Small Business Labs

Economic Uncertainty Changing People's Decision Making

The American Institute of CPA's just released the results of an interesting survey looking at major life event decision making by Americans. 

The  survey found that half of American adults (51 percent) have delayed at least one important life decision in the last year due to financial reasons. This up from 31% in 2007.

The survey chart below shows that for many life events twice as many Americans are delaying decisions for financial reasons than in 2007.

Economic uncertainty is powerful trend.  It's a key reason we have lower marriage rates, lower birth rates, lower home ownership rates, higher income inequality and lower economic mobility.

It's also leading more people to seek side gigs and second jobs as well as being a key driver behind the growth of firms like Uber and Airbnb. 

We cover the impacts of this trend in our Economic Uncertainty section.

Millennials Pass Gen X as Largest Generation in the U.S. Workforce

Pew Research's Millennials surpass Gen X'ers as the largest generation in the U.S. labor force reports that in Q1 of 2015 Millennials surpassed Generation X to become the largest share of the American workforce.

The report chart below shows the generational shifts in the U.S. workforce over the past two decades.

 

An interesting sidelight to the report is Pew's definitions of age cohorts. Somewhat surprisingly there are no official demographic cohort definitions, so different groups use different definitions. Pew's are to the right.

Most everyone uses the same definitions for the older generations, but there are differences in how people define Gen X and Millennials.

For example, Pew ends the Millennial generation in 1997(see chart on right).

We define Millennials as those born from 1981 to 2000.

In most cases differences of a few years one way or another won't really matter or change the results of most surveys.

But it does make a difference in generational size. Obviously, the total size of Gen Y is larger by our definition than Pew's.  

So while it's not a big deal overall, it's worthwhile to check the definitions when you see sizing data by generation.

For example, we recently saw a report that defined Gen Y as those born from 1980 to 2007. The report focused quite a bit on how big Gen Y is relative to other generations.

Had we not known they defined the generation much more broadly than most, we might have misinterpreted their data.

WeWork Moves into Coliving

Coworking giant WeWork is launching WeLive, a project combining their coworking spaces with dorm-style micro apartments.

Here's the description of the Arlington, VA project from the press release:

The Crystal City project will be WeWork's first residential building, bringing the same benefits of co-working – shared amenities, a sense of community and opportunities for collaboration – to a residential building. The project will offer an entirely new type of apartment living within walking distance of the Crystal City Metro Station, several bus stops and Capital Bikeshare stations, and will serve as a model for adaptive reuse of an outdated building until redevelopment can occur.

The 12-story building will have 252 units, many of them 360 square feet or less, and several shared two-story “neighborhoods” with expansive common areas. The neighborhoods will be connected by staircases and feature commercial-grade kitchens, dining areas and shared community spaces.

WeWork's not the only company interested in coliving. 

General Assembly co-founder Brad Hargreaves is starting a coliving company. Key quote from a Fast Company article on his plans:

"The biggest problem that our students would always have at General Assembly is how do they find low-cost, flexible housing that has some of the same community values that we built," he says. "Many of our students can’t qualify for leases."

Fast Company's Six Months Inside a Coliving House, Silicon Valley's Answer to Urban Housing Problems nicely covers what it's like living in these places.

While the coliving movement is definitely gaining steam, it's not without hiccups. One of the larger coliving businesses, Campus, announced last week it was closing. 

And not everyone is positive about coliving. Pacific Standard's Silicon Valley's Extremely Expensive Bunk Beds makes it clear they don't like much about this movement.

But much like coworking, coliving makes sense for many people. And much like coworking, we expect it to become increasingly common.

The Reports of the 1099 Economy's Death Have Been Greatly Exaggerated

If you followed most of last week's news about a ruling by by the California Labor Commission that a Uber driver was an employee and not a contract worker, you'd think the 1099 economy will soon be dead. 

But, of course, it won't be.

My first thought was to write a long article listing the reasons. But I decided it would be easier to reference the articles already out there that present a balanced view of this decision.

Could a Legal Ruling Instantly Wipe Out Uber from Forbes point out:

A legal decision that could instantly cripple Uber would be years off and would likely only apply to part of its operations — and in the meantime, Uber would have time to lobby for new regulations or tweak its business model to stay afloat, legal experts say.

Uber Driver Case Poses Questions for the Sharing Economy from the Financial Times quotes me pointing out Uber can make changes to reduce the risk of being seen as an employer:

For its part, Uber seems set to fight. Its loss in California only came to light this week when it filed its intention to appeal the ruling. And Mr King believes that, with relatively minor changes to the way it handles drivers, it could reduce the risk of being seen as an employer.

