
• Amount of investment in the technology in 2021 (size of bubble in the chart)

McKinsey also provides an adoption rate score for each technology but doesn't use that score in its ranking chart.  

This approach leads to some interesting results.

As the McKinsey chart below shows (click to enlarge), applied AI is the leading technology with a very high innovations score, coupled with relatively strong interest scores and investment levels.

Tech industry darling, Web3 scores relatively low. This is due mainly to a low innovation score - despite many techies believing Web3 is the next big thing.  

The McKinsey article provides a detailed analysis of the 14technologies in their list, and how it ranked in 2018.  

We like McKinsey's approach because they go beyond just looking at the technology and include data on the drivers of adoption.  

Anyone interested in tech trends will find McKinsey's list well worth reading.

The Power of Weak Ties and Coworking

LinkedIn's study A causal test of the strength of weak ties shows that weak ties - casual acquaintances versus close friendships - provide the most useful connections in job hunts.

This confirms Mark Granovetter's landmark 1973 study The Strength of Weak Ties 

As LinkedIn's article points out, Granovetter's study was conducted well before the era of big data and his surveys often had less than 100 respondents.

LinkedIn's study was massive. Key quote from their article:

"Digging deep this time, Rajkumar and colleagues tracked the modern-day connection-making patterns — and job-hunt outcomes — of 20 million LinkedIn members. The research was conducted on data from 2015 and 2019."

The reason weak ties turn out to provide the most help for job hunters is nicely explained in the LinkedIn article:

"When we connect with so-called weak ties — people we know only slightly — we gain access to job networks that stretch into unexpected areas. That lets us find people and opportunities we otherwise wouldn't know about. 

This is the magic of weak ties," Rajkumar says. "They bridge information flows. They help us navigate large spans of the labor market efficiently." By contrast, our best friends' contacts are so similar to ours that they don't help much; they're redundant." 

So what has this got to do with coworking?

The answer is simple. 

As we pointed out a decade ago in our article Coworking Strengthens Weak Ties, belonging to a coworking space increases the size and usefulness of members' weak tie business networks.

We also found that weak tie networks don't just improve job hunting outcomes. Weak ties also improve business development outcomes. 

This is especially important for independent workers (freelancers, etc.). who can leverage their coworking weak ties to win new projects and business. 

Like Granovetter's studies, our first studies on weak ties and coworking were qualitative and had relatively small sample sizes.

But since 2012, we've surveyed thousands of coworking members and interviewed hundreds more on this topic. And our findings have been consistent - coworking increases the weak tie networks of members, and that improves their business development outcomes.

LinkedIn's weak tie study doesn't directly confirm our work on weak ties and coworking. But it reinforce our study's findings by illustrating the power of weak ties.

Airbnb's Guild on How Communities Can Benefit From Digital Nomads and Remote Workers

Airbnb says its Guide to Live and Work Anywhere "provides industry-first analysis of global remote work initiatives."

This isn't even close to accurate- there have been many studies on this topic. 

But marketing hyperbole aside, the Guide provides an interesting look at how cities benefit by offering incentives to attract remote workers.

They also show the incentives cities are using. Below is the Guide chart on Tucson's remote worker incentive package.

The growing competition among cities and countries to entice digital nomads is one of the most interesting remote work trends.

Whether it's the creation of digital nomad villages, providing specialized remote work visas - or, as Airbnb's Guide points out - providing direct financial assistance, countries and cities are increasingly engaged in an arms race to attract remote workers.

Study Finds Only One Third of Americans are Financially Healthy

The Financial Health Networks 2022 U.S. Financial Health Pulse study reports that financial health in America declined across many demographic and socioeconomic groups over the past year.

This is the first time in the five years of this study that Americans' financial health declined.

As the report chart below shows (click to enlarge), the share of Americans reporting being financially healthy declined from 34% to 31%.  

The study also reports that 37 million Americans are financially vulnerable, 139 million are financially coping, and 78 million are financially healthy.

We track this data because a lack of financial health is a key driver of the growing number of part-time gig workers.

