Small Business Labs

Ryder Creates an Airbnb for Trucks

Truck leasing and rental company Ryder announced it's launching an asset-sharing platform for commercial vehicles. This move is quite interesting because the new marketplace will directly compete with Ryder's core business.

The platform, called Coop by Ryder, connects fleet managers that have idle vehicles to businesses that are looking to rent vehicles.

In other words, they're creating an Airbnb for trucks. 

According to Ryder, data from the 200,000 vehicles it leases and rents to fleet customers showed that around 25 percent of them sit idle more than one day a week. It seems likely that commercial vehicles owned by companies sit idle even more.

So there's a lot of spare truck capacity available. 

This means the new marketplace will allow anyone with spare truck capacity to rent it to others. This is directly competitive with Ryder.'s main business. 

But this type of marketplace was going to happen anyway (and marketplaces like this already exist). So Ryder decided that building their own marketplace is better for them than being disintermediated by someone else.

Seems like a smart decision to us. Below is Ryder's video explaining Coop.

Ryder's move highlights the ongoing shifts towards access over ownership and the use of connective technologies to increase asset utilization. 

These shifts are enabling small businesses access equipment and infrastructure once only available to larger enterprises.

This is very important trend that is creating many new small business opportunities. 

A good example is our firm, Emergent Research.

We wouldn't exist without the ability to access through the cloud advanced analytical tools that even fairly recently were only available to firms large enough to afford the substantial expense of installing these systems in-house. 

Fab Labs, Maker Spaces and the 3rd Digital Revolution

A new book, Designing Reality, argues we're entering the 3rd digital revolution, which the authors say is based on new fabrication techniques and technologies. 

In case you were wondering, the book says the first two digital revolutions were computing and communications.

The 3rd revolution is being driven by a combination of computer aided design tools linked to a variety of fabrication technologies including laser cutters, NC milling machines and, of course, 3D printers.

The authors are three brothers including Neil Gershenfeld, who runs the Center for Bits and Atoms at MIT.

The center studies "how to turn data into things, and things into data." 

Gershenfeld is also a founder of the Fab Foundation, which supports a global network of over 1000 Fab Labs.

These are makerspaces focused on educating members on digital fabrication. They are located primarily in schools, libraries,museums and other public spaces.

The book lays out a future where in the next decade fabrication stores will be located in most communities. Think FedEx Office/Kinko's, but for making physical goods.

Twenty years or so into the future the book suggests homes with a digital fabricator will be common. And in 30 years or so most homes will have multiple digital fabricators, fulfilling Star Trek's vision of the replicator. 

While this vision may or may not come to pass, what is happening is the number of global  fab labs and makerspaces is rapidly growing. 

We've long studied these coworking spaces for making things and our 2009 study on the maker movement is one of our favorite research projects. 

So while a Star Trek like replicator is probably decades away, fab labs and makerspaces are changing how things are made today. They're also creating new, small business manufacturing opportunities.

By 2020 Less Than Half the Children in the U.S. Will Be White

According to the U.S. Census, by "2020 less than half of children in the United States are projected to be non-Hispanic white alone (49.8 percent of the projected 73.9 million children under age 18)."

They say "white alone" because the U.S. Census defines Hispanic as "a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin regardless of race".

While Hispanics can be of any race, ancestry or ethnicity, most are white.

So in 2020 white children in total will comprise about 72 percent of all children. This, by the way, means in 2020 about 23% of all U.S. children will be Hispanic.

In addition to becoming more ethnically and racially diverse, the U.S. is also getting a lot older.

As the U.S. Census chart below shows, in 2035 there will be more Americans 65 and older than are 18 and under. 

Key quote from the U.S. Census on what this means:

As the population ages, the ratio of older adults to working-age adults, also known as the old-age dependency ratio, is projected to rise. By 2020, there will be about three-and-a-half working-age adults for every retirement-age person. By 2060, that ratio will fall to just two-and-a-half working-age adults for every retirement-age person.

Demographic trends don't tend to get as much attention as other trends. This is because they happen relatively slowly.

But these are seismic shifts that will have major impact on society and business in the coming decades.

Financial Shocks Lead to Gig Work

One of the most important findings from our gig economy research is the role financial hardships and shocks play in the decision to become a gig worker. 

These include things like job loss, work hours being cut, inability to work due to an illness or the need to care for someone, etc. 

Our surveys show that 21% of on-demand gig workers - those that get work through online marketplace such as Uber, Upwork and Task Rabbit - reported they participated in this type of work to help them get through a financial hardship or shock.

We also found that 41% of on-demand gig workers had faced a financial shock or hardship in the last year.

We were reminded of how easy it is for many to face a financial shock by the Car & Driver article Cash-Strapped Shoppers Enter the Used-Car Market on the Losing End.

The article covers AAA data that about one-third of American drivers cannot pay for the average car repair, which is between $500-$600, without going into debt. 

