Small Business Labs

Media Bias and Pew's On-Demand Economy Survey

Most of the media is not positive about the on-demand economy. A good example is the coverage of Pew Internet's Shared, Collaborative and On Demand: The New Digital Economy report.  

The study findings show the on-demand economy has extensively penetrated the U.S. economy in a relatively short time.

As the study chart below shows, 72% of Americans have used some sort of on-demand/sharing economy service, 15% have used a rideshare (meaning Uber, Lyft, etc.) and 11% a home sharing service such as Airbnb.

            
Given that most sharing economy companies have only been around for 5 years or less (Airbnb effectively has been available for 8 years), these are impressive numbers.

Few industries have grown as fast - especially since most of these services have been broadly available across the U.S. for only a couple of years. 

But based on the media coverage, you'd think these services hardly have any customers.

Despite the impressive numbers, the press has been reporting that the Pew survey found few Americans are participating in the on-demand economy. Some examples include: 

Fortune's 89% of Americans Don't Even Know What the 'Gig Economy' Is And only 15% have used Uber of Lyft has the key quote "Nearly 28% of Americans say they have not used any major shared or on-demand platforms." Somehow the fact that 72% reported using on-demand platforms escaped their attention.

Most Americans Don’t Know About Ride-Sharing and the ‘Gig Economy’ from the Wall Street Journal says "only 15% of adults have used ride-hailing services." This, of course, makes it sound like having 35 million Americans (roughly 15% of adults) using a service is a very small number. 

The reality is in just a few years - Uber went live 2011 and Lyft in 2012 - ridesharing has fundamentally changed the taxi business. 

Fortune's Uber and Lyft Have Absolutely Gutted L.A.’s Taxi Industry is one of many articles chronicling how much share ridesharing companies have taken from taxis. So grabbing 15% of all adult Americans isn't so small after all.

Other articles portray the users of on-demand services as only used by the rich and well-educated. 

Quartz's Uber and Airbnb really are for the wealthy and well-educated is a good example. It says "The new digital economy is increasingly looking like it belongs to the rich and well-educated", which simply isn't what the data shows. Yes, higher income people are more likely to use these services than lower income people.

But this is true for all consumer discretionary spending. For example and not surprisingly, Starbucks sells more coffee to middle and high income people than they do to those with low incomes. 

The general media bias against the on-demand economy is understandable.

Uber's intentional bad boy image and confrontational style certainly is one reason the press doesn't like this sector. Labor issues also clearly have had an impact on how the press (and others) view the on-demand economy.

But we think a bigger issue may be that the original, utopian vision that the sharing economy would lead to a kinder, gentler and more equal economy has not come true.

Instead, we got companies like Uber. Even the early sharing economy darlings Aribnb and Etsy have turned out to be profit driven instead of just socially minded. Etsy even had the nerve to legally minimize their tax bill. 

We suspect the disappointment with how this turning out is behind much of the media bias.

We're not suggesting there aren't problems with the on-demand economy. There are and these should be covered by the media. 

But as the Pew data shows, the on-demand economy is successful and consumers of all kinds are embracing it because the services add value.

It would be nice to see more balanced coverage of these facts.

Blockchain Starting to Move into the Real World

Goldman Sachs recently released a report suggesting that blockchain is moving past the hype and that the decentralized ledger technology that Bitcoin is based on will be used across a variety of applications in the near future.

We covered blockchain last year and here is our description:

... blockchain is a shared, distributed ledger — really a new type of database structure — that runs without a single centralized operator. It is a secure, public and external system of record that participants can inspect, audit and update, and within it, all transactions are recorded.

Information stored in the blockchain system is boiled down into a code or “hash.” If someone tries to change the information, the hash will appear different, making it easy to detect any foul play.

This transparency provides a security layer that is designed to prevent anyone from altering information being exchanged via blockchain, which is why everyone is excited about its use for transactions.

Goldman Sachs is suggesting 5 transaction oriented applications where blockchain's decentralized ledger technology could have a major impact by 2020:

1. Peer to Peer Digital Payments: Blockchain technology could promise a secure and superior system for record-keeping and managing digital payment histories in peer to peer applications such as directly renting a car from someone.

2. Decentralized Power: Goldman suggests that blockchain could be used to "facilitate secure transactions of power between individuals on a distributed network who do not have an existing relationship."

3. Property Title Insurance: These are classic ledger applications, so they are potentially right up blockchain's alley. 

4. Stock Trading: By using blockchain to record the clearing and settling of equities trades, Goldman estimates the industry could save some $12 billion in annual costs due to fewer errors and mistakes. This would be true for other types of trading also.

5. Preventing Money Laundering: By storing account information on a blockchain, it could reduce the number of invalid or fraudulent transactions that get through.

