Small Business Labs

Work is Going Hybrid and it Will Have Major Economic and Societal Impacts

CNBC's JPMorgan will have staff cycle between office and remote work in a move that may remake Wall Street covers a plan by the bank to institute a rotational work location model that includes in-person and remote work. 

Key quote:

“We are going to start implementing the model that I believe will be more or less permanent, which is this rotational model,” Pinto told CNBC in a Zoom call from London, where he is based. “Depending on the type of business, you may be working one week a month from home, or two days a week from home, or two weeks a month.”JP Morgan isn't the only company planning on this.

According to a survey by the HR consulting firm Mercer, 73% of the firms surveyed plan to implement a hybrid work environment that includes both in-office and remote work.

And a Gartner study found that 82% of executives surveyed plan on allowing employees to work remotely at least some of the time. 

They are doing this, at least in part, because although most employees don't want to return to the office full-time, most want to return to the office at least some of the time.

Most companies also want employees to show up at the office at least some of the time.  They think it improves cultural, social cohesion, teamwork and innovation.  

So both employees and employers are saying they prefer the hybrid model.  

Axios also covers this topic in their article Remote Work Won't Kill Your Office.  Key quote:

The big picture: Since the onset of pandemic-induced telework, companies have oscillated between can't-wait-to-go-back and work-from-home-forever. Now, it's becoming increasingly clear that the future of work will land somewhere in the middle — a remote/in-person hybrid.

Surveys conducted in the six months since most people started working from home show that less than 10% of Americans actually want to work remotely all the time, according to a new Barclays analysis.

So it looks like the hybrid model is going to be the winner, at least over the next few years.  

If this happens, it will have major economic and societal impacts due to dislocations caused by changing commuter patterns and shifts in where people choose to live.

Urban centers will most likely be impacted the most due to the decreased number of workers commuting to city center offices. They will also see residents leave for cheaper places with more space.  

Suburbs will benefit due to existing suburbanites spending more time and money in their communities. 

Suburbs will also see an increase in new residents, due to people leaving the cities in search of lower costs and more space. But many of these workers will still need to be in commuting distance since a hybrid model means going to the office on a somewhat regular basis.

Smaller cities will also likely benefit because a large number of people will likely have enough flexibility to move even farther away from the office. 

The chart below, from LinkedIn's article So long big city! Handling a pandemic often means calling the movers shows these shifts are already happening.  

We're not at all suggesting the death of urban centers.  Many will still find them attractive places to live and a lot of people will continue to work in them.

But the remote work shift is going to have major social and economic impacts and we're still a long way from understanding what these will be.

Slow Travel, VanLife and Digital Nomads

Marriott's Taking Pause: How Slow Travel Is Changing the Way We Explore takes a look at the "slow travel" trend.

Slow travel, which is considered an offshoot of the slow food movement, focuses on spending more time in fewer places.  

Instead of attempting to squeeze as many sights or cities as possible into their trips, the slow traveler explores a destination and experiences the local culture. 

The slow travel trend has been around for years, but prior to the COVID-19, it attracted relatively little attention. 

The pandemic has changed this.

Due to travel restrictions and health concerns, slow travel is in vogue - especially with the large group of workers who can now "work from anywhere" thanks to the pandemic.

The new slow travelers like the less frenetic pace associated with longer stays. They also report being more productive workwise when they travel less.  

Van manufacturers have noticed.  

Business Insiders RV makers are rushing to cater to the new 'work from anywhere' crowd as the pandemic continues to force people to rethink their lives covers their surge in demand for RVs and Vans. Key quote:

"Many RV, camper van, and travel trailer makers have started catering their road travel builds to accommodate the rising popularity of digital nomads and "work from anywhere" crowd amid the pandemic."

We'll be publishing more detailed data on the boom in digital nomads and #VanLifers soon. But the quick summary is lots of people have taken to the road since the pandemic started.  This is especially true for those with traditional jobs who can now work from anywhere.

The K-Shaped - and Swoosh-Shaped - Recovery

There's much talk these days about a K-shaped recovery. This is a recovery where professionals and those with higher wealth and income are hurt less by the recession and recover more quickly than moderate and low-income Americans.

The K-shape is driven, in part, because industries that employ high percentages of low and moderate wage jobs are not recovering as quickly as other industries.

The chart below is from the U.S. Chamber of Commerce article The K-Shaped Recovery and the Cost of Inaction.  Key quote:

"Long gone is the notion that we’ll have a V-Shaped Recovery—a deep economic decline followed quickly by a sharp rebound. Instead, what we’re looking at is a recovery that will be vigorous for some sectors while others remain in freefall."

The Chamber article illustrates this by pointing out that "the financial services sector, for example, has already recovered 94% of its pre-pandemic employment. Leisure and entertainment, on the other hand, has only brought back 74% of the workforce."

Another factor is remote work. A much higher share of high wage jobs can be done remotely than low wage jobs. This has resulted in much higher levels of unemployment among low wage workers.

Cutting the data by income reinforces the idea of a K-shaped recession.

According to an NPR survey and covered in their article Nearly Half Of U.S. Households Face A Financial Crisis 54% of those with household incomes below $100,000 reported serious financial problems due to the pandemic, compared with only 20% of those with incomes above that threshold.