So a simple break down could lead to major financial problems for many Americans.

It also could lead to a 2nd job in the gig economy to help pay for the repair.

The reality is despite a strong economy and labor markets, a growing number of Americans live on the edge. 

It’s also clear that our traditional safety nets are not working as well as they need to.

This means more people will face financial shocks and need highly flexible sources of supplemental income to get through them. 

Which means more people will look to the gig economy for work.

Deloitte Thinks the Retail “Apocalypse” is Really a Renaissance

According to a new study from Deloitte the retail apocalypse is a myth. Instead, they believe retail is changing in line with consumer income bifurcation.

Their key finding is retailers serving higher-end and price-conscious customers are doing well and opening new stores, while retailers targeting middle income customers are struggling and closing stores. 

They even found that despite all the noise about store closures, thanks to the growth of high and low end retailing more brick and mortar stores have opened over the past 5 years than closed. 

The chart below is from Quartz's This is the real story of American retail, which covers the study. It shows that revenues of higher-end and price-conscious retailers grew 81% and 37% over the past 5 years. Revenue for those in the middle grew only 2%.

The reason for this bifurcation is growing income inequality. Key quote from the study press release:

“Households have diverged along economic lines and now people’s respective income levels are steering their behaviors and dictating the success of retail segments,” said Robert Stephens, senior manager, Deloitte Consulting LLP and co-author of the study. “More affluent shoppers have fueled high-end retail as their income and net worth have grown, while lower-earning consumers, faced with growing expenses and dramatically less disposable income, have turned toward price-conscious stores. Retailers that try to court all consumers will likely be challenged as income bifurcation leaves different shoppers with differing motivations.”

And the report quantifies this:

For the past 10 years, the lower 40 percent income group has found itself struggling to keep up with expenses, while the middle 40 percent has seen its income shrink. Thus, for 80 percent of consumers, the last decade has generally represented a dramatic worsening of their financial situation. Income and net worth gains are disproportionately going to the highest-income group.

That income inequality is significant and growing is hardly a new insight. But the Deloitte report nicely illustrates how it's changing the retail sector.

It also helps explain why so many Americans are turning to the gig economy to supplemental their income.

Study: Despite Uncertainty, Self-Employed Happier at Work Than Traditional Employees

A new academic study reports that the self-employed are happier and more engaged at work than traditional employees are.

The reason, according to the study, is they have greater levels of autonomy than traditional employees. 

This gives them more control over their work and a greater ability to be innovative.

The study - Work orientations, well-being and job content of self-employed and employed professionals - was conducted by professors from the Universities of Sheffield and Exeter and based on surveys of 5,000 workers in the UK, the United States, Australia and New Zealand. 

The research also found self-employment comes with challenges, anxiety and stress. These include longer hours and greater levels uncertainty than faced by traditional employees. 

Despite these drawbacks, the self-employed reported preferring self-employment over a traditional job. 

Since we covered this topic just last week, we feel like we're repeating ourselves. 

But despite the overwhelming amount of research showing these results, there are still many who don't believe that the majority of self-employed are satisfied with their work and prefer self-employment over having a traditional job.

As we also pointed out last week, some of this skepticism is due to risk profiles. Most Americans think self-employment is too risky. This makes them skeptical that others would find these risks acceptable. 

Another reason is a large minority - about 30% - of the self-employed would prefer having a traditional job. So it is fair to say a large number of the self-employed aren't happy.

But to repeat ourselves yet again - most are.

Flying eVTOL Taxis Getting Closer

The Barron's Penta article The Next Wave in Flight: Flying Vehicles You Can Summon With Your Phone covers eVTOLs, which are electric vertical take-off and landing vehicles. 

As the article points out, electric flying vehicles have a number of major advantages over traditional helicopters. They're substantially quieter, need much less maintenance and are easier and safer to fly.

They're also projected to be dramatically cheaper to own and operate. Key quote from the article:

While light single-engine turbine helicopters cost anywhere from $1 million to $4 million, have a distinctive and pronounced noise signature, and hourly direct operating costs of $360 to $644, eVTOLs are envisioned to cost anywhere from $70,000 to $250,000, emit half the noise or less of a helicopter, and cost 75% less per hour to operate.

Based on these cost projections, Uber thinks they can keep eVTOL passenger fares as low as $1.32 per seat mile. They plan to start testing their air taxi service - called Uber Elevate - in Dallas and Dubai in 2020. 

Other companies are also investing in eVTOLs, including big companies such as Bell Helicopter, Toyota, Airbus and Boeing. Most of these companies say public testing of their eVTOLs will happen in the 2019 to 2023 timeframe.

The picture below shows Airbus's eVTOL on it's first full-scale test flight.

According to the article, in total "more than 50 companies have already publicly invested $1 billion specifically in eVTOL vehicles and research ...".

We've pointed out in the past that flying cars have been predicted to be just a few years away since at least 1917. That's when both Ford and Curtis Aircraft released their first flying car prototypes.