Those financially vulnerable or coping are much more likely to supplement their income with part-time, or even full-time, independent work.  

And as the Financial Health Network's findings show, 176 million Americans fall into these two categories.

This is one reason we continue to forecast that independent work and the gig economy will continue to grow.  

The report has a lot more information on the financial health of Americans and is well worth reviewing for anyone interested in this topic.

NIL Payments Have College Athletes Joining the Creator Economy

If you're a college sports fan, you know that NIL payments - paying college athletes for the rights to their name, image, and likeness - is changing amateur athletics.  

After the NCAA lost a supreme court case, college athletes were allowed to profit from their celebrity. This lets college athletes - especially football and basketball players - earn money by monetizing their name, image, and likeness.

Morning Brew's In year No. 2, NIL continues to disrupt college football points out that 12 college football players have signed agreements worth over $1 million.  

And it's not just high-profile stars. Key quote from Morning Brew:

"Boosters at many powerhouse schools have formed controversial collectives to funnel money into athletes' pockets. At Texas Tech, the Matador Club collective is paying every football player and women's basketball player $25,000 a year in exchange for event appearances and community service."

This means even the back bench walk-ons that couldn't qualify for a college scholarship can earn a decent amount of money.

NIL money is not limited to football and basketball players. Even college athletes in nonrevenue sports - like golf - are being paid.

It's also not limited to college athletes. High school athletes are starting to earn NIL money, and even elementary students are getting into the act.   

The rules around NIL money vary by state, but NIL recipients are independent workers. And because they're earning money by monetizing their name, image, and likeness, they're part of the creator economy.

Not surprisingly, the big conferences dominate NIL revenue. 

The chart below is from OpenDorse, an athlete marketplace, and NIL technology company. It shows the top 10 conferences by total NIL Income.

It's unclear what the long-run impact of this shift from amateur to paid college and youth sports will be.

But what is clear is that NIL money has created a large, new segment of the rapidly growing creator economy.  

Edelman's Depressing 2022 Trust Barometer Study

We've followed the Edelman Trust Barometer research series for many years, and we consider it one of the most important studies we follow.

As we point out in the title, we also consider it one of the most depressing studies we follow. 

The reason is the study chronicles the long-term global decline in people's Trust in society's institutions.  

And the 2022 study, which is subtitled The Cycle of Distrust, continues to show this decline.

As the study chart below shows (click to enlarge), businesses are now the most trusted institution, with 61% of global respondents saying they are trusted.

The chart also points out that businesses got the top spot because their trust level fell less - down 4% points from 65% in 2020 - than governments' trust level over the past two years.  

Two of the other top 10 findings caught our eye. Key quote from the report:

Distrust is now society's default emotion: Nearly 6 in 10 say their default tendency is to distrust something until they see evidence it is trustworthy. Another 64% say it's now to a point where people are incapable of having constructive and civil debates about issues they disagree on. When distrust is the default – we lack the ability to debate or collaborate.

There is a collapse of Trust in democracies: In many of the democracies studied, institutions are trusted by less than half of their people, including only 46 pts in Germany, 45 pts in Spain, 44 pts in the U.K., and 43 pts in the U.S. Moreover, no developed countries believe their families and themselves will be better in 5 years.

These are genuinely dismal findings.

The one bright is that the trust deficit provides an opportunity for businesses that can develop a trusted relationship with their customers.  And it shows customers are willing to give businesses a chance to do so.

Even as Coworking Takes Off Again, the Women's Coworking Space The Wing is Grounded

The Wing, a network of work and community spaces designed for women that raised over $100 million in venture funding, is closing.

Below is the email The Wing recently sent to members.

   

The Wing always saw itself as much more than a coworking space. They envisioned their firm as a lifestyle brand built to empower women in all phases of their lives. 

The New York Times described The Wing's vision in their lengthy 2017 article The Wing, a Chic Women's Club, is Going Wide as:

"... a locus of a mediacentric feminist movement, like Ms. in the 1970s, or a mass-scaled temple of "exclusivity," like Soho House, if Soho House wrapped itself in a marketing banner of she-power."