And, of course, the stock market's recovery heavily favors the wealthier.  The top 1% of Americans in terms of wealth own over half of all stocks and mutual funds and the top 10% own about 87%. 

That doesn't leave a lot for the other 90%.

Recessions have always increased economic inequality and hurt the wealthy less than those with low and moderate-incomes.  

But this one seems particularly hard on the low to moderate-income group.  

In terms of the recovery's shape, we think it will be both a swoosh and K-shaped.  One reason it will be both is the k-shaped jobs and industry recovery will keep the overall economy from fully recovering quickly. 

We think the economy will get to 90%-95% of pre-pandemic levels by the end of the year, but the last %%-10% - which are big percentages in terms of the economy - will take much longer. 

Unfortunately for the small business sector, it over indexes in industries that are not recovering quickly.  This is one reason we continue to forecast that a large number of small businesses will close this year.  

Most Want to Return to the Office, at Least Part-Time

A recent study by Colliers, a global real estate services company, found that 83% of those working from home due to COVID-19 would prefer to continue doing so after the pandemic ends.

As the study chart below shows (click to enlarge), 45% said they'd like to work from home 1-2 days per week.

Only 15% said they'd like to work from home full time.

Other studies have similar results.  A study by PWC, for example, found that 72%  say they’d like to work away from the office for at least two days a week post-pandemic. 

The Colliers study includes an interesting chart (see below and click to enlarge) showing what people miss about being in the office.

The top reasons tend to be related to social interactions.  This is not a surprise.  Loneliness is consistently listed as one of the top challenges associated with remote work.

It's clear that remote work will grow in the future.

But it likely will be a hybrid model with most employees splitting their time between home and the workplace.  

Study Finds Most Rideshare Drivers Want to be Independent Contractors

A recent survey shows that most rideshare drivers prefer being independent contractors instead of employees, including a slight majority of full-time drivers.

The study was sponsored by Uber (we'll get to that later) and conducted by two political consulting firms, one that leans Democratic and one that leans Republican.  Key quote from the report on the two firms and their work:

"Uber engaged two independent and well-respected research firms, Democratic-leaning Benenson Strategy Group and Republican-leaning GS Strategy Group to come together in a bi-partisan independent research project to explore the needs and concerns of app-based Drivers ..."

The study's key finding is that 64% of drivers report they prefer being independent contractors, with 24% saying they would prefer being a traditional W2 employee. The chart below (click to enlarge) is from the detailed study results report.

And as the study chart below shows (click to enlarge), a key reason most drivers prefer being an independent contractor is the flexibility it provides.  

This, of course, is no surprise to anyone following this topic. 

Almost every independent worker and/or rideshare driver study that has a representative sample we've seen shows that flexibility is a key reason people prefer being an independent worker.  And we've been at this a long time and have seen hundreds of studies.  Browse through our independent worker section to see many examples.

This study was sponsored by Uber, which means those opposed to Uber and drivers' classification as independent workers will attack it because of their involvement. We understand that having a corporate sponsor can lead to bias.

But in this case, the research firms released their full question set and answers.  This means you can dig through the questions and data and look for bias.  We did this and found that overall the study and survey questions were well constructed and methodologically sound. 

However, we found several cases of leading questions where the phrasing likely influenced the survey takers' responses. The study's agree/disagree questions also used a 4 point scale, which tends to inflate both positive and negative responses compared to a 5 point scale.

But as you can see from the chart above, the key study question on whether or not drivers want to be employees or contractors used a 5 point scale.  

We also found leading questions that both benefited Uber and went against them.  So at least in our opinion, the leading question and scale issues balanced out. 

Add in the fact that the study findings are consistent with almost every study done on this topic (including ours), and it's hard to argue the study is biased.

But a long time rule of PR is if you can't attack the message, attack the messenger.  In the case of studies, this translates to if you can't attack the study methods or results, attack the researchers and/or the research backers.  

So expect this study and its results to be attacked because Uber was involved.  

Braintrust - a Coop Online Freelance Talent Marketplace

Braintrust is a new entrant in the online talent marketplace space, but with a twist. 

Instead of being owned by investors and founders, Braintrust is a non-profit and the founders say it will be user-controlled by their talent.  

In other words, Braintrust is a coop, which is a business owned and controlled by the freelancers that they serve. 

Braintrust focuses on high-end IT projects and works with an impressive list of large corporations.  According to the company, their clients include Deloitte, Nestle, Netflix, Nike, Four Seasons, and Task Rabbit, NASA, Porsche, PWC, and Pacific Life. 

They also (naturally) have a blockchain and cyber token angle. 

Freelancers using the site will be issued tokens in exchange for working on the site or bringing new talent or clients to the site.  These tokens equate to voting rights on Braintrust's corporate actions and decisions.  This is how power will be distributed to the workers.  

Braintrust argues that by being a coop, their freelancers will earn more and have better control over their work than they would using a traditional for-profit marketplace.  

Establishing a coop online talent marketplace is not a new idea.  In 2014- 2015 the concept of "platform cooperatisim" was widely discussed in sharing economy circles.  

Shareable's 2016 story How Platform Coops Can Beat Death Stars Like Uber to Create a Real Sharing Economy nicely covered the topic.