Blockchain is still at least a year or so away from being generally used beyond Bitcoin. So we continue to advise small businesses not to invest too much time or effort on it (unless, of course, your business is using bitcoins).

But we continue to think it's worth small businesses knowing about because it is a very compelling technology that is being developed by both well funded startups and major corporations. 

For those wanting more information on blockchain, the Strategy & Business article A Strategist's Guide to Blockchain provides a good overview. 

***Update*** An alert reader pointed us to the article Here's Why Blockchains Will Change the World, which was also came out today. It's another good overview of the topic.

Consulteering - A New Approach to Retirement

Work a Little, Play a Little: A New Retirement Strategy from the New York Times covers the  growing trend towards people working part-time in retirement.

As we reported last week, record numbers of Americans are working past 65. They are doing so for a variety of reasons, including financial need, wanting to stay engaged and simply enjoying work. 

The article focuses on a retired educator who has put together a portfolio of activities to meet his goal of “balancing a life of leisure with a life of purpose ...”. He calls this approach consulteering, which he describes as: 

"... my trifecta,” he said. “Paid work, giving back and relaxation."

Volunteering and spending time with family covers most of the giving back and relaxation. He also works part-time. The key is time management. Key quote:

The biggest challenge is time management. The management comes in how many gigs I will take on and how much volunteering we can realistically do.”

The article suggests more people will choose this path. We agree.

One reason is more people will need to do so. Simply put, many older Americans are not financially prepared for retirement and will need to work.

Additionally, many older Americans are pushed out of their jobs before they are ready to retire. Key quote from the article:

"A sizable 60 percent of retirees surveyed last year by the nonprofit Transamerica Center for Retirement Studies said they were pushed out of their jobs before age 65, largely for reasons out of their control, according to Catherine Collinson, president of T.C.R.S."

Others will choose to work part-time in retirement to stay and engaged. And, of course, many older Americans will continue working simply because they like it.

As we mentioned last week, older Americans have the highest rate of self-employment of all age cohorts. Age discrimination plays a part in this, but many older workers also prefer the flexibility and control independent work provides.

With 85 million baby boomers moving into their retirement years, you can see why we think the number of independent workers will continue to grow.

Coworking Has Crossed the Chasm

The Coworking Industry is an interesting white paper by coworking industry veteran Drew Jones, who is a partner in the boutique coworking consultancy OpenWork.

The paper uses the diffusion of innovation model developed in the book Crossing the Chasm to show that coworking has reached the early majority phase. This roughly equivalent to saying coworking is beginning to enter the mainstream. 

The key reason for this is the real estate industry and corporate America are starting to adopt coworking. Key quote:

We are approaching a world of work where building owners and property managers will have to, like today’s coworking spaces, present granular, modular, membership based office solutions directly to their corporate customers. 

We, of course, agree with this assessment and have even recently written about this. 

BTW, Crossing the Chasm first came out back in 1991 and was an immediate best seller. The framework is still used and even appears to be having a bit of a revival. It's been referenced in a number of recent meetings we've had with tech startups. 

The "chasm" refers to the most difficult customer acquisition step in the life cycle of a technology product - moving from visionaries (early adopters) buying your product to pragmatists (early majority) buying.

Most technology products don't make it through this step, which is why it's called a chasm.

The reason the authors feel coworking has crossed the chasm is the growing demand for coworking by corporations. According to the paper, this is due to 3 key drivers:

1. Radical reduction of real estate footprints (and costs) by corporations

2. Radical improvement in the quality of workspaces for the spaces that remain

3. Dramatic increases in choice and flexibility for knowledge workers

The paper also covers the evolution that has occurred in the coworking industry and how it has grown up. Key quote:

"AT FIRST, the growth of coworking was as much a social movement as it was a new way of working and using office space ...Today, as I discuss shortly, coworking has become a business, a subset of the real estate industry, where the relevant metric is revenue per square foot (RPSF)."

This shift is also extensively covered in Shareable's Look Out, Coworking. Here Comes Big Money. See the article's comments for a spirited discussion on this topic.

Record Number of Americans Working Past 65

Bloomberg's I'll Never Retire covers the trend towards people working past the traditional retirement age - or at least the recent traditional retirement age.

As the article chart below shows, the percentage of Americans aged 65 and older who are still in the workforce is at an all-time high.

The shift towards older Americans staying in the workforce is not new. As is clear from the chart, it started in the mid-90s. The reasons for people working longer are also not new and fairly straight forward.

About half, according to the article, mention a financial need to work and/or needing access to benefits. About one third said the primary reason was they enjoy work and/or want to stay engaged.