The Wing had 11 locations in 2019, with six in New York City. But as their email says, they struggled during the Covid-19 pandemic and could not recover.

The coworking industry, in general, struggled during the pandemic. According to Fortune's As the office goes extinct, the WeWork era rises again, over 800 coworking spaces shut down over the past two years.

But as the article also points out, the coworking industry is experiencing a post-pandemic boom. Key quote:

"Old coworking spaces are back to life, and new ones are popping up. The advent of hybrid work and the slow return of business travel has left both middle and upper classes seeking a place where they can take meetings, focus, and find companionship: a coworking space."

The future is clearly bright for the coworking industry.

But unfortunately, the rising tide of remote work-driven coworking demand was too late to provide lift for The Wing.  

And yes, we got a bit carried away with our flight metaphors.  

The Six Fold Jump in Work From Home

Nick Bloom is a Stanford Economics professor and one of the leading authorities on the shift to remote work.  

He's part of the team at WFH Research, which produces a steady stream of high-quality research and data related to the shift to remote work.  

He posted the chart below on LinkedIn yesterday. Key quote from his post:

"The shift to WFH is the largest shock to labor markets in decades. Pre-pandemic WFH was trending towards 5% of days by 2022. Now WFH has stabilized at 30%, a 6-fold jump."

Companies have been trying to get their workers back to the office, but most of these efforts have been unsuccessful.  

We continue to think the hybrid model has won, which will lead to more workers returning to offices.  

Because of this, we think the share of days worked from home will trend down to around 22%-25% over the next 2-3 years.  

This is still a substantial increase relative to before the pandemic.

McKinsey finds 36% of Employed Americans are Independent Workers

McKinsey's Freelance, side hustles, and gigs: Many more Americans have become independent workers, covers the results from their American Opportunity study.

And this study found that independent work is booming. Key quote:

"... a remarkable 36 percent of employed respondents—equivalent to 58 million Americans when extrapolated from the representative sample—identify as independent workers. This figure represents a notable increase since we estimated the US independent workforce in 2016 at 27 percent of the employed population."

The study asks survey respondents to self-identify as independent workers. Those answering yes to either, or both, of these questions are considered to be independent:

• "Is your current job as a contract, freelance, or temporary worker?" 
• "Would you consider yourself a gig worker or part of the gig economy?"

The article covers a range of data from the study, but the data on how workers view economic opportunity jumped out at us (click to enlarge the chart below). Key quote:

"Given the broad range of reasons why people work independently, it's surprising how united this group is in one distinct characteristic: they are among the most optimistic workers in the country."

Striking out on one's own requires a certain amount of optimism.  So it's not surprising to us that independent workers, on average, are more optimistic about their economic opportunities than workers overall.  

See the article for more details.

New Business Applications Continue at Historically High Levels

The number of new business applications in July was 425,698, which is another strong month.

Although down from their all-time high in 2020, applications in 2022 have averaged about 420,000 per month. This is about 40% higher than before the pandemic.

The business application data comes from IRS Employment Identification Numbers (EIN) applications. EINs are the tax id number that identifies a business for tax purposes.

Most applications (about 70%) are from firms the Census calls "applications other than high propensity" (grey in the chart; click to enlarge).

These are applications from businesses that are unlikely to have employees, such as freelancers, independent contractors, and other types of solopreneurs.

"High propensity applications" (yellow in the chart) is Census speak for firms they think are likely to hire traditional employees.

As the above chart illustrates, the share of solopreneur applications has steadily increased over the past decade.

Retail continues to be the industry with the most applications. This has been the case since the surge of applications started in 2020. Professional services is second, consistent with its position since the pandemic began.

As we pointed out earlier this year, only about 20% of applications for tax I.D.s result in a new business starting.

But the continuing high levels of business applications means a corresponding surge in new employer small businesses and solopreneurs.

Is Reshoring of Manufacturing Finally Happening?

The Wall Street Journal's U.S. Companies on Pace to Bring Home Record Number of Overseas Jobs covers data from the Reshoring Institute showing that American manufacturing firms are shifting jobs back to the U.S.