It pointed out at that time a number of online talent marketplace coops existed.   These included New Zealand's Ensprial, a cooperatively owned and operated freelancer network, and Loconomics, a now-defunct (at least in the U.S.) coop version of Task Rabbit.

And, like Braintrust, the article argued that coops would provide workers with more income and control.  But 4 years later, coops haven't made a dent in the online talent marketplace industry.

But many great ideas and business concepts fail a couple of times before succeeding.  Maybe the same thing will be true with coop online labor platforms.

We hope so. Alternatives are always good, especially ones that are worker-friendly.

For those who want to learn more, Harvard Business School's Future of Work project has an excellent podcast interview with the founders of Braintrust.

The Rise of Synthetic Biology (and Synthetic Biology Platforms)

According to the National Human Genome Research Institute synthetic biology is:

"... a field of science that involves redesigning organisms for useful purposes by engineering them to have new abilities. Synthetic biology researchers and companies around the world are harnessing the power of nature to solve problems in medicine, manufacturing and agriculture."

Synthetic biology is not a new trend. About a decade ago it was hailed as the next big thing.  But like so many technologies, it's taken a while for the reality to catch up to the early hype.

But a number of new bioengineering technologies and advances, and especially CRISPR, are enabling a wave of new synthetic biology products and companies. 

Tech Crunch's Synthetic biology startups are giving investors an appetite reports on this trend.  Key quote:

"There’s a growing wave of commercial activity from companies that are creating products using new biological engineering technologies."

The best known synthetic biology company is probably Impossible Foods. 

They use plants and bioengineered additives to create plant-based food that looks and tastes like meat. 

But the TechCrunch article mentions several other examples, with our favorite being Pivot Bio.

They are creating self-fertilizing cereal crops like corn, wheat and rice.  This would eliminate the need for nitrogen fertilizers, which are major global pollutants. 

Another interesting example is Bolt Threads. Among other things, they are creating a synthetic alternative to silk using the same proteins as spiders use.

And, not surprisingly, there are synthetic biology platform companies helping to build the industry.  Another quote from the TechCrunch article:

"Platform companies like Ginkgo Bioworks  and Zymergen have large libraries of metagenomic data that can be applied to products like industrial chemicals, coatings and films, pesticides and new ways to deliver nutrients to consumers."

Both of these firms already have multi-billion dollar valuations.

There's little doubt that, at some point, synthetic biology will fundamentally change the world.  And it's starting to happen.  

The Census Bureau's Small Business Pulse Survey is Back and Shows the Pandemic is Still Taking A Toll on SMBs

The U.S. Census started a COVID-19 impact survey back in April to measure how the pandemic was impacting small businesses.  The weekly surveys ran until the end of June.

Unfortunately, the pandemic wasn't over by then.  But after skipping 6 weeks, they're back with what they are calling phase 2 of the surveys.

Things haven't improved much over the 6-week layoff according to the small businesses surveyed - 34% of the respondents said the pandemic has had a large negative effect on their business and 45% said it a moderate negative effect.  Only 6% said it had a positive effect.

More interesting, 11% said in the week prior to the survey they had decreased the number of employees at their firm and only 7% said the number of employees had increased.   

The combination of only 7% saying they increased employment coupled with 11% saying it decreased shows the economy is still struggling. 

The Census added a new question in phase 2 asking whether or not small businesses had increased their use of online platforms and marketplaces since the beginning of the pandemic.

As the Census chart below (click to enlarge) shows, only 25% of the SMBs surveyed said they increased their use of online platforms, while 35% said they had not increased their use. 45% said they didn't use online platforms in their business.  

This surprised us a bit.  Other surveys have shown a greater share of SMBs increasing their use of online platforms.  Since it's only one week's worth of data, we'll continue watching this to see if these numbers change.

The pulse survey is well worth following.  The Census even provides some simply analysis and visualization tools so you can play with data and/or track it over time.

The 2nd phase of this survey will run through October 15th.  We suspect, unfortunately, that there will be a third phase. 

3D Printer Homebuilder Raises $35 Million

Iconn, a developer of advanced construction technologies, recently raised $35 million. They're best known for their giant 3D printer that builds houses and other structures.

So far Iconn has mostly worked with non-profits on affordable housing in Mexico and other locations.  But they've also built the first permitted 3D printed house in the U.S. (pictured below). 

They have a big vision, which is disrupting the way houses and buildings are built.  Key quote from the VC investing in Iconn:

“I believe we will see an evolution of the entire home-buying value chain, especially when integrated with other technologies like digital transactions and augmented reality,” Constance Freedman, founder and managing partner at Moderne Ventures, said in a statement. “Consumers will be able to order, build, design and purchase a brand-new home in a matter of days — something that is truly innovative and truly disruptive.”

The video below shows Iconn's 3D printer in action and being used by a group of U.S. Marines to quickly build a storage facility. 

We've long covered the ups and downs of the 3D printer industry.  And while there are plenty of examples of 3D printing having an impact, the hype around 3D printers has generally exceeded the reality.

But developments like the Iconn printer show the reality is catching up.

