Small Business Labs

McKinsey's Bias Busters Collection

McKinsey's Bias Busters Collection covers how are decisions are often affected by cognitive and/or organizational biases. 

These include being unwilling to cut back on an under performing asset or activity, getting too distracted by shiny new initiatives, sticking with numbers or projections that are out of date or likely incorrect.

But our favorite was what they call taking an "outside view" of a project or forecast. They describe this as:

"... building a statistical view of your project based on a reference class of similar projects."

They say this is important because if you do the analysis based only on in-house data, you're likely going to miss important information that can be learned from other, similar projects.

This is what we do in our forecasting projects here at Small Business Labs.

Because we're forecasting things that usually have little or no historical data, we can't use traditional forecasting models. Instead, we use diffusion of innovation models that incorporate growth rate data from similar industries or products that are more mature. 

For example, we built our coworking forecasts in part by using the growth and expansion rates experienced by premium coffee shops and boutique hotel chains in their early years. 

This approach helped us in creating forecasts that have been fairly accurate. It also helped us forecast how coworking's industry structure would likely evolve, and in particular, the emergence and coexistence of big and niche coworking spaces. 

We learned about this approach long ago while working at a consulting firm (not McKinsey). We were unaware of McKinsey's "outside view" method, which was developed by Nobel laureate Daniel Kahneman and his colleagues in the 1990s until we read the article. 

But it's nice to know that we are using an approach similar to one designed by Kahneman and used at McKinsey. 

While McKinsey focuses on the impact of biases on corporate decision making, the same biases impact small businesses and independent workers. 

The one we see most often with smaller businesses and independent workers is an unwillingness to cut back on a activity that clearly is not adding value. 

Regular readers know we often write about biases and our efforts to avoid them.

These are some of our least read articles. But we'll continue to write about biases. 

It's too important a topic not to.

Kauffman Foundation Indicators Show U.S. Entrepreneurship Near 20 Year High

The Kauffman Foundation recently introduced the Kauffman Indicators of Early Stage Entrepreneurship. 

The indicators cover:

• Rate of new entrepreneurs: The broadest measure possible for business creation by population.
• Opportunity share of new entrepreneurs: The percentage of new entrepreneurs who created a business out of choice instead of necessity.
• Startup early job creation: The number of jobs created in the first year of business.
• Startup early survival rate: The rate of survival in the first year of business.

The indicators cover the time frame from 1996 to 2017 and will be updated annually. They replace the Kauffman Index, which was also on entrepreneurial activity but not as data intense.

We first reported on the old Kauffman Index back in 2007 and have followed it every since. We will, of course, continue to follow the new indicators.

The most interesting finding from the new indicators is that early stage entrepreneurship was near a 20 year high in 2017. 

As the study chart below (click to enlarge) shows, the rate of new entrepreneurs is fairly stable.

But after peaking in 2010, it declined until 2013 and then started to increase again. 

The Kauffman Indicators use a somewhat unusual entrepreneurship measure - the percent of the adult U.S. population who create a new business each month. 

In 2017 this worked out to be .33% of the adult population, or 330 out of 100,000 adults. This is just shy of the .34 in the peak years of 2009 and 2010.

There have been a number of reports on the decline of entrepreneurship in the U.S. over the past few years. See this Brookings Study or the Washington Post's The decline of American entrepreneurship — in five charts for examples.

The Kauffman data shows otherwise.

We agree with Kauffman that entrepreneurship is alive and well in America. We'll explain why in a future article. 

Most CFO's Use Non-Employee Labor for Major Initiatives

New research from Robert Half Management Resources found nearly seven in 10 CFOs (69 percent) use non-employee labor for major one-time business initiatives, such as an acquisition or system implementation.

As the study infographic below (click to enlarge) shows, the most common approach is using a combination of internal and external teams.

The top reason for using external talent is access to specialized skills.

This study illustrates the growing use of highly skilled independent workers by corporations.

We'll have more on this topic in the near future.

Insect Farming Company Ynsect Raises $150 Million

Ynsect, a Paris-based producer of insect protein used in fish farming and pet food, recently raised $125 million. 

The company is using the money to expand in the U.S. and build the world's largest insect farm in Northern France. They plan to grow mealworms, which are larvae of the beetle species Tenebrio molitor (not that you care) at the plant.

       

Key quote from CEO of Ynsect from the TechCrunch article Tech investors see bugs as a big business as Ÿnsect raises $125 million on why insects are a good protein choice:

“By offering an insect protein alternative to traditional animal and fish-based feed sources, Ÿnsect can help offset the growing competition for ocean fish stock required to feed two billion more people by 2050, while alleviating fish, water and soil depletion, as well as agriculture’s staggering 25 percent share of global greenhouse gas emissions,” says Hubert. “Our goal is simply to give insects back their natural place in the food chain.”

We've covered the use of insects as a food source in the past.