CNET's Uber Driver is an Employee Not Contractor, Says California explains that Uber can make a number of adjustments and be just fine:

"These costs can be allocated across all parties involved in the work arrangement, from the employer to the worker to the consumer," said Gene Zaino, CEO of MBO Partners, a management services company for independent professionals. "For Uber, it does not mean that its business model is invalid. It just needs a good system to allocate these costs accordingly, apply a surcharge to passengers and remit the taxes. It certainly is a change, but these are all solvable issues."

Uber Finalizing $2 Billion Line of Credit from the Wall Street Journal shows that despite all the negative press, Uber can still raise money. They were looking for a 1$ billion line of credit but moved it to $2 billion because so many banks wanted in.

While this ruling will not kill Uber or the 1099 economy, it will increase the pressure on regulators and elected officials to clarify America's antiquated and byzantine methods for classifying workers.

A couple of articles highlight this issue:

Asking Tough Questions About the Gig Economy is an op-ed in the Washington Post from Virginia Senator Mark Warner. He makes a really good point about not leaving this issue to the courts:

... while while litigation about whether on-demand workers are independent contractors or employees, this question is too important to leave to the courts alone. As policymakers, we should begin discussing whether our 20th-century definitions work in a 21st-century economy.

Fast Company Co. Exist's Could Creating a New Class of Worker Solve the Sharing Economy's Labor Problems makes the case for a new class of worker, the dependent contractor:

Today, all employees are either full-time or independent contractors. For many modern workers, the definition is somewhere in between.

Re/Code's It's Not About Uber: Beyond the W2 Versus 1099 Debate covers similar ground. Written by the folks from the Institute for the Future, they say the world of work is changing and our ways of classifying labor need to change with it:

.. the danger is that we will use old classifications, like W-2 and 1099, to solve problems that are unique to this new landscape, laying groundwork for polarization and years-long legal battles. More importantly, we may miss a once-in-a-century opportunity to address long-standing inequities and build a labor economy for the future that is fair, creative and suited to the tasks of the 21st century.

We expect to see legislators at both the Federal and state levels to start to move on creating new laws around workforce classification.

Mobile Ad Spending Booming

Not surprisingly given the growth of mobile computing, spending on mobile digital advertising is booming.

As the chart  below shows, eMarketer is forecasting that in 2016 digital ad spend will surpass $100 billion and account for more than 50% of all digital ad expenditure.

        

They are also forecasting that in 2015 there will be there will be more than 2 billion smartphone users and about 1 billion tablet users worldwide.

Cloud Security a Plus for Small Businesses

The Wall Street Journal's Small Firms Shift Towards Cloud-Based Software covers the "fundamental shift" towards the use of cloud software and services by small businesses.

The article points out one of the major concerns on the part of small businesses is cloud security and whether or not their data will safe. It also nicely covers why this shouldn't be a major issue. 

Key quote:

Mr. Harmon, the Forrester analyst, said he expects those security concerns to fade as more small businesses begin to understand that their business data in the end may be safer on the cloud-based servers of a technology vendor, than “on a hard drive in the back of your store.”

Most vendors, he added, have their own security experts on hand—while many small-business owners do not.

This echos our research, which consistently shows 3rd party cloud security to be stronger and more effective than the onsite IT security of the vast majority small businesses.  

For example, our firm has lousy IT security. Despite the fact we have IT backgrounds, we simply don't have the time or the expertise required to be good at security. It's a key reason we make extensive use of cloud applications. 

This is not to say cloud security isn't an issue. Cloud companies do get hacked and small businesses need to have policies and procedures in place to manage the security of cloud applications.

But as the chart below from CDW's s Cloud 401: Navigating Advanced Topics in Cloud Computing study shows, only about 1 in 4 survey respondents report security as a major issue with cloud computing.

The slide also has some good advice on managing cloud security. 

How Silicon Valley is Changing How and What We Eat

KQED's 6 Technology Trends That are Changing How We Eat covers a group technology startups that "help people choose healthier, and affordable, food options."

Food products and technology have become a hot area in Silicon Valley.

According to Time's How Silicon Valley is Addressing the World's Food Crisis:

... the food industry and tech industry have started to intersect and companies like Google and Yahoo have major research projects related to the future of food. Many Sand Hill Road venture capitalists have placed major bets on various food technology and services.

Driving this interest is the size of the food industry (enormous) coupled with a growing interest in healthy eating.

Key quote from the KQED article:

"“More conscientious eating — meaning organic, sustainable and healthy food — is a huge trend, much bigger than many people realize,” said Ali Partovi, an investor in food companies. He says 91 percent of Walmart shoppers said in a 2014 survey that they would consider buying affordable organic food."

My favorite example from the article is Bitty Foods, which makes cricket-based flour and cookies. Their cricket-based chocolate cookies are shown above.    

We've covered the growing use of insects as food in the past, and we've had the opportunity to taste cricket-based flour. 

All in all, it's not bad. But afterwards you have the urge to jump around a bit.

In case you're not interested in health food, you will be happy to know that technology is also improving junk food. For example, Pepsi is using 3D printers to improve the potato chip.

