Small Business Labs

The Continuing Growth of the Multi-Earner Trend

Morgan Stanley's Goodbye Gig Economy. It's a Multi-Earner Era describes the long-term trend towards people having multiple sources of income instead of relying on a single traditional job.

Key quote from the article:

"The concept of working multiple jobs isn't new. But what has changed is the desire to eschew or supplement traditional employment, as well as the ability to do so cheaply and at scale using platforms that reach large and growing audiences."

The article has an interesting taxonomy describing the various online platforms used to earn money today. They call it the X to Earn Ecosystem:

• Create-to-earn platforms include everything from YouTube and TikTok posts, to original music, art, and more.
• Sell-to-earn platforms represent two categories: merchants selling or re-selling products via large marketplaces and small businesses using platforms to run or amplify their businesses.
• Deliver-to-earn platforms focus on delivery, takeout food, and other staples.
• Rent-to-earn platforms make it easy for owners to rent their vacation rentals and personal car rentals.
• Invest-to-earn platforms represent two categories—traditional and crypto investing.
• Gig-to-earn platforms are among the more established in the segment and include such areas as ride-sharing, task sharing, and professional outsourcing.
• Play-to-earn platforms, also known as P2E, have been growing in popularity, in part out of enjoyment but particularly because players are rewarded in a variety of cryptocurrency tokens for their participation.

The article also points out that many of the multi-earners hope to be able to leave their traditional job and focus on X to Earn activities. Key quote:

"An average of 40% of people earning across all X-to-Earn categories surveyed suggested that they aspire to leave their full-time jobs in the coming six months to focus on these income streams."

We've long covered the trend towards multiple sources of income.

In 2014, in conjunction with Intuit Corporation, we released Small Business Success in the Cloud. As part of that study, we discussed career portfolioists, which we described as:

"Successful cloud-adapted freelancers will bring together multiple income streams to create a career portfolio."

The chart below (click to enlarge) is from that study.

The proliferation of X to Earn platforms has made it cheaper, easier, and less financially risky to generate revenue from various activities.  

And as we know from economic theory, when things become cheaper and easier, their use tends to grow.

That's certainly the case with multi-earners.  

The Hollywood Model and Freelance Teams

A.Team is a new startup that helps companies easily and quickly assemble teams of vetted specialists to design, build, and bring digital products to market.  

Their focus on teams is referred to as the Hollywood model, which is often touted as the future of work. The 2015 New York Times article What Hollywood Can Teach Us About the Future of Work describes this model as:

"A project is identified; a team is assembled; it works together for precisely as long as is needed to complete the task; then the team disbands." 

A.Team is already described as using the Hollywood model and even has Hollywood celebrities as investors. Key quote from the Forbes article Tech Talent Startup A.Team Raises $55 Million From Investors Like Adam Grant And Jay-Z: 

"Like a Hollywood producer that brings together talent to make a movie, A.Team's business model is based on matching top-tier talent with worthy projects. That means vetting and restricting who gets on its platform, soliciting the right client work, and creating community through content, connections, and conversation."

Freelance teams are not new. We started Emergent Research two decades ago using this model - and we still use it today.

Also, large freelance talent marketplaces like Fiverr and Upwork released teaming services several years ago.  There are also many niche firms providing project teams.

For example, Communo provides creative and production teams for marketing and media projects. There are similar firms in a variety of fields.

We find A.Team interesting for several reasons.

First, as the A.Team chart below shows (click to enlarge), their focus is on larger, longer term projects (they call them "missions") that use highly skilled labor.  

Others are also doing this. But A.Team illustrates that the appetite for high end freelance teaming continues to increase.

We also like their stated focus on building community among their freelancers. Again, others are also doing this. But so far, few have cracked the code of making freelance communities genuinely effective. We'll be interested to see if A.Team figures it out.

BTW, we think A.Team should sign Mr. T as their celebrity spokesperson.  No doubt we're not the only ones suggesting this.

The Shrinking American Middle Class

Pew Research's How the American middle class has changed in the past five decades reports that the share of adults who live in middle-class households fell from 61% in 1971 to 50% in 2021.