Older workers are, of course, much more likely to be independent workers (self-employed, contractors, etc.) than younger workers. So this is one of the key trends that is helping to drive the growth of the independent workforce.

Because of this, we've long covered this trend and even went as far as saying we were getting tired of it several years ago.

But with the oldest Boomers reaching 70 this year, we will no doubt be spending more time on this in the coming months.

See our Baby Boomer section for more on this.

Why People Work in Coffee Shops and Why This Means Coworking Will Continue to Grow

I ran across a really interesting post in Medium titled What are People Working on in Coffee Shops?

The title is a bit misleading.

It's really about what people are working on in a single coffee shop in Venice Beach, a hip and trendy L.A. beach community just north of Santa Monica. 

The article's authors briefly interviewed everyone who working in the Deus Ex Machina coffee shop (pictured above) on a Tuesday at 12:30 PM.

The results of their informal survey are not surprising - most everyone was doing some sort of job related work.

But even though it's just one space, I think the reasons given for working at a coffee shop are representative:

I work better around people.

I feel inspired around other people.

I like coming here because it’s close to home and I’m inspired by being around people.

I love the coffee and the environment here.

I try not to work at home because of all the potential distractions.

Regular readers have no doubt already jumped to the same conclusion I did - these folks would probably love coworking spaces. 

Even more interesting is the reaction of the article's authors. Key quote:

Something interesting happened that we weren’t expecting.

As I mentioned earlier, our brains were pleading with us not to talk to anyone in the coffee shop.

As soon as we’d finished though, the both of us were BEAMING.

It felt absolutely amazing to connect with all these people who were previously part of the background. We had small conversations, shared many, smiles and laughs, and left the coffee shop overflowing with energy and raw joy.

We kept telling each other:

That was amazing! I love people! This changes everything! I can’t wait to say hi next time I go back!

In other words, the authors found out that community is good. 

I'm not suggesting everyone working coffee shops will join a coworking space.

But if only a very small percentage of folks working coffee shops figure out how beneficial community is, the coworking industry will continue its rapid growth. And I think a small percentage will.

ProFinder - LinkedIn's Freelance Talent Marketplace Targets Upwork

LinkedIn has quietly launched ProFinder, it's online talent marketplace. 

It was first released in last fall, but at the time it was a bit unclear how serious LinkedIn was about ProFinder. That's no longer the case.

ProFinder, not surprisingly, is targeting the same market as Upwork, Freelancer.com and the other online talent marketplaces that connect freelance talent with businesses. 

Linkedin's post The Gig Economy is Seeing Double makes this very clear. So does their website. The chart below from the ProFinder site shows the types of talent you can find on their site.

If you wander over to Upwork's site, you'll see pretty much the same list.

It makes perfectly good sense for LinkedIn to target this market given that they're the main social networking site for white collar professionals.

What's been a bit surprising is that it's taken them so long to do this.

We suspect it has to do with LinkedIn's main source of revenue - helping recruiters and companies hire full-time employees. Providing direct access to contingent workers may have been seen as potentially competitive with their customers.

But as their chart below shows, the number of freelancers on LinkedIn's site has grown substantially over the past 5 years. It's simply become too big a business to ignore.

LinkedIn's entry into this market is another clear signal of the growth of the gig economy and the increasing role contingent talent is playing.

Top 10 Signs Coworking is Entering the Mainstream

The annual U.S. Global Coworking Unconference Conference (GCUC) was held last week in Los Angeles.

Based on what we saw, heard and learned, coworking is entering the mainstream. Our top 10 reasons why are:

1. The continued exponential growth of global coworking spaces and members: Carsten's Foertsch's excellent presentation on the coworking industry made it very clear our forecast at the 2014 GCUC that there would be 1 million coworking members by 2018 is woefully low. We'll be updating this forecast in the near future, but assume it's going way up.

2. Big Coworking is getting bigger - and more numerous: We first wrote about big coworking spaces in 2011, which at the time we defined as bigger than 20,000 square feet. Since then they've become much more numerous and much bigger, with spaces over 100,000 square feet increasingly common. WeWork is the obvious example, but there are now many, many more.

3. The real estate industry is embracing coworking: We regularly hear from real estate people developing shared spaces these days and they were active at GCUC. Since one of the industry's leading economists is suggesting that coworking's  growth is "absolutely unprecedented",  expect more participation from this giant industry.

4. Coworking continues to expand to new niches: Coworking continues to hybridize and verticalize with spaces being designed for a wide variety of target markets. A good example is MakeOffice's soon to be opened, 21,000 square foot space in Chicago targeted at health tech companies. Segmentation and growth into niche markets are clear signs of a maturing industry. 