The Great Gig Work Flexibility Debate

A debate is raging around whether workers have to choose between the flexibility of gig work or the benefits and protections offered by traditional W2 employment. 

On one side are those who believe Uber and Lyft drivers - and most other gig workers - should be classified as traditional W2 employees.

They argue there's nothing in labor law that prevents companies from offering employees as much work flexibility as gig work does. 

They say gig companies should hire all their workers as W2 employees and give them the same flexibility they have as independent workers.  

Uber, Lyft, and other gig companies disagree. 

Uber's essay Can Employees Really Work However They Want? argues that workers can't have both - or at least rideshare drivers can't - because it's not economically feasible. Key quote:

Think about it this way: Starbucks offers one of the most flexible part-time jobs around, but baristas can't just walk in unannounced, decide they will only make lattes while refusing all orders for cappuccinos, leave during the morning rush to go pick up their kid from school (without permission from their boss) and return to work at a Peet's Coffee. That would absolutely be allowed under the law, so why doesn't it happen?

The answer is simple: businesses simply won't survive if they have zero control over what their hourly employees, whether full- or part-time, actually do. Imagine a restaurant that offered their employees the same freedoms that drivers currently have with Uber. On any given night they might have a single waiter trying to serve 100 customers or 100 waiters all serving one customer. In the middle of preparing a dish, the chef could leave to go cook for the food truck across the street. And anytime their employees decided to be on-shift, they would have to be paid, whether they had any work to do or the restaurant was closed. 

We've studied the tradeoffs associated with self-employment and gig work - what we call The Yin and Yang of independent Work - for over a decade. We're also gig workers ourselves and have been for a long time.  So we think we have a pretty good understanding of this issue. 

We agree that labor laws don't, per se, restrict worker flexibility. Companies could offer workers the same level of flexibility that Uber offers their independent drivers.

But we also agree with Uber.

Economic reality means firms offering the same flexibility as independent work wouldn't be operationally efficient enough to be financially viable.

Because of this, if rideshare companies are forced to classify their workers as employees, they will have to make significant labor changes to maintain their financial viability.  These would likely include:

• requiring driver schedules, which would greatly reduce worker flexibility
• a reduction in the number of full-time drivers
• a substantial reduction in the number of part-time drivers

Full-time drivers who are offered a job and are fine working to a schedule would clearly benefit from this shift. 

The much larger group of part-time drivers (the vast majority of rideshare drivers work part-time) would either lose their job or lose the flexibility they want or require. Also, some full-time drivers would likely lose their jobs and others, because they are unable or unwilling to work to a schedule, would need to find alternative employment.    

Riders would also be impacted.  Fares and wait times would likely increase and areas with low demand would likely see their service substantially reduced, or even eliminated.   

We agree that rideshare drivers and gig workers, in general, should be provided more legal protections, better working conditions, and higher pay.  Our concern is requiring gig workers to be classified as employees would hurt many more people than it helps.  

Uber has recently proposed a set of legal changes that would provide a third way for drivers. It's their attempt to fix what has been called the "square peg, round hole problem" with labor law. 

We don't think Uber's third way proposal goes far enough. But we think it's a good start.  

But we also think eliminating low friction, highly flexible work options that millions of Americans financially rely on makes no sense.  Because of this, we think California's AB5 is way too restrictive and is hurting many of the people backers claim it is designed to help.

So in our view, neither solution solves the problem. So we'd like to see both sides go back to the drawing board.

As a side note, we've asked those claiming companies can offer as much flexibility as independent work for examples of traditional W2 jobs that do this.  So far not a single example has been offered.  If you know of any examples, please let us know.  

Farmers Business Network Raises $250 Million

Farmers Business Network (FBN) provides a data and analytics platform that helps farmers - and especially family farms - with everything from seeds and planting advice to pricing and marketing.

They recently raised $250 million and the company is valued at $1.75 billion.  According to their press release:

FBN is an advocate for family farmers and ranchers and is committed to the premise that true price transparency levels the playing field for farmers – regardless of geography or size – and also enhances competition at the manufacturing, wholesaling and retailing levels. By providing timely and transparent pricing on crop protection products, biologicals, seeds, technology and services, as well as ecommerce purchasing and financing options, FBN arms farmers with the tools they need to make the best decisions for their business, their families and the planet.

FBN says they have 12,000 members, covering 40 million acres of farmland across the U.S., Canada and Australia.

They make money by cutting out middlemen and selling directly to farmers.

According to the U.S. Department of Agriculture, there are over 2 million family farms in the U.S.  They categorize them into 3 groups:

• Very large family farms (101,265) gross over $500,000
• Large family farms (86,551) gross between $250,000 and $500,000
• Small family farms (1,925,799) gross under $250,000

Not surprisingly, small family farms - despite having an oversized presence at farmers' markets - only produce about 15% of U.S. farm products. 

And many of them only survive because the farmer has other sources of income. Family farms are also under financial stress due to trade wars and the impact of COVID-19 restaurant and cafeteria shutdowns. 

So any help family farmers can get is appreciated.

FBN is another example of the rapidly growing role platforms and ecosystems are playing for small businesses of all kinds.  And increasingly, the platforms target specific vertical or niche markets.

