Obviously The Future: Everyone is an Entrepreneur
Situation: The nature of work is changing. The era when you could pick a career through a four-year university degree program, enter the workplace and commit to an employer and profession for 30 years, and then retire comfortably is gone. The pain points with these models are now clearly visible in the vestige of unionized labor forces like teachers and police officers.
Young people entering the workplace no longer have opportunities in academia, entry-level teaching often doesn't pay a livable wage, and public sector jobs, particularly locally, are few and far between as budget cuts put pressure on municipal systems.
The individual is now responsible for managing their career and growth. That might mean looking for in-demand work on a service-labor-marketplace and building up a track record or reputation. It might mean starting in a full-time job in the knowledge economy. Or as a creator in the passion economy. Now everyone is an entrepreneur or, at least, has to think like one.
All of this is evident in data.
This generational change shows in the data: The median tenure for workers age 25 to 34 is 3.2 years and for employees age 65 and over is 10.3 years. Workers in management, professional, and related occupations had the highest median tenure (5.5 years), and workers in service occupations had the lowest median tenure (3.2 years).
There are 58 million active microbusinesses across the US. 23.5 million individuals and non-employer businesses received a 1099-K and/or 1099-MISC. 2020 saw a flurry of new business applications (up 24.3% over 2019).
What has changed?
1) Consumers have recognized that they can have more than groceries delivered “on-demand.” The “on-demand” economy is now firmly rooted in the US and Europe and will continue to grow. For a sense of its breadth, products and services you can get on-demand: after-school activities for your children from Outschool, data science support through Upwork (I did this last week!), access to a conversation with a venture capitalist through Twitter Direct Messages (please reach out), or a have a refrigerator delivered via Dolly.
2) Traditional businesses are moving away from FTE towards on-demand employment. Large companies ranging from Amazon (Amazon Flex) to XPO Logistics to DR Horton (homebuilding) have shed assets (e.g., vehicles) and W-2 positions. Every business wants to be asset-light. It's never been easier for businesses to hire on-demand. You can now hire data scientists, product managers, designers on platforms like Upwork, Topl, and Dribbble. Now that the world is flat and software-enabled, productivity and output quality of labor are both visible and easier to manage.
3) Individuals have always valued freedom and autonomy but now norms have changed to allow individuals to form micro businesses to make their own decisions and have flexibility. As institutions become more restrictive with who and how they employ full-time, individuals will seek ways to carve out and build their own careers. It's also never been easier to find ways to earn side money online - see for yourself on SideHusl. The trade-offs to a more entrepreneurial existence will gain in attractiveness as the traditional benefits given to full-time employees are increasingly offered as a direct menu of options and choices to individuals and microbusinesses. The menu includes retirement account saving, health insurance or healthcare access, insurance, and home-ownership planning.
COVID-19 has made the inflection point today and opportunity abounds.
COVID has accelerated the shift to a world of solo-prenuers. Online labor marketplaces and creator economy dynamics are just gaining steam and creating more downstream opportunities as the way people think about work shifts.
Vertical specific labor marketplaces are exploding. Every niche and vertical will have an online marketplace for gigs. Casting Depot just launched for acting gigs. Online, real-time marketplaces are increasingly important to micro-entrepreneurs to source leads, build a reputation, and manage their business. This is compounded by the expectation that consumers want to have a direct relationship with the product or service that they purchase.
Microbusinesses and freelancers have unique needs and a distinct risk profile. The legacy credit providers have not innovated to serve this segment. This leads to an opportunity to provide financial services and products that cater to the micro-entrepreneur. For example, Level* offers tailored financial services to micro-businesses through partnerships with labor marketplaces. Catch provides access to portable benefits a la cart for those who don't get them through an employer.
Career advisory services and life-long learning are increasingly important.
In a world where you have to manage your career on a 2-4 year cycle, like the average 25-34 year old does, having on-going access to good advice, networks, and structure on how to guide your career outside of the workplace is vital for success. Companies like Lloyd aim to be a co-pilot for your career and fill this gap.
Skills needed to be successful in the workplace are evolving fast. Even taking 12-18 months off of work can leave a person with strong base skills feeling lost and undifferentiated. Life-long learning, reskilling, and upskilling products and services all fill this void. Sometimes, there are platforms like Prowess that target specific populations, like mothers of young children, to build skills and create a match between potential workers and employers.
How is it going to play out:
Nobody knows for sure what the future holds and which platforms and companies will benefit the most. However, the old model is never coming back. And we know for sure: in order to succeed as an individual in the new economy is to be an entrepreneur or think like one.
* Note: I am an investor in Level.