And while insects are popular snack foods in parts of the world, most people continue to be hesitant to embrace eating bugs. So using bugs to feed fish, pets and livestock makes a lot of sense.

Insect farming is another example of the many changes happening in the food industry. See our Small Farms section for more on this.

Food Delivery Continues to Boom

It's been an interesting couple of weeks in the food delivery industry. 

Controversy swirled around grocery delivery company Instacart and their policy on tipping, witch many called wage theft.

While this led to Instacart changing their policy, other food delivery companies so far are continuing with their tipping practices despite complaints by both drivers and customers. 

The furor over tipping overshadowed a lot of news showing that the food delivery industry continues to boom. Examples include:

• Doordash is in the process of raising roughly $500 million at a valuation of more than $6 billion. This is a substantial increase in their valuation.
• Postmates has filed to go public. This is after recently raising $100 million at a $1.85 billion valuation.
• Walmart is partnering with delivery companies to provide same-day grocery delivery to 40 percent of households across the United States.
• Uber's financials suggest its delivery service, Uber Eats, is likely going generate $1 billion or more in net revenue in 2019.

And as the chart below from the Forbes article Uber's Secret Gold Mine shows, Uber Eats is about the same size as U.S. industry leader GrubHub.

The rapid growth of food delivery is also creating opportunities for a new kind of restaurant.

Referred to as "ghost" or "cloud" Kitchens, these restaurants prepare food for off-site dining only and use firms like GrubHub and Uber Eats for delivery. 

This, BTW, is an excellent example of how digital transformation is changing industries. 

The on-demand economy continues it's rapid growth. And, of course, it's not just food on demand. Everything is on demand and everything is being delivered.

And we see no reason why delivery shouldn't continue its rapid growth.

Purpose and a Paycheck and the New Retirement

Purpose and a Paycheck is a new book from Chris Farrell, a leading expert on retirement and workforce issues facing people over the age of 50. 

The book covers the "new retirement".

This is the growing trend towards older workers delaying retirement and continuing to work, either in traditional jobs or by starting their own businesses.

Regular readers know this is a topic we cover often (see our Baby Boomer section). 

In fact, back in 2013 we wrote:

We've written so often for so long about Americans - and especially baby boomers - delaying retirement that we're honestly getting tired of the topic. 

But since then it has grown in importance. 

The reasons are encapsulated in the book's tagline: finding meaning, money and happiness in the second half of life. 

Lots of research, much of which is cited in the book, shows that staying engaged and active in retirement leads to greater levels of health and happiness. 

Older Americans have figured this out and more and more are choosing to work longer — or have to, given that many haven't adequately saved for retirement.

This makes Purpose and a Paycheck a timely look at this topic.

The book's first few chapters debunk "the myth of creative decline" by pointing to extensive research showing that older people are as creative, innovative and entrepreneurial as their younger peers.

Farrell also covers research showing that older workers are generally just as productive and younger workers, and often more productive. 

The rest of the book focuses on the different ways older workers are staying attached to the economy. This includes self-employment, entrepreneurship, full-time jobs, part-time work, flexible employment and encore careers in both the for and non-profit sectors.

Throughout the book Farrell includes personal stories of people who’ve successfully continued working well past the traditional retirement age.

These stories include practical advice that anyone considering the new retirement will find useful.

The book also contains an analysis of the economic impact of an aging society as well as policy suggestions on how to deal with ageism and other age related issues.

Anyone considering working past the age of 55 will find this book of great value.

So will anyone who is older and not working, or younger and planning on not working when they get older. 

While choosing a life of leisure sounds great. The reality is those who stay engaged and contribute to society live better lives.

"Job Crafting", Independent Work and the American Dream

"Job crafting" describes the ways in which employees redesign and customize their jobs to foster greater work satisfaction and engagement.

This is done by breaking a job into tasks and then deciding what to do less and more of. 

The New York Times article How to Make Work Better covers job crafting and suggests greater use of it by those with traditional jobs would make work much better. 

It also points out that the academic researchers who came up with the concept were "inspired by what freelancers and entrepreneurs do." 

And, of course, independent workers and entrepreneurs are natural job crafters.

Our research, and the research of others, has consistently shown having work autonomy, control and flexibility is a key reason people become and stay self-employed.

Work freedom and control means independents can craft their work to their needs and desires. They can focus on the tasks they like to do and work when, where and how they like to work. 

We don't just want flexibility, control and autonomy in our work. It's also a central part of the American dream.

Another New York Times article - The American Dream is Alive and Well - covers a study by the American Enterprise institute that included asking Americans their view on the American Dream. Key quote on what the study found:

When Americans were asked what makes the American dream a reality, they did not select as essential factors becoming wealthy, owning a home or having a successful career. Instead, 85 percent indicated that “to have freedom of choice in how to live” was essential to achieving the American dream.