Uber's Third Way for Independent Contractors

Uber's 18-page report, A First Step Toward A New Model For Independent Platform Work, outlines their proposal for improving the financial security of independent contractors, especially Uber drivers. 

Uber's CEO also has an op-ed in the New York Times that provides highlights of the report and the reasons they issued it. 

The report has a series of nine proposals from Uber.  The report chart below (click to enlarge) summarizes these.

The RideShareGuy has an excellent review of the proposal from the drivers' point of view.  Because it's so good, we won't bother covering the same ground. 

Instead, we suggest you click here to read it.

Armchair Digital Nomads Hitting the Road

"Armchair digital nomads" is the term we use to describe the millions of Americans who aren’t currently digital nomads but tell us in surveys they plan on becoming one.  

We call them armchair digital nomads because in the past the vast majority who say this have not followed through. 

Instead, they've mostly treated digital nomadism as a spectator sport, following the exploits of real digital nomads via Facebook, Instagram, blogs, and other forms of social media.

For example, in 2019, 57.1 million Americans said they would (16.1 million) or might (41 million) become a digital nomad over the next 2-3 years. These numbers dwarf the 7.3 Americans who said they were currently digital nomads.

And based on data from prior years, we estimate pre-COVID only about 1.5 million of the 57.1 million armchair nomads became a digital nomad.

But COVID-19 is changing this.

The pandemic induced shift to remote work is untethering millions from their offices and even the need to be close to their offices. 

This is leading workers to leave their armchairs and become digital nomads.  

It's also changing digital nomadism in three key ways:

1.  More traditional employees are becoming digital nomads: In 2019, most digital nomads (almost 60%) were independent workers (freelancers, gig workers, self-employed, etc.).  This is because corporations have been hesitant to allow their employees to become nomadic.  This has obviously changed with a growing number of companies announcing they plan on allowing a much greater degree of remote work long term.  This gives millions of people the ability to become more nomadic - and many are doing so.

2.  Closer to home travel: Instead of flying from country to country, digital nomads are staying closer to home due to travel restrictions and a desire to be closer to family and healthcare.  This, too, will likely continue post-pandemic because nomadic traditional workers will likely be expected to show up at the office on at least an occasional basis.  Nomads will also choose closer locations due to a need to be in sync time-zone wise.  This means more #Vanlifers and RV based nomads.

3.  Longer stays, less travel: At least as long as the pandemic lasts, digital nomads will likely choose to stay put more and travel less.  We expect this trend to continue even after the pandemic ends. This is due to nomads learning the advantages of exploring a place and culture in-depth, countries increasingly courting digital nomads. and firms providing "living as a service" offerings that make multiple month stays easier.

We're currently doing a deep dive on how the pandemic is impacting digital nomads. We will report our findings in the fall.

MIT Economists on the Impact of COVID-19 on Labor Markets

The Hamilton Project essay The Nature of Work after the COVID Crisis: Too Few Low-Wage Jobs is authored by MIT economists David Autor and Elisabeth Reynolds. 

The essay covers four shifts being accelerated by the COVID-19 pandemic and their impact on labor markets. 

And, according to the authors, all four potentially have significant, negative consequences for low wage workers, economic inequality and overall employment. 

The four are:

1.  Telepresence: The essay points out that the shift to remote and telepresence is " is so self-evident that it might escape notice." But if there is a substantial reduction in the number of people working in offices and/or traveling to meet in offices, there will be much less need for the workers who feed, transport, clothe, entertain, and shelter people when they are not in their homes.

2.  Urban De-Densification: While stressing that "the death of cities have been greatly exaggerated over many decades," changes caused by COVID-19 will likely lead to a reversal in the growth of large urban centers due to people moving to the suburbs as well as smaller towns.  This, too, will result in less need for many workers who support those living in urban areas.

3.  Employment Concentration in Large Firms: Because of their stronger balance sheets and ability to raise capital, large firms tend to do better in economic downturns than smaller firms.  As we've pointed out, this recession is hitting small firms hard and many will likely permanently close this year.  

4.  Automation Forcing: Due to social distancing requirements and labor lock-outs, firms are quickly adopting automation technology (such as delivery drones) to keep their businesses running. This will likely result in leaner staffing in retail stores, restaurants, factories, and other places where companies have invested in labor-saving automation systems.

The authors suggest these four shifts will reduce the demand for low wage work, which will increase income inequality and long-term unemployment while also reducing economic growth.

Not good.

The essay ends on a positive note explaining that policy interventions at the federal, state and local levels could limit the negative impacts. 

NPR's economics show The Indicator has an excellent segment on the essay.  Also, see the essay for specifics on the policies they believe will be needed.

It's Looking Like a "Swoosh" Shaped Recovery for the U.S.

It's looking much less likely the U.S. will experience a sharp, V-shaped recovery. Instead, a growing amount of data is indicating a slower, "swoosh" shaped recovery is likely.

The swoosh refers to the shape of Nike's logo and indicates a recession that starts with a steep decline and is followed by a gradual recovery.

According to the Wall Street Journal's Economic Forecasting Survey, 70% of economists think the recovery will be swoosh shaped.

The reason is the continued outbreaks of COVID-19, which is leading to less economic activity.

The Opportunity Insights chart below (click to enlarge) shows an estimate of the percent change of total U.S. consumer spending.  