But this time finally looks to be different.

NPR on Anxiety in the Gig Economy

NPR's recent Marketplace-Edison Research poll data (below) shows that gig workers "report significantly higher economic anxiety than regular full-time workers."

Regular readers will not be surprised by this. We've long reported on what we call the "yin and yang" of independent work. 

The yin and yang is most independents like the freedom, control and autonomy being independent provides. In exchange, they must deal with the hard work, uncertainty and anxiety that comes with it.  

NPR-Edison’s survey also found the yin and yang. Key quote on the positives of gig work from their article What Makes Gig Worker Anxious:

"Our survey finds that gig workers highly value setting their own schedule and being their own boss."

in our work we've found substantial risk profile differences between independent workers and those with traditional jobs. The net of this is independent workers are more willing to accept and deal with these risks – and the anxiety that comes with it - than those who have traditional jobs.

Even highly successful freelancers and independent workers face higher levels of anxiety. Key quote from the Harvard Business Review's The 4 Things You Need to Thrive in the Gig Economy, which covers a study of successful gig workers:

"All those we studied acknowledged that they felt a host of personal, social, and economic anxieties without the cover and support of a traditional employer—but they also claimed that their independence was a choice and that they would not give up the benefits that came with it."

So yes, gig workers experience more anxiety. But most think it's well worth it.

We've just started a new study looking at how independents and non-independents view and respond to risk. We'll report our results in a few months.

The Rise of Highly Skilled UK Freelancers

Exploring the rise of self-employment in the modern economy is a new report on self-employment in the UK.

It comes from IPSE (the Association of Independent Professionals and the Self Employed), who worked with Kingston University on this project. The study is based on data from the UK's Office for National Statistics.

The study provide a good overview of the growing self-employed sector of the UK economy. 

It also focuses on what they refer to as "highly skilled freelancers". These are the self-employed working in managerial, professional and technical occupations.

Key quote from their summary:

Today, more people than ever before are choosing solo self-employment for reasons such as the freedom and flexibility it provides. As a result, self-employment has grown enormously in the last decade, and the trend shows no signs of slowing.

Much of the recent growth has been driven by the expansion of the highly skilled freelance sector. This group has grown by 46 per cent since 2008, and now accounts for almost half (46%) of all solo self-employed.

This is similar to the U.S findings of the MBO Partners Client of Choice study series (we work with MBO Partners on this study). 

As the chart below shows, the number of U.S. independent workers providing services to businesses, which is a similar group to IPSE's skilled freelancers, have also been growing rapidly.

That the growth of this segment is similar across the two countries is no surprise. Both are facing the same trends and shifts. 

We're currently working on the 2018 update to this study series. We will report our new finding in a few months.

Do Uber Drivers Only Make $3.37 Per Hour? (The Quick Answer is No)

A study on ridesharing drivers - The Economics of Ride-Hailing: Driver Revenue, Expenses and Taxes - was released last week by the MIT Center for Energy and Environmental Policy Research.

Their finding that the ridesharing drivers working for firms like Uber and Lyft have median earnings $3.37 per hour was widely covered in the press.

The only problem was their analysis was flawed, something they conceded this week. 

The main flaw was pointed out by Uber in a post by their chief economist. It's a technical flaw, so we won't bother covering it here. See the Uber post for the details.

After reviewing Uber's rebuttal, the MIT researchers re-ran their numbers and are now saying ridesharing drivers median income is between $8.55 per hour and $10.00 per hour.

Both Uber and Lyft say this is still too low, and point to several studies showing higher earnings. In response, the MIT researchers say they are going to spend a few weeks reviewing their revised results. 

Our research 18 months ago on ridseharing driver earnings (net of expenses) found a $12-$14 per hour range for an average Uber/Lyft driver. 

But our data - like the data used in the MIT study - was based on survey questions asking rideshare drivers what they estimate their hourly gross earnings to be.

It's well known that people often misstate their earnings (intentionally and unintentionally) on surveys, which makes this data imprecise at best. 

It's also important to point out that there is no "average" or "median" rideshare driver. Most work part-time, drive different types of vesicles, pay different amounts for insurance, gas,etc. This means rideshare drivers have different cost structures. So using a set of average costs - as the MIT study and our study did - also leads to imprecise results.

Combining these two factors means any findings using surveys to get revenue and averages for the cost data are going to have large margins of error.

So large, we believed, that didn't publish our rideshare earnings study results. We simply didn't have enough confidence in the data.

All of this points out how hard it is to study this stuff.

After all, the folks at the MIT Center for Energy and Environmental Policy Research are obviously smart, talented researchers. But even they got it wrong. 

So, do Uber drivers only make $3.37 per hour? No.

But we still don't know how much, on average, they actually make.

For more this, see The Rideshare Guy's article on the study. In addition knowing the rideshare industry as well as anyone, their data was used in the MIT study.