Key quote:

"American companies are on pace to reshore - or return to the U.S. - nearly 350,000 jobs this year, according to a report expected Friday from the Reshoring Initiative. That would be the highest number on record since the group began tracking the data in 2010."

Reshoring is a trend that has long been forecast to happen. The New York Times 2010 article Is Manufacturing Coming Back to the U.S. reads much like the recent Wall Street Journal article.  

And while the four words most wrong in forecasting are "this time it's different," this time it seems different.

The pandemic exposed the weaknesses and lack of resiliency in global supply chains.

And the war in Ukraine, coupled with geopolitical strife between the U.S. and China, has countries worldwide looking to become more self-reliant - or at least not reliant on countries not viewed as close friends.

This may lead to a world with two major trading blocks. Key quote from Foreign Affairs' The End of Globalization?:

"But it now seems likely that the world economy really will split into blocs—one oriented around China and one around the United States, with the European Union mostly but not wholly in the latter camp—each attempting to insulate itself from and then diminish the influence of the other."

So it does appear that reshoring - and the related trend of nearshoring - may finally be happening.  

Ezra Klein Show on Rethinking the Office and Work

One of our favorite podcasts is The Ezra Klein Show. It dives deep on various topics, the interviews are excellent, and the show's guests are experts in their field.

The show's recent episode, The Office is Dying. It's Time to Rethink How We Work, features Anne Helen Petersen and Charlie Warzel as guests.

They're the authors of Out of Office: The Big Problem and Bigger Promise of Working From Home.

Key quote from the podcast landing page describing what the episode covers:

The office is dying, but a new, viable model of work has yet to be born. And that liminal space raises all sorts of new questions: What is the office actually for? What will the post office's future of work look like? And if the future of work means working from home in some capacity, how do we make that future better for everyone involved?

We don't agree with everything Petersen and Warzel say in the podcast - especially some of their forecasts.

But they clearly have deep expertise on these topics and provide an excellent overview of the current state of the office and potential ways the office may evolve in the future.

Anyone interested in the future of work, remote work, or the future of the office will find this episode well worth listening to.

Like all Klein Show podcasts, this episode is long - 1:34. 

But one of the reasons we like The Klein Show is that it takes the time required to explore topics in-depth.  

The Inflation Reduction Act and the Growth of Microgrids and Virtual Power Plants

The Inflation Reduction Act, which was just signed into law, has a variety of tax credits and incentives to encourage homeowners and businesses to install green energy systems.  

One of the biggest incentives is for solar power systems. The bill extends a current tax credit for ten more years and raises the tax credit to 30% of the system's cost.  

The law's various credits and incentives will lead to broader deployment of microgrids.

These are localized power generation grids that can disconnect from the traditional grid and operate autonomously.

They can also feed power back to the traditional grid.

The growth of microgrids is allowing the development of virtual power plants.  

Virtual power plant (VPP) consists of distributed microgrids that are used in concert to provide power plant levels of electricity to the grid.

An example is Tesla's virtual power plant agreements with California's two largest utilities.  

Under this agreement, Tesla connects Tesla Powerwalls (a battery storage device fed by solar panels) to the grid and supplies power during peak power usage. Tesla's Powerwall customers are paid $2 per kilowatt hour for contributing energy to the VPP.

Generac, which also provides solar systems with battery storage to homeowners and businesses, has a similar arrangement with Arizona's largest utility.

Given the advantages of distributed solar microgrid systems - cleaner energy, lower costs, resilience to outages - we expect the deployment and use of microgrids and VPPs to grow rapidly.

And as we pointed out in our article The Clean Energy Economy = Small Business Opportunities, the distributed nature of microgrids means numerous opportunities for small businesses.  

Why Direct Sourcing of Freelancers is Growing in Popularity

One of the most interesting findings of the MBO Partners Contingent Labor Imperative study, which looked at the use of contingent labor by large corporations, is the growing use of direct sourcing of freelancers by these firms.   