The chart below is from the AEI study and shows how Americans rank the components of the American Dream.

A recent Harris Poll also found that "six in 10 Americans (60 percent) said freelancing is the modern version of the American dream."

As we pointed out last week the trend towards desiring greater levels independence - and the autonomy, control and flexibility that comes with it - takes many forms. 

Job crafting is one form. Self-employment is another. And for many, so is pursuing the American Dream.

Modern Homesteading and the Trend Towards Greater Independence

The trend towards desiring greater levels independence - and the autonomy, control and flexibility that comes with it - takes many forms. 

Since we track the future of work, we spend most of our time researching the growth of independent work (freelancing, independent contracting, self-employment, etc.).

But there are other aspects to this trend. For example, the growing FIRE (Financial Independence, Retire Early) movement is all about independence. 

Another example is modern homesteading, which the Small Town Homesteading blog defines as:

Homesteading is a lifestyle of the pursuit of self-sufficiency and sustainability. It is often characterized by subsistence agriculture, livestock production, home preservation of foodstuffs, and it may or may not also involve other tasks such as; the small scale production of textiles, clothing, and craftwork for household use or sale.

Data on how many people are pursuing this lifestyle is non-existent. But according to the book The Modern Homesteader:

Dreams of self-sufficiency, independence, and tranquility continue to pull in a new generation of modern homesteaders.

We believe the movement is growing, although it continues to be small.

We also think that much like the digital nomad movement, most followers are "armchair homesteaders" who will never become real ones.

Instead, they will do things like raising chickens in their back yards or spinning yarn. 

For those interested in modern homesteading, there are a number of events you can attend to learn more. We're going to try to go to the DIY Homesteader Festival, which is being held outside of Winnipeg, Canada this August. 

We've never been to Winnipeg and figure if we're going to go, August is the month to do so. 

Modern homesteading is an edge community that has formed, in large part, around the desire for greater independence. This makes it interesting to us. 

Funding for Education Technology Startups Continues to Boom

Crunchbase's Aceable Scores $47M, As Startups Look To The Future Of Education (And Work) covers the continuing growth of venture capital investment in Edtech. 

The article chart below (click to enlarge) shows some (but not all) of the bigger Edtech funding rounds in 2018.

Key quote on why this is happening:

College is more expensive these days, the way that we think about work and training is shifting, and existing positions are requiring more tech skills than ever before. All of these changes are giving way to differentiated approaches to education, whether that be supplying an alternative way to go to school or offering courses to improve upon the skills people already have.

The article also references a prior Crunchbase article, China’s Education Startups Continue To Pull In Massive Funding Rounds. It covers Chinese firms that have raised hundreds of millions of dollars, mostly to help Chinese kids with their homework or learn English.

The idea that education would be disrupted by technology was one of the most common futurist forecasts during the Internet boom of the late 1990s. And after a very long gestation period it appears to happening, especially in China.

It's also happening in independent worker space, with a growing number of companies offering Edtech based training to help independent workers upskill. As we said in a recent article on this topic:

On-demand learning platforms play an important role in helping independent workers (and others) build marketable skills. We believe they will continue to grow in importance in the coming years.

JWT Intelligence's Top 100 Trends for 2019

The 2019 edition of one of our favorite trend reports - JWT Intelligence's annual forecast of 100 trends to watch in the coming year - is out. 

Yes, it really covers 100 trends across 10 broad categories. The chart below (click to enlarge) shows 5 of the categories and around 50 of the tracked trends.

JWT Intelligence is part of the giant advertising and marketing group J. Walter Thompson. So it's no surprise they focus on consumer trends.

But they also cover other types of trends, including a couple of work related ones:

Trend 96 - Workanomics - suggests:

"Reduced working hours, even down to a four-day work week, could become the reality for most workers this century."

Trend  36 - Freelancer First Services - is described as:

The writing is on the wall (including the acres of exposed brickwork of rapidly mushrooming WeWork co-working spaces). As self-employment continues to explode, a wave of freelancer-first networks and platforms is emerging, offering help and advice to self-employed workers.

But most are consumer oriented trends.

Some are the usual suspects and carry overs from prior years. For example there are several trends about the long tracked shift to experiences.

Of these, our favorite is trend 72 - Wanderlux - which is described as:

“Luxury used to be about gold, marble and chandeliers, big lobbies and glitzy hotels. It’s now about the experience. It’s about the destination. It’s about what I, as a guest, am getting out of this from an educational point of view and an emotive point of view ...”

Some are new and unusual. Bread 2.0 (trend 44) is an example:

“Carb” was a dirty term in the health and wellness world for a long time. But even with the gluten-free mania that’s sweeping the scene, a new generation of bakers is repopularizing bread, taking it in a healthier—and more inventive—direction.

We didn't know bread was gone, much less gone and back. 

Always fun to read, the report is well worth wading through for anyone interested in trends.