You can easily recognize the famous Nike swoosh in the chart.

You can also easily see that consumer spending stalled in mid-June and is running at about 6.4% below pre-COVID levels.  While much better than earlier this year, this is in a range that indicates we're still in a deep recession.  

Other data also supports a swoosh shaped recovery.  

The chart below is from Oxford Economic's U.S. recovery tracker.  The tracker looks at 6 economic sectors to develop an overall economic score.  

It again illustrates the swoosh.  But more ominously it also shows the U.S. economy has declined a bit over the past month.  Key quote:

"The foundations to this recovery are cracking under the weight of a mismanaged health crisis. Our Recovery Tracker fell for the third time in five weeks in the week ended July 10. The health index declined for the fourth consecutive week; demand fell for the second consecutive week, its largest decline in four months; and employment was unchanged."

Other data also points to a slower recovery, especially unemployment claims which have averaged well over 1 million a week over the past 4 weeks and rose last week over the prior couple of weeks. 

The resurgence of  COVID-19 likely means a full economy recovery won't happen until a vaccine is available and - and this is a big and - widely distributed.  This combination will likely not happen until at least Q2 of next year, and it could easily take longer.  

We, of course, hope the economy recovers quickly. But businesses of all kinds need to be prepared for the recession lasting well into next year.

Which Colleges Will Survive the Coronavirus

Scott Galloway is a professor at NYU, tech entrepreneur, author, and popular podcaster.  His article This Chart Predicts Which Colleges Will Survive the Coronavirus has caused quite a stir in colleges and universities across the country. 

The reason for the stir is the chart suggests a large number of colleges will fail and even more will struggle going forward.  His chart (click to enlarge) is below.  

Upsetting colleges, even more, is he names names.  And being listed as college likely to "perish" is not good PR.  

Galloway backs up his chart with a detailed analysis of the 438 US universities and colleges ranked by US News & World Report's top National University and National College rankings.

The analysis results in an index score for colleges that lumps the 438 colleges into 4 buckets - Thrive, Survive, Struggle and Perish.

Like all index-based ranking systems, there's plenty to quibble with if you don't like the scores.  But while we aren't all that knowledgeable about colleges, we have built multiple index ranking systems and this one looks pretty good to us.

You may ask why are we covering this in a blog focused on the future of work, small business and the gig economy?

The answer is colleges are facing the same set trends, shifts and dislocations as businesses and workers are.  So it's interesting to see how they're reacting.

Online Mental Health Marketplaces Democratizing Therapy

The COVID-19 pandemic has led to a substantial increase in mental issues.  According to a Kaiser Family Foundation study:

"Over half of U.S. adults (56%) report that worry or stress related to the coronavirus outbreak has caused them to experience at least one negative effect on their mental health and wellbeing, such as problems with sleeping or eating, increased alcohol use, or worsening chronic conditions."

Several online marketplaces are trying to make it easier and cheaper for people looking for a therapist to find one. These firms match therapists with patients and provide billing and telemedicine solutions for mental health practitioners.

Frame, for example, is a new startup based in Los Angeles. 

They use answers to an online patient questionnaire to match potential patients with therapists.  

Denver based Sondermind also matches patients with therapists. 

As an added service they check to see if the patient's insurance covers all or part of therapy costs.   

They recently raised $27 million in venture funding.

Both firms are attacking two big problems customers face when shopping for a mental health provider. 

The first is finding a provider who is a good fit.  This is the common matching problem faced by all online talent marketplaces. 

Both Frame and Sondermind do this by asking patients to fill out questionnaires and based on the answers provide multiple therapist alternatives.  

Key quote from the founder of Frame in Yahoo Finance's article This startup works like a dating site for therapy:

“We facilitate free intro calls,” she said. “Our users typically call two to three therapists ... You get to talk it out and make sure it's the right fit for you so that you feel comfortable. And then you can make your decision.”

The second problem is cost.  Therapy is expensive.  Both firms offer telehealth solutions, which cuts down on the cost.  And as mentioned above, Sondermind also helps patients access and use insurance if possible (a feature Frame will no doubt also have at some point).  

By making it easier to find and connect with mental health professionals - and by reducing patients costs - both firms are trying to allow more people the ability to access mental health professionals.  This is part of the broader democratization of services trend we've long covered.  

At this point, there are few - if any -  professions that don't have specialized online talent marketplaces connecting service providers with customers.  Lawyers, doctors, dentists, wealth managers, mental health providers of all kinds, engineers of all kinds, etc., etc., etc. all have industry specific online marketplaces.  

There's still much work to be done before the use of most of these marketplaces is mainstream.  Matching, for example, continues to be an issue. 

But it's clear the use of online talent marketplaces is rapidly moving to the mainstream. 

Zagat's Future of Dining Study

Zagat, the restaurant review site favored by foodies, recently released a Future of Dining Study. 

The study looks at the impact of COVID-19 on the eating habits of consumers and how they may evolve post-COVID.  

Zagat's report chart below (click to enlarge) shows that consumers plan to return to dining out post-COVID, but at a lower rate than pre-COVID.

These results are not surprising. Nor are the reasons. 

Simply put, diners miss the experience of dining out - and especially the social side of dining out.