The study defined direct sourcing of freelancers as:

"Direct sourcing of contingent labor (also called “self-sourcing”) is when a company builds a proprietary labor candidate pool comprised of independent contractors, freelancers, etc., which the company can engage directly instead of through staffing companies or third-party labor suppliers."

The study found that 28% of the firm surveyed widely use direct sourcing and another 32% use it in some areas of their firm. Another 28% report experimenting with direct sourcing. Only 12% say they are not currently using direct sourcing for contingent labor.

And as the study chart below shows, most firms plan on increasing their use of direct sourcing over the next 18 months and 5 years.

The report chart below explains why firms plan on increasing their use of direct sourcing (click to enlarge).

Simply put, direct sourcing addresses the top challenges corporations face in hiring and utilizing freelancers and other forms of contingent labor.

In our work, we've done many product-market fit studies.  And we've rarely seen a service so extensively address the business challenges of its target market as well as direct sourcing of freelancers does.  

Because of this, we're confident the plans by large firms to increase their use of direct sourcing in the future will happen.

See the study report for more information on the use of contingent labor by large corporations (those with 1,000+ employees). 

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

Teens Embracing YouTube and TikTok; Facebook Usage Declining

Pew Research's Teens, Social Media and Technology covers how American teens' usage of social media has changed since 2014. Key quote:

"TikTok has established itself as one of the top online platforms for U.S. teens, while the share of teens who use Facebook has fallen sharply."

As the Pew chart below shows (click to enlarge), almost all teens (95%) use YouTube, and 2/3rds of teens (67%) use TikTok.  

     

But the share of teens using Facebook has fallen to 32%, down from 71% in 2014-15.  

The study also examined the frequency teens use leading social media platforms.  

YouTube was the leader, with 19% of all teens saying they use YouTube almost constantly, 16% saying this about TikTok, and 15% saying it about Snapchat.

Only 2% of teens say they use Facebook almost constantly.

YouTube and TikTok aren't usually considered social media platforms. But social media and entertainment have been blurring over the past decade, so this usage comparison is valid.

And with the social media platforms adopting TikTok's approach to making recommendations, they will likely blend more in the future.

The Rise of Digital Nomad Villages

Digital nomad villages are organized communities that provide the work infrastructure remote workers need to be productive - and social activities to keep them happy.

The villages are generally in scenic locations and have coworking spaces, places for remote workers to live, decent WIFI, networking events, and a range of social activities.

The first digital nomad villages evolved organically and informally. 

Ubud in Bali and Thailand's Chiang Mai are examples and have been popular with digital nomads for many years.

But with the growth of remote work, local governments are starting to invest in the development of digital nomad villages.  Their objective is to attract digital nomads and the economic activity they provide.

The Portuguese island Madeira is often cited as the location of the first planned digital nomad village.  It has a very active social scene. Key quote from the village's community manager:

“It can be very social. In high season for nomads, which is in March until June, you might have to make a conscious effort to take a break from all the social interaction, depending on your personal social battery."

According to Sifted's Where are Europe’s top digital nomad villages? there are now quite a few digital nomad villages across Europe.  

Brazil recently decided to jump on the digital nomad village bandwagon.

According to Skift's Behind Brazil’s Plan to Launch South America’s First Digital Nomad Village, the beach town of Pipa (pictured below) was selected as the country's first digital nomad location. 

Work has begun to create the infrastructure needed to attract and support digital nomads.

Brazil is partnering with NomadX to build out Pipa. They're the firm that helped create the village in Madeira and several other locations.  

The competition to attract digital nomads and remote workers is heating up.  Countries and cities have realized digital nomads spend money, don't take local jobs - and even create local jobs supporting the needs, including work needs, of digital nomads.  

We expect many more purpose build digital nomad villages to be created over the next few years.

Corporate Use of Private Freelance Talent Marketplaces Accelerating

MBO Partners Contingent Labor Imperative covers a recent study looking at the use of contingent labor by large corporations (those with 1,000 or more employees). 

This is the second year of this study, and Emergent Research (that's us) worked with MBO Partners on this project. 

The study covers much ground, including contingent labor's share of corporate workforces, reasons for using contingent labor, challenges with using contingent labor, and the use of direct sourcing of freelancers and other forms of contingent labor.