According to a blog post in 3Ders.org,a site that tracks the 3D printing industry, Pepsi's new "Deep Ridge" potato chip was designed and prototyped using 3D printers.

My favorite article quote is about the IP generated by this project:

"the company has patents on not only the design of the Deep Ridge potato chip, but also the cutter and the ‘mouth experience’. "This is multiple layers of IP," he said."

You can patent a "mouth experience"? 

What is LifeWorking and How Does it Relate to Coworking?

Futurist Ayelet Barron has coined the term "LifeWorking" to describe:

"a way of life that does not try to separate life and work into two distinct and seemingly incompatible spheres, but instead meshes both into a new way of thinking about a life journey in the 21st century."

Her point is to find work that is personally exciting and fulfilling and that also allows you to enjoy the journey. Since work and life are blending anyway, why not do it a way that makes sense.

We're seeing many examples of LifeWorking in action in coworking spaces. The results of our recent survey of coworking members highlighted this. Key quote from the results presentation:

The boundaries between our work lives and personal lives are becoming increasingly permeable; we no longer rigidly split up our time between “work hours” and “non-work hours”.

Coworking members see their facilities as not just places of work, but also spaces where they meet other people and actively socialize. They're also places where they learn new skills and improve existing skills. 

In other words, they're not just workspaces, they're LifeWorking spaces.

Ayelet pointed me to the great quote below, which unfortunately describes work for way too many people.  The goal of LifeWorking is to change this.

If one wanted to crush and destroy a man entirely, to mete out to him the most terrible punishment … all one would have to do would be to make him do work that was completely and utterly devoid of usefulness and meaning.

Fyodor Dostoyevsky in The House of the Dead

The Rise of the Skills Training/Job Placement Industry

The current employment picture is quite interesting. The official statistics say we've got a great jobs market.  According to one economist:

"Not only are the labor markets stronger today than at any point in the past 20 years, but we are beginning to see the start of broad-based wage growth," Rick Rieder, chief investment officer for fundamental fixed income at BlackRock, said in a client note.

But many Americans disagree - especially recent college grads and young adults who are struggling to find work. 

The problem is a mismatch between job skills and job openings.

Corporation report increasing problems finding qualified people. According to a recent survey by the employment consulting group Manpower, companies are facing a "crippling talent shortage".

At the same time, many people report being unable to find work. Add in a growing reluctance by corporations to train their staff and the mismatch becomes even clearer.

In response to this problem a rapidly growing industry focused on providing skills training and job placement has emerged.

A good example is General Assembly, which teaches technology, design and business skills through a variety of part-time and full-time courses. Below is a description of their web development immersive course from their website.

Another example is Korfu, which teaches recent and soon to be college grads basic business skills.

Programs at Korfu and General Assembly aren't cheap. Korfu's three-and-a-half week course costs $2,750 and General Assembly's 8-10 week intensive classes cost between $8,000 and $12,000. 

If you need job skills or are interested in changing careers, courses like the ones offered by Korfu and General Assembly (and others) are certainly helpful.

Not only will they teach you in-demand skills, but you're also surrounded by highly motivated students (they are mostly paying their own way) who engage and push their fellow students.  Because of this, there's a real focus on learning.

But the reason they can charge so much and are increasingly hard to get into - Korfu, for example only accepts 1 out of 4 applicants -  is their track record getting their graduates jobs.

These firms know in the end their success and the success of their students success is measured by how well they place their grads in jobs. Because of this, they work hard on job placement.

We've interviewed dozens of people who haven't taken these courses and the vast majority report being highly satisfied. And the reason is almost everyone we've interviewed found a job in their field of study and many had multiple job offers.

A combination of trends are driving the rapid growth of these types of training firms. Expect to see this industry continue to expand in the coming years.

The Personal Services Boom

Back in 2008 we forecast that personal services would be one of the key small business growth sectors over the next decade. We described their appeal as:

Personal services firms ... provide life support services to increasingly harried, time-constrained consumers. Basically, these folks are paid to do things we used to do on our own, or did without.

Since then the personal services sector has boomed (and yes, we are patting ourselves on our back).

And according to trend spotting firm PSFK, the personal services industry will continue to boom. Their article Democratizing Access to Personal Helpers describes this trend as "always-on assistance". Key quote:

While the concept of hiring help is certainly nothing new, the proliferation of mobile devices and growing acceptance of the sharing economy have coalesced to democratize access to a dedicated network of helpers. What was once reserved for the wealthy has now become possible for the freelance writer, young professional, or middle class parents of the world.

  

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

While convenient for consumers, not everyone is happy with the growth of the personal services market.

Many believe the personal services sector is creating a new class of serfs - poorly paid workers with few rights, benefits or legal protections.

We're more positive about these jobs.

But regardless of what you think about this sector, it's going to continue growing rapidly for at least the next 3-5 years.