And as the chart below shows, they also miss their favorite places.

But while consumers want to return to restaurants, they've also learned some new behaviors thanks to the shutdowns.  More people are cooking at home - and most are saying they plan on cooking more after the pandemic ends than they did before the shutdowns. 

Food delivery has also accelerated. And again, most say they plan on continuing using food delivery services at higher rates when the pandemic is over than prior to the pandemic.   

Restaurants are, obviously, one of the most COVID impacted industries.  Because of this, they are interesting to watch and learn from.  

Thrasio's "Platform on a Platform" Rolling Up Fulfillment by Amazon Small Businesses

Thrasio is a large and fast-growing acquirer of small consumer product companies that are part of Amazon's Fulfillment by Amazon program (FBA).  They recently raised $260 million in a funding round that values the company at $1 billion.  

Thrasio's business model is fairly straight forward.  They find and buy category-leading consumer product small businesses that operate on Amazon's platform. 

Key quote from Crunchbase's article on Thrasio's recent funding:

"... the company has acquired nearly 60 Amazon businesses, including 17 in the last quarter. In addition, more than $300 million in pro forma revenue and 6,000 products, makes Thrasio one of the top 25 sellers on Amazon ..."

After acquiring the firms, they integrate them into their systems and marketing programs.  This makes the individual firms more efficient and provides Thrasio with economies of scale. 

One of the things we find most interesting about Thrasio is they are building a platform business on top of Amazon's FBA platform.  This "platform on a platform" business model is not rare, but still somewhat unusual.  And even more unusual is Thrasio's size and ambitions. 

Most platform on a platform companies are relatively small. Thrasio is looking to be a very large firm and has the financial backing to do so.  

Thrasio's success will likely lead to others following its roll-up approach.  These new entrants will add layers of business complexity for anyone operating on or running a business platform or ecosystem.  

Thrasio itself, of course, has to dance with an elephant (Amazon) without getting crushed. But small businesses in the FBA program now have to contend with both Amazon and Thrasio - as well as potentially a number of Thrasio imitators.  

In our Top 10 Small Business Trends of 2017 we wrote:

Platforms have become so important that small businesses need a platform strategy. For most this will consist of identifying the best platforms to participate in and the right ecosystem roles to play. These decisions will increasingly play a key role in small business success.

This has become even more true today.  

How to Become an Independent Consultant

Last week we had an article on U.S. Census data showing a big uptick in the number of Americans who are self-employed.  

sIt's likely this increase is caused by people who have lost their jobs turning to self-employment.  

Because of this, we found the recent MBO Partners' blog post How to Become a Consultant: 5 Steps to Starting Right to be very timely.

Their 5 steps are:

1. Confirm that Self-Employment is Right for You
2. Develop a Strong Network
3. Use Social Media to Market Your Skills
4. Hone Your Personal Brand
5. Take a Look at Your Finances

They go into detail on each of the 5 steps and we certainly agree with their advice. So head over to their article to learn more.

Longer-term, we think the growth of full and part-time self-employment will continue even after the country recovers from the current recession.   

One reason is companies of all sizes will increase their use of nonemployee labor to improve their business agility and flexibility.  This is what happened as the country recovered from the two prior recessions.  

Another reason is more people will choose to become self-employed, which they will do for a variety of reasons including: - 

• to have more flexibility, autonomy and control over their lives and work
• to supplement their income
• self-employment is their best or only job option   

Regardless of the reason for becoming self-employed, it's important that the growing numbers of the self-employed plan for their shift to independent work. And if they plan to become independent consultants, a good place to start is MBO's article. 

Disclosure:  MBO Partners is an Emergent Research client.

Census Household Pulse Survey Data Shows Self-Employment Recovering

According to the U.S. Census Pulse Survey of Households. over the 10 weeks the surveys have been conducted (they started the end of April) the number of self-employed Americans has increased from 13.5 million to 15.2 million.  

This is an increase of 12.7%. 

During this period, the number of traditional jobs increased by only 1.2%. 

The pulse surveys are short, weekly surveys designed to track how households are doing during the pandemic.   

It's important to note that the Census started these surveys after the first wave of pandemic related layoffs, which is why the overall numbers are slightly higher over the 10 weeks.

Had they started these surveys before the pandemic, the most recent traditional employment numbers would be about 12.5% lower than when the pandemic started.

But the most recent self-employment numbers would only be about 4% lower.  

What's interesting about this data is during prior recessions self-employment fell faster and deeper - and recovered more slowly - than traditional employment.

This time it may be that self-employment is declining less than traditional employment and recovering more quickly. 

It's still way too early to draw any conclusions from this data.  And even if this is happening, it will take more research to understand why.  

But it's at least a potential bit of good news at a time when good news is hard to come by.

About 14 Million Freelancers, Gig Workers and Self-Employed are Getting Unemployment Insurance

The Pandemic Unemployment Assistance program (PUA) is part of the federal CARES stimulus act passed in March. The PUA extends unemployment insurance to the self-employed, independent contractors, gig economy workers, and others who typically don't qualify.

It's clearly been a success, with about 14 million workers receiving aid through the PUA.  