But what we found most interesting was the year-over-year growth in the use of private freelance marketplaces — company branded and operated talent platforms that directly connect vetted freelancers with the firm's hiring managers.  

As the study table below (click to enlarge) shows, 54% of firms surveyed reported using private freelance marketplaces. This is up from just 32% in 2021.  

Also, users of private freelance marketplaces report broader and more intensive use of private freelance marketplaces. 

The study table below shows that 71% of companies that use private freelance marketplaces use them in 3 or more areas across their organization, compared to just 42% in 2020.  

There a several reasons for this surge in the use of private freelance marketplaces.

Companies have increased their use of contingent labor to access specialized labor, find hard-to-hire talent, and increase their workforce agility and flexibility.

The pandemic-induced shift to remote work has also increased the use of all things online, including private freelance marketplaces.  

But a significant reason is the ability of firms to establish a pool of known and vetted external talent that can be confidently reused across the firm.

This leads to reduced sourcing costs and faster fill times - and more importantly, because the firm vets and reuses the freelancers, higher work quality.    

In our 2016 Harvard Business Review article How PwC and The Washington Post Are Finding and Hiring External Talent, we covered some of the first corporations experimenting with private freelance marketplaces.

Six years later, the use of private freelance marketplaces has entered the mainstream.  

The Best Digital Nomad Locations

Digital nomads are getting a lot of media attention these days. Just recently, there've been multiple articles on the best places for digital nomads to go.

Airbnb compiled a list of "the top destinations in the United States and Canada for long-term guests and their Hosts, based on affordability, hospitality, popularity, and Host income."

According to Airbnb, the most popular places in the U.S. and Canada among their long-term stay nomads are:

In the U.S.:

• Los Angeles, California
• New York, New York
• San Francisco, California
• Houston, Texas
• Seattle, Washington 

And in Canada:

• Toronto, Ontario
• Montréal, Québec
• Vancouver, British Columbia
• Calgary, Alberta
• Victoria, British Columbia

Fortune's Zoom calls from the beach: These are the 10 best tropical islands for remote work covers a study from Zenefits on the top islands for digital nomads. These are:

1. Curaçao 
2. Koh Phangan, Thailand
3. Fernando de Noronha, Brazil
4. Easter Island, Chile
5. Aruba 
6. St. Lucia
7. Grand Cayman, Cayman Islands
8. Little Cayman, Cayman Islands
9. Moorea, French Polynesia
10. Jamaica

CNBC's From Bali to Bermuda: 6 tropical destinations that make it easy to live and work remotely also mostly covers island getaways for digital nomads. Their six are:

1. Anguilla
2. Antigua and Barbuda
3. Bali
4. Bermuda
5. Barbados
6. Costa Rica

Interestingly, there isn't any overlap between the two lists of tropical islands. The reason is that there are a lot of great tropical islands in the world.

We think the rapidly growing number of countries offering digital nomad visas - including many island countries on these lists - is why digital nomads are getting so much recent press.  

See our Digital Nomad section for more on this trend.  

Is it the Beginning of the End of Social Media?

The Axios article Sunset of the Social Network suggests that the rise of TikTok is leading to the demise of social media as we've known it. Key quote:

"Mark last week as the end of the social networking era, which began with the rise of Friendster in 2003, shaped two decades of internet growth, and now closes with Facebook's rollout of a sweeping TikTok-like redesign."

Facebook's TikTok redesign is based on adding a TikTok-like recommendation algorithm to their existing social graph algorithm.

The best description we've seen of this change, and its likely impacts, is Medium's The End of Social Media, which describes TikTok's approach as "recommendation media." Key quote:

"In recommendation media, content is not distributed to networks of connected people as the primary means of distribution. Instead, the main mechanism for distributing content is through opaque, platform-defined algorithms that favor maximum consumer attention and engagement."

In other words, social media users see content generated by their friends and social connections.

With recommendation media, algorithms distribute content based on the user's likelihood of becoming engaged in the content - regardless of the content's source. 