As the Pew chart above shows, while the middle-income share was falling, the upper-income tier increased from 14% in 1971 to 21% in 2021. Also rising was the share of those in the lower-income cohort, from 25% to 29%.

At first blush, these numbers don't look so bad. After all, increases in the upper-income cohort explain 63% of the decrease in the middle class.

But the Pew chart below tells a more troubling story.

In 1970, middle-income households accounted for 62% of U.S. aggregate income. But by 2021, their share had fallen to 42%. 

Meanwhile, upper-income households increased their share of U.S. aggregate income from 29% in 1970 to 50% in 2021.  

The main driver of the share growth is that the income of upper-income households increased by 38% more than the incomes of middle-income households - and by more than 50% faster than low-income households.

Pew didn't go deeper in this study, but a prior Pew report - Trends in Income and Wealth Inequality - reported that the top 5% of households saw the most rapid growth in household incomes.

In other words, much of the share growth in aggregate income by upper-income households is attributable to the fast-rising incomes of the top 5% of U.S. households.

Widening income inequality has a variety of social, political and economic impacts. Growing political polarization is one example. 

And an economic example is the growth of both dollar stores and luxury retail. 

Another is the rise of side gigs and the gig economy due to the increased need for supplemental income by lower income Americans.  

The trends driving inequality continue to be in place, and we expect income and wealth inequality to continue to increase.

Not Many are Excited About the Metaverse

According to the recent Axios/Momentive What's Next 2022 Poll, only about 40% of Americans are familiar with the metaverse, and just 7% are more excited about the future because of it.

The low metaverse awareness number is also likely overstated.  

This is because when you ask about awareness of trendy or aspirational topics in surveys, you get a lot of false positives. This is especially true if the topic is trending online and in social media.

As the Axios/Momentive chart below shows (click to enlarge), younger people, not surprisingly, are more likely to say they are familiar with the metaverse than older people.

We found the survey's excitement and scared question and data (see chart above) quite interesting. 

The question is, in our opinion, oddly worded and prone to misinterpretation. So although it's interesting, we're not taking the results too seriously.  

But it does seem to indicate that few are more excited about the future because of the metaverse - even only 14% of younger respondents said they were more excited. 

Also, the scared data is, at least for the industry, scary.

Not only does one-third of respondents say the metaverse makes them more scared about the future - it's true for all age groups.

These data points indicate that the industry's excitement, hype, and hope about the metaverse may be overblown.   

It definitely shows that the metaverse industry needs to do a lot more explaining and education. 

The Axios/Momentive poll covers other topics, including consumer views on smart cities, micro-mobility, and electric vehicles.  

BTW, Momentive is the company formally known as Survey Monkey.

McKinsey and Bain on the Economic Impacts of the War in Ukraine

McKinsey and Bain are two of the three "big 3" strategy consulting firms. They provide business and financial advice to large corporations, governments, and non-profits across the globe.

Each firm has recently come out with its views on the likely economic impacts of the war in Ukraine.

Both firms point out that while Russia, Ukraine, and Belarus are relatively small end markets, these countries are critical sources of supply for various global commodities. 

Because of this, they both believe the broader economic impacts of the war are potentially significant.  

The chart below (click to enlarge) is from Bain's Crisis in Ukraine: Respond and Reposition and it shows the significant exports of the three courtiers involved in the war.  

Food and energy are the biggest categories, but metals and other raw materials are also on the list.

Bain highlights too many potential impacts to cover here. But the big ones are increased inflation, supply chain disruptions, lower economic growth, and geopolitical realignment.  

McKinsey's War in Ukraine: Lives and livelihoods, lost and disrupted covers much of the same ground.

One of their most interesting observations is that there will be financial system ripple effects. Key quote:

The disruption of sanctioned financial flows has the potential to ripple through the banking system and financial markets, with significant repercussions for affected bondholders, lenders, aircraft lessors, derivatives counterparties, and investors. There remains a risk of contagion with second-and third-order effects across the globe.

An example is AerCap, the world's largest aircraft leasing company, which has filed a $3.5 billion insurance claim because they have 100 jets stuck in Russia.