5. Business centers and coworking spaces have finally figured out they're in the same industry: The Alliance Business Center Network and GCUC are now partnering on these events . Also, the new executive director of the Global Workspace Association is a former coworking space owner. The recognition by each group of the value of the other will help the entire industry.

6. Successful coworking business models have emerged and exposure to the business center industry is making them stronger: Business centers have always been, on average, savvier and more sophisticated financially than coworking spaces. This financial knowledge is being transferred to the coworking industry.

7. Coworking's innovative approaches to space and community are making the business center industry stronger: Business centers/executive suites are also gaining from interactions with coworking spaces. In fact, it's time to get rid of the separate names and start calling them the flexible workspace or workspace-as-a-service industry.

8. Coworking is truly global.  Conference speaker Jean-Yves Huwart discussed how coworking is taking off in Africa and Middle East. It's also booming in Asia and Europe. As we discovered last year on a trip to India and Dubai, there are coworking spaces everywhere. This is because the need for these spaces is universal.

9. Big corporations are moving into coworking: It seems almost everyday we hear about another big company getting involved in coworking. An interesting recent move by a big corporation is Verizon's partnership to develop workspace-as-a-service spaces with Grind.

10. WeWork continues to thrive: While other private "unicorns" are seeing their valuations get slashed (even Uber and Airbnb), both T.Rowe Price and Fidelity both marked up their valuation of WeWork last quarter. So even the tech slowdown is not (yet) impacting coworking.

Back in to 2012 we wrote about the Top 10 Signs Coworking is Growing Up. It's safe say coworking has entered adulthood. But at the same time it's still a nascent industry with lots of room for continued growth. 

New Coworking Video; GCUC Coworking Conference Presentations Available

A new coworking video was released last week at the GCUC coworking conference. 

It's short (2:30), to the point and nicely covers the reasons coworking has become so popular. It features the results of our coworking member survey.

 

The conference presentations are also available (registration required).

Lots of good stuff, including presentations on the changing nature of the economy and work, the important role community plays and lots of cool information on the leading edge of workplace design.

Uber Didn't Create the Gig Economy; The Gig Economy Created Uber

We've been in a lot of meetings lately where people talk about the "Uberization of Work".

These discussions tend to go the same way. The claim is made that Uber is creating the gig economy by hiring independent contractors instead of traditional employees.

We don't agree.

In fact, we believe the opposite - Uber exists because of the growing need for highly flexible part-time work to supplement incomes. In other words, Uber didn't invent the gig economy, they tapped into it. 

Several recent articles and studies help explain this. The Atlantic's The Secret Shame of Middle-Class Americans is written by one of the 47% percent of all Americans who couldn't come up with $400 to cover an emergency expense without borrowing or selling something.

This is not new news. As we pointed out last year, even many relatively high income households are living paycheck to paycheck. 

But the article generated so much interest, The Atlantic is publishing a series of responses from academics and researchers.

The article and the responses blame the usual suspects - wage stagnation, the loss of middle income jobs, lower unionization rates and fewer traditional jobs with benefits. And these are all part of the problem. 

But the response that caught our eye came from one of the folks who worked on the U.S. Financial Diaries project, which we consider one of the most important projects looking at economic uncertainty. Key quote from their response:

In the U.S. Financial Diaries project, Jonathan Morduch and I found that, on average, households in our sample experienced more than 5 months a year in which their income was 25 percent more or 25 percent less than the average. The same was true for spending.

Echoing this, recent research from the JP Morgan Chase Institute confirms the high degree of income volatility many Americans experiences. As their chart below shows, over half of Americans experienced an income swing of greater than 30% over the past year.

 

This income volatility means even those with the annual income needed to pay their bills often hit bumps in the road that lead to financial stress.

So what does this have to do with Uber and the rise of the on-demand economy?

The answer is Uber and the other on-demand economy companies have created simple, highly flexible ways for people to supplement their income. Because of this, they are able to top into a growing pool of people who due to wage stagnation, the decline of middle class jobs and greater levels of income volatility who are looking for highly flexible part-time work.

Airbnb was one of the first companies to recognize and tap into the growing need for highly flexible, supplemental income. They recognized this in part because the founders of Airbnb themselves needed supplemental income. 

But they weren't the first. The multilevel marketing industry has long tapped into this pool of workers, but they only offered work to people who enjoyed or were at least willing to do sales. The on-demand economy provides an opportunity for pretty much anyone to generate supplemental income in a highly flexible way.

And, of course, our work with Intuit shows the majority of those working in the on-demand economy are doing just that - working part-time to generate supplemental income.

We're often asked if we think on-demand economy jobs are good or bad. The quick answer is they are both, depending on the job, person and situation. 

But the reality is they are a necessary source of income for a growing number of people.