Not everyone is happy with this shift. Trevor Noah, for example, says Instagram now "sucks" due to its use of recommendation algorithms.  

And reality stars Kylie Jenner and Kim Kardashian are telling Instagram to “stop trying to be TikTok.”

The shift to recommendation media has major implications for small businesses and independent workers using social media for marketing.

Building large audiences of followers will become less important while designing content to appeal to recommendation algorithms will become more important.  

It will also mean spending more time and effort building and cultivating customer communities while using recommendation platforms like TikTok and Instagram (and soon, Facebook) to find new customers.

We think traditional social media will survive. The use case - connecting friends, family, customers and people with like interests - is too strong not to.  

But the rise of recommendation media will change the marketing game for small businesses and independent workers.

The Freelance Gender Pay Gap

Bloomberg's Men Make 48% More Than Women in the Gig Economy. Study Finds covers an interesting ZenBusiness study on freelancer earnings by gender.

The study's methodology is quite clever.  

ZenBusiness scraped data on freelancers' names, specialties, and hourly rates for almost 6,000 US-based freelancers active on the talent marketplace Upwork.  

And after using a gender API to group the freelancers by sex, they calculated the average wage rates for men and women.

They found that the average hourly rate for men is 48% higher - $68.58 versus $46.30 for women.

As the Bloomberg chart below shows (click to enlarge), the study found that the pay gap varies quite a bit by job type.

Our broader studies of the overall independent workforce have found the gender pay gap between male and female independent workers to be in the 20% range.  

This is similar to the 16% gender gap Pew Research found for full-time workers.  

And although we're impressed by the ZenBusiness study, it's not without issues. 

For example, listed hourly rates may not reflect actual pay rates. 

We also know from our studies that, on average, part-time independent workers charge less than full-timers, older workers charge more than younger workers, and more experienced workers charge more than less experienced workers.

The ZenBusiness study doesn't have data on any of these attributes. But gender differences in any of these areas could easily skew the results.  

So kudos to ZenBusiness for raising this issue and pointing out this data. 

But more research is needed before conclusions can be drawn on the freelance gender gap associated with online talent marketplaces. 

California's Independent Truckers Shut Down the Port of Oakland

Independent truckers protesting California's gig law, AB5, shut down cargo operations at ports in Long Beach and Oakland last week.

The reason is that AB5 will force most of California's 70,000 independent truckers to become employees of trucking companies. The vast majority of independent truckers want to stay independent. So they're protesting.

Although AB5 was passed several years ago, the law's impact on truckers was delayed by a series of legal actions by the California Truckers Association (CTA).  

A few weeks ago, the U.S. Supreme court refused to hear CTA's appeal, which resulted in AB5 becoming effective for the trucking industry in California.

Key quote from the Owner-Operator Independent Drivers Association (OOIDA) on this decision:

"For truckers that have invested their blood, sweat, and treasure in creating their own businesses, it is dismaying that lawmakers and the courts are forging ahead with this radical policy that dismisses a beneficial business model that has been in place for decades."

The independent truckers are demanding an exemption to AB5, which has been granted to over 30 professions. Key quote from Transport Dive's article on the protests:

"Our goal is to get exempted from [AB5], to get carved out from it, just like other industries," Cindy Perez, a Long Beach owner-operator, said on July 14. "And if we're not, we at least want to know why."

The logical response for many California independent truckers, if they don't get an AB5 exception, will be to take their trucks and move to another state. Truckers are in demand across the country.

Losing these truckers will hurt more than just California.

It will also disrupt operations at two of our country's largest ports for an extended period, impacting supply chains across the U.S.

This is yet another example of the backlash against AB5 by workers the law was supposed to help. 

Gender Identity and Sexual Orientation are Complicated and Fluid

We recently updated our contact information with an organization that supports small businesses.

When we got to their gender identification question, we discovered their pull-down box listed 37 options, which are listed below (click to enlarge).  

     

Gender identification and sexual orientation have been rapidly changing.

A recent Gallup poll found that the share of adult Americans who self-identify as LGBTQ has doubled to 7.2% over the past decade.