This is one of the first of what will likely be a barrage of losses and legal claims caused by the war and related sanctions.  

Both McKinsey and Bain point out that the war has created a high level of uncertainty in the global business environment. 

We certainly agree and think small businesses should:

1. evaluate how exposed they are to the direct impacts of the war. Energy and food-related companies will be likely be directly impacted. But supply chain disruptions due to raw material shortages will also impact a variety of SMBs. And almost everyone will need to deal with higher inflation.  

2. have a plan in case the war and its effects push the U.S. economy into recession. The good news is that most economists are not currently forecasting a recession. But many economists are cutting their economic growth forecasts and suggesting a slowdown in global economic growth will happen.

3. the pandemic forced many firms to become more agile and resilient. War impacts may mean SMBs will need to redouble these efforts.

The Bain and McKinsey articles are an excellent places to start in terms of thinking about how the war may impact small businesses. They're well worth reviewing.

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

The Shifting Views on the Riskiness of Traditional Jobs Versus Self-Employment

Harvard Business Review's Workers Don't Feel Like a 9-to-5 Job Is a Safe Bet Anymore, which we co-authored, covers the changing way workers view job security.

As the article chart below shows, the pandemic accelerated a growing trend towards full-time independent workers feeling more secure working independently instead of having a traditional job.

 

Also, the share of jobholders saying independent work is more secure than a traditional job has increased from 18% in 2018 to 29% in 2021. 

While this data initially sounds counterintuitive, the reasons behind this shift in views are straightforward. 

Almost everyone believes traditional jobs have become less secure than they used to be. This is because corporate restructuring and layoffs have become common even in good times. 

And because traditional jobs have become less secure, self-employment - by comparison - looks more secure than it used to.

The self-employed also tell us that they feel more secure because they have multiple income streams, can pivot and react to changing market conditions, and control their destiny.

And it also appears that independent work has become less risky over the past decade.  

We cover this in more detail in the article. But the key reason is that the Internet and new technologies have made it cheaper and easier to become self-employed and operate as an independent worker.  

This shift in how workers perceive job security means businesses large and small need to rethink their employee value propositions. Key quote from the article:

Job security is a key reason people choose traditional employment over independent work. But declining perceptions of job security, coupled with workers rethinking what they want when it comes to work/life balance, are leading more people to prioritize flexibility, autonomy, and control when choosing where they will work ... Because of this shift, to successfully attract and retain top talent in the post-pandemic world, employers will need to give their employees the freedom and flexibility associated with independent work.

See the article for more on this topic.

The Post-Pandemic Rise of the 3rd Place

The Hill's The future of work: Not the office or home covers an academic study showing that more people are working from "3rd places", which is anywhere that is not a person's home or regular place of work.

As the study's chart below shows (click to enlarge), workers reported spending about 12% of their working hours in 3rd places in November of 2021.

In terms of 3rd places, public places (coffee shops, libraries, etc.) were the most popular, followed by "a friend's house" and coworking spaces.

Regular readers know we've long covered coworking and the increasing use of 3rd places, such as coffee shops, gyms, and other spaces people work.  

So the trend towards working in 3rd places is not new. But like many other trends, it's been dramatically accelerated by the pandemic-induced shift to remote work.

While we're on this topic, another interesting shift relates to one of our favorite trends - the paradox of place.  

The paradox is that even though the Internet and connective technologies have made working remotely easier than ever, people and companies have increasingly clustered together in fewer locations, mostly in and around major cities.  

Economists call this agglomeration, which proves yet again economists shouldn't be allowed to name things.  

This is another trend impacted by the pandemic. 

We're seeing signs that, thanks to the shift to remote work, the paradox of place is breaking down and workers and companies are geographically spreading out.     

We expect both the trends towards greater use of 3rd places for work and economic de-agglomeration to continue.  

According to Gallup, Few Remote Capable Workers Want to Work Full-Time in the Office

Gallup's The Future of Hybrid Work: 5 Key Questions Answered With Data covers their data showing that only 9% of workers with remote capable jobs prefer returning to the office full-time.