The chart below (click to enlarge) is from CNBC's Job losses remain ‘enormous’: Coronavirus unemployment claims are worst in history. It shows that PUA claims are about 40% of all the current continuing unemployment claims.

Without the PUA program, many millions of self-employed Americans would much deeper financial trouble than are currently are. And the economy would also be in much worse shape.

The program's success - and its importance to the financial health of so many people - lead to two policy implications.

First, the PUA program should be extended until the economic recovery is further along. Otherwise, many gig workers and self-employed are going to face financial difficulties.

And second, the PUA program is a successful example of a portable benefit that's detached from a traditional job.  Going forward, we need to create more portable benefits and make them permanent.  

BTW, Harvard Business Review's Gig Workers Are Here to Stay. It’s Time to Give Them Benefits nicely covers portable benefits.  See that article for more information on this topic.

U.S. White Population Started Falling in 2016

According to U.S. Census data, the number of white Americans fell by close to 100,000 in 2016 and continued falling in 2017 and 2018.  

As the Brookings' chart on this data below (click to enlarge) shows, the white population change in the U.S. has been declining for several decades.  But in the last 3 years, it fell.

Key quote from the Brookings report on this data: 

An important finding in the new census data is the decline of the nationwide white population for the third consecutive year. Between 2016 and 2019, the white population declined from 197,845,666 to 197,309,822, in yearly amounts of -97,507, -212,957 and -225,380. This three-year loss of over a half-million whites was enough to counter gains earlier in the decade, in total yielding a loss of white U.S. residents from 2010 to 2019.

And this change, thanks to the large cohort of aging baby boomers, is expected to continue.  

But while the number of whites declined, other demographic groups increased in number.  Again from the Brookings' report:

The unanticipated decline in the country’s white population means that other racial and ethnic groups are responsible for generating overall growth. Nationally, the U.S. grew by 19.5 million people between 2010 and 2019—a growth rate of 6.3%. While the white population declined by a fraction of a percent, Latino or Hispanic, Asian American, and Black populations grew by rates of 20%, 29%, and 8.5%, respectively. 

We've long covered the changing demographic make-up of the United States.  These changes are, if anything, accelerating.  

Just 6 years ago most demographers projected that the U.S. would become a minority-majority nation sometime around 2040.  

But this new data indicates that it will likely happen sooner, probably around 2035 (whites currently make up about 60% of America's population).  

BTW, it's highly likely 2020 will the be the year when less than half of U.S. children aged 18 and under will be non-Hispanic white alone (49.8 percent of the projected 73.9 million children under age 18).

So our shift to being a minority-majority nation is well underway. 

Our Updated Small Business Closure Forecast is More Optimistic, But Still Grim

In early April, we released a 2020 small business closure forecast. We've updated our forecast and the good news is we're more optimistic about small business survival rates than in our April forecast.  

The bad news is the numbers are still grim with the base case indicating about 1 million (17%) of U.S. employer small businesses will close in 2020. 

As the chart below shows (click to enlarge), the base case closure rate (50% probability) has decreased from 21% to 17% and the optimistic case (probability 25%) from 14% to 12%.  Under the optimistic case, about 700,000 employer small business businesses would close in 2020. 

As a point of comparison, in an average year about 8% of employer small businesses close.  And in 2010, the peak of the last recession, 10% closed. 

So even in our revised optimistic case, we're forecasting a 20% increase in closures compared to the Great Recession.  

The key reasons for the more optimistic view are:

1. After early hiccups and problems, the CARES Act has been more effective in supporting small businesses - and especially very small and micro-small businesses -  than we forecast in our April base case.  
2. The country opened up faster than in our base case.
3. The number of COVID-19 cases declined a bit more quickly than in our base case.

However, our pessimistic case (25% probability) closure rate is still very high at 32%, which equates to about 1.9 million small businesses.   

The pessimistic case remains high - both in closures and probability of happening - because COVID-19 cases are rising in many parts of the country, leading to new business restrictions and reduced consumer confidence.  This is putting another round of financial stress on already vulnerable small businesses.  

Also, if we face a 2nd COVID wave in the fall, we could easily see broader and stricter business restrictions across the country.  This would likely be the final straw for many small businesses already weakened by months of COVID related financial struggles.  

So our pessimistic case remains very pessimistic. And if the virus continues to expand at current rates, the odds of our pessimistic cases happening would increase. 

To say the economic outlook remains uncertain is, obviously, an understatement.  

For more on the forecast scenarios and methodology, see our April 7th forecast article.  

75 Must-Know Statistics About Race, Income, and Wealth

Morningstar's 75 Must-Know Statistics About Race, Income, and Wealth covers a wide range of U.S. financial indicators by race. 

Key article quote summarizing these statistics:

"On average, people of color experience significantly lower levels of income, retirement savings, and rates of homeownership than white Americans. Those shortfalls contribute mightily to other ill effects: poorer healthcare outcomes, lower educational attainment, and shorter life expectancies, for example."

The article chart below (click to enlarge) shows the median household net worth by race.  While the data is a bit old (2016), more recent estimates indicate this data is still accurate.

Wealth and income inequality is a major issue facing the U.S.  And it's not just a racial issue.  Generational wealth and income inequality is also a problem.  We'll have more on this topic in the near future.