This growth is driven by younger adults, with 20% of Gen Z and 10% of Millennials reporting they identify as LQBTQ. This compares with 4.2% of Gen X, 2.6% for Baby Boomers, and less than 1% for traditionalists (born prior to 1946). 

This means the LGBTQ share of the population will continue to increase and could double again over the next decade.  

Not only has gender identity and sexual orientation gotten more complicated - they have also become increasingly fluid.

Web MD defines gender fluidity as:

"Someone who is fluid -- also called gender fluid -- is a person whose gender identity (the gender they identify with most) is not fixed. It can change over time or from day to day. Fluid is a form of gender identity or gender expression rather than a sexual orientation." 

And as the BBC's Why sexual identities shifted during the pandemic reports, the pandemic accelerated the trend toward people changing or adjusting their gender identity or sexual orientation.

The shifts and fluidity in gender identity and sexual orientation - and how society views these shifts - are important social trends.  

And businesses need to understand that a growing share of their customers and workers identify as LGBTQ.  

If you're curious about the gender terms listed above, check out the Gender Wiki for definitions.  

St. Louis Fed on Women's Growing Share of Self-Employment

The Federal Reserve Bank of St. Louis released data showing that the share of self-employment in U.S. employment increased during the pandemic.  

The data also shows that self-employment declined less and recovered more quickly than traditional employment did during the pandemic.

But one of the Fed's most interesting findings is women's growing share of self-employment during the pandemic.  

As the St. Louis Fed chart below shows (click to enlarge), women's share of self-employment has been growing since 2008 - and it shot up during the pandemic.

The St. Louis Fed suggests that "the burden of home and child care placed on women in 2020 made self-employment a more attractive option."

We agree in terms of the large jump during the pandemic. 

The data used in this study comes from the monthly Current Population Survey (CPS), which is the source of the monthly jobs report and unemployment data.

The CPS numbers include people who said they were self-employed during a specific reference week, and that self-employment was their primary source of work during the reference week.  

These constraints are why the numbers are relatively low. The June CPS, for example, reported about 16.8 million self-employed workers.

Yesterday we reported on the Nonemployer Data Set. It uses tax data to estimate the number of U.S. solopreneurs. In 2019 the estimate was 27.1 million,

This is still substantially lower than the MBO State of Independence study estimate, which is that there were 51.1 million independent workers in 2021. This study uses a broader definition of independent work than the CPS and Nonemployer Dataset.

And other studies show even larger numbers of independent workers - some as high as 68 million.

These studies, surveys, and data collection efforts use different definitions of self-employment and methodologies. This makes understanding the numbers quite confusing.

But it does give us things to write about.  

Number of Nonemployer Business Grew Again in 2019

According to the U.S. Census, in 2019, the number of U.S. nonemployer businesses increased to 27,104,006, up 2.3% from 2018. 2019 is the most recent nonemployer data available.

Nonemployers are businesses with an owner but don't have paid traditional full or part-time employees (W2 employees).

The data comes from tax records, and you can think of nonemployers as solopreneur businesses (some exceptions apply). The data includes anyone reporting $1,000 or more in self-employment income, so part-time solopreneurs are included in these numbers.

From 2010 to 2019, the number of nonemployer businesses has grown at an average annual rate of 2.5%.

That may not sound like much growth, but it's about three times the growth rate for overall employment.

One of the more interesting nonemployer data sub-trends is that the number high earning nonemployers - those who report gross receipts of $100,000 or more per year - is one of the fastest-growing segments.

Higher earners grew at an average annual rate of 3.7% between 2010 and 2019 and reached 3.23 million in 2019.

The Nonemployer Dataset gets less attention than other government data on self-employment.

This is because the dataset is messy, hard to work with, and includes a hodgepodge of business entities - passive businesses, firms no longer in business, LLCs owned by major corporations - that aren't active solopreneur businesses.

It also is hardly up to date.  The latest data is from 2019 and 2020 data won't be out for at least another year or so.  

But despite these issues, we find the nonemployer data to be a useful indicator of the historical growth of solopreneurs in the U.S.