As the Gallup chart below shows (click to enlarge), most (50%) prefer a hybrid work schedule, and almost one-third (32%) say they'd like to work remotely full-time.

This is not good news for the companies planning to return to the office full-time.

The reasons most workers want a hybrid work schedule are:

1. To avoid commute time.
2. It's better for my well-being overall.
3. I need the flexibility to balance family needs or other obligations
4. The option to work in person with coworkers.
5. I feel more productive and connected to my organization.

Key quote from the article:

"Hybrid work helps employees get the most out of their day while ensuring they feel connected to coworkers and the organization."

That few want to be in the office full-time is not surprising. Workers have found they like the flexibility working remotely provides.

And it's clear they won't give it up easily.  

See the article for more details on where people want to work and what it means. 

Workcations, Bleisure Travel and the Growing Digital Nomad Trend

Morning Consult's When It Comes to Travel, Blended Is the New Business covers the growing trend towards people combining work and leisure travel.  

This trend - which is referred to as bleisure travel or workcations - is not new. We first covered it in 2015.

But the pandemic and shift to remote work have greatly accelerated this trend. According to Morning Consult's data, about 40% of those planning to travel on business this year will combine their trips with leisure travel.

Fortune also expects to see more people taking workcations in 2021, and they've included it in their 2021 travel trends to watch list.  

The Morning Consult chart below (click to enlarge) shows the top reasons people embrace bleisure travel.  

According to CFO's 'Workcation' plans rising: What it means for your company, increases in bleisure travel will require companies to create new policies to avoid tax and legal compliance issues.

CFO's article covers much of the same ground as our HBR article Your Company Needs a Digital Nomad Policy.  

And a growing number of companies are adding new policies and programs for bleisure travel and digital nomads. 

Shopify, for example, calls theirs program Destination 90, and Unilever's is called Uwork. We expect many more firms to add programs like these.

Work and life continue to blend in new ways, with many accelerated by the pandemic. Bleisure travel is a good example.

In our interviews with digital nomads, we've learned that bleisure travel is often the gateway experience that leads them to become longer-term nomadic travelers.

So we expect the increase in bleisure travel to be a growth driver for digital nomadism.

See our digital nomad section for more on this topic.

Ark Invest's 2022 Big Ideas Tech Trends Report

Ark Invest is an investment management firm that invests in companies it views as developing disruptive technologies.  

Ark and their fund manager, Cathy Wood, became investing superstars in 2020 due to their eye-popping financial returns. But more recently, Ark funds have fallen quite a bit due to the general decline in tech valuations.

Ark releases an annual tech trends report, and the 2022 version - Big Ideas 2022 - was released recently. 

The report covers 14 technologies Ark believes will have a transformative impact and generate substantial investment returns by 2030. These are:

1. Artificial Intelligence
2. Digital Consumer
3. Digital Wallets
4. Public Blockchains
5. Bitcoin
6. Ethereum and DeFi
7. Web3
8. Gene Editing
9. Multi-Omics
10. Electric Vehicles
11. Autonomous Ride-Hail
12. Autonomous Logistics
13. Printing and Robotics
14. Orbital Aerospace 

We consider Ark's report must reading for anyone interested in tech trends.  But we do have one caveat, which is their forecasts.

The folks at Ark are the ultimate techno-optimists, and their forecasts reflect this.  

For example, the report chart below (click to enlarge) shows their forecast for A.I.-related IT spending, which is four times higher than the current consensus forecast.

While we agree the consensus looks low, 4x the consensus is a very aggressive forecast, especially over the next 2-3 years.  

We've done some back-of-the-envelope math using their forecasts, and if all the forecasts came true (they won't), we think the result would be the world economy growing at an annual rate in the 8%-9% range over the next decade (it won't).  

So we think you should be a bit skeptical while reading their forecasts. 

But the Ark folks are very smart.

And they do a great job of describing the technologies they follow and why they're so bullish on them (we're bullish on them too, just not as bullish as Ark).  

So despite our view that their forecasts are too optimistic, we still think the report is excellent and well worth reading.