Category Archives: My new book

David Bowie Bonds and the Future of Work

David-BowieDavid Bowie was an innovator of so many things including  in 1997 the first securitization of music royalties which came to be known as David Bowie bonds.  In my book, A New Brand of Expertise  published 15 years ago, I posited that Bowie was the first to create a human capital bond, since he was in essence creating a security from the creative works of a brilliant mind — his own.  In my final chapter discussing the future of work, I asked this question: Why couldn’t there be similar bonds created in the human capital marketplace, synthetic instruments which could pool the revenue streams of thousands of the top independent consultants, protecting against down time, slow periods or any other cash flow disruption? A consultant bond, I argued, would place a value on knowledge much as companies value their intellectual property assets.

Now fast forward 15 years, the Bowie bonds, made David a cool $50 million but were not such a windfall for his investors given the industry economic disruption caused by the onset of music streaming.  For more on this see http://money.cnn.com/2016/01/11/media/bowie-bonds-royalties/.

Although the music royalty bond notion may have fallen from favor, the consultant bond has more legs than when I originally described it.  The weaknesses to my early argument, to be completely candid, was in the issuer.  I suggested that the consultants collectively would be the issuer.  Although I knew that was an unwieldy structure, it was thought provoking when discussing the future of work.  What is different now, though is the human cloud.

Whereas my firm, M Squared,  was one of the first to provide on demand expertise 28 years ago, now there are all sorts of intermediaries parsing work into everything from looking up addresses to  writing code to managing corporate operations.  These firms  source, place and pay their resources in the cloud, and many rank them there as well.  So my year 2000 notion of taking the top 500 consultants in an area was aspirational, but now there  could be ways to do it through the yelp like data being collected on consulting purveyors.  Human cloud companies could be the issuers.  Investors would be buying into the knowledge and talent market, with prices fluctuating with demand and supply.

I know it still sounds a bit far fetched.  But in the words of the inimitable Davide Bowie,

“Turn and face the strange, ch – ch- changes.”

 

1099 Questions about the gig economy

Professor Laura Tyson of the Haas Business School published a great piece  last week about the challenges of the gig economy.https://agenda.weforum.org/2015/11/how-can-we-protect-workers-in-the-gig-economy/

She focused on digital labor platforms, noted that nearly 400 million people have posted resumes on Linked In The problem, and of course there always is one, is that as this contingent workforce has grown through the likes of Uber, Taskrabbit and Upwork, employment has not, since most of the work is done on an independent contractor basis. As such,these individuals are  paid on a 1099 not a W2, and separated from the employment based benefits which provide the proverbial safety net via health insurances and retirement programs. She goes on to discuss the policy implications as well as the interesting coalitions being formed around this issue.

Although Professor Tyson discussed the independent contractor (IC) issue as a relatively new phenomenon, it is not. Independent consultants, and other professionals like  real estate agents  have faced this issue for decades.  For many, creating the answer to the safety net issue was part of the calculus of starting their independent business in the first place. These individuals were making a deliberate choice to create an independent, professional  lifestyle , another point that often gets lost in the IC debate.

From my research several years ago ( which clearly needs to be updated) a significant minority of ICs were able to secure benefits through a spouse.  Further proof of that is that when we set up benefits programs for ICs the greatest interest was in tax deferred income and retirement products.  Granted, the sample we were targeting included the highest paid ICs, so they would have had arguably the greatest economic flexibility.  In the last 5-10 years, the IC ranks, thanks to the new digital platforms,  have grown to  include lower wage workers.

Conversely, according to a recent article in the Economist, the data does not support amazing growth in this IC economy,  with the caveat that labor statistics are egregiously poor in both the UK and US .  (Indeed, the US government discontinued the tracking of contingent workers  in 2005 by eliminating the Contingent Work Supplement . Senator Mark Warner  has requested  that  the Bureau of Labor Statistics, and the IRS reinstate it.  ) In a 10/23 article, the author, Laura Gardiner,  notes that the number of self employed workers in the US is actually falling and the proportion of full time workers  in both countries has not decreased. Freelancers represent only 2% of the workforce in Britain.

Gardiner goes on to suggest that this non intuitive lack of growth may be the result not of  bad statistics but of improper definitions.  The gig economy, also the sharing economy, includes the 1099 worker but also encompasses the AirBnB hosts, for example, who don’t see that extra income from renting a room  as  job related. This is true for many participants in the sharing economy, suggesting that the true size of the current market activity may be significantly understated.    In some cases the income may go unreported but in most it will just appear as 1099 income. As such, that may be the better metric to track.

The  Bay Area Council Economic Institute did just that.  It compared the growth in the number of  1099s  issued ( not the dollar value)  with the number of W2 returns by year and indexed for inflation.  Although 1099s tended to peak  and then retract after recessions, as demonstrated in 1990, 2001 and 2007 the pattern has changed.  Since the financial crisis and attendant recession in 2009, 1099s issued has continued to rise, while W2s have shown greater variability. 

By 2025, Tyson suggests the gig economy will approach $2.7 trillion in global GDP. Hopefully by then we will have a better understanding of how the marketplace functions,  and a much better handle the policy infrastructure needed to support it to ensure the independence and flexibility it affords can be sustained.

 

Repurposed Expertise

At the Vision 2020 conference, Stewart Butterfield, CEO of Slack described the importance of humanity in business, connecting at a personal level with your clients. He then went on to describe a customer service exchange which was an homage to the original Star Wars movie.   Although it was a great story, I was still struck by his opening riff on the origins of the rapidly growing messaging company; he and his colleagues repurposed some software from another life, “pivoting” to the messaging space.  I fixated on this point, perhaps, because I had been in the repurposing business as well, but I repurposed expertise.

You hear about “repurposing” a lot in the software business.  Instagram had famously flopped as a platform until it was repurposed as a photo sight.  In the human capital space, though, its not a term of art.

Independent consultants ( like those from M Squared or The Talent Group or Cerius Executives)  are accomplished professionals who have a body of expertise in a given discipline.  With every assignment they take, they are, by definition, enhancing their  intellectual capital, since even though one engagement may be similar to another, each has its unique challenges. To meet those challenges – or opportunities — they need to repurpose their arsenal of management  and consulting skills. My favorite gigs were always those where the client agreed to engage a consultant who was pivoting to take the assignment, by applying expertise in consumer goods to digital media, for example.

As I think about my book project, perhaps there should be a repurposing chapter…

The New Book via the Old One

To think about the new book, I need to go back to the old one,  A New Brand of Expertise; How Independent Consultants, Free Agents and Interim Managers are Transforming the World of Work.  The title is a mouthful, I admit, but it wasn’t my idea. That idea came from the publisher.

book

Speaking of ideas, it wasn’t my idea to write a book actually.  In 1998 I was visited by a British CEO, Dennis Russel,  who ran a business somewhat like mine in the UK. He sought me out specifically because he had written a book entitled  Interim Management about this nascent industry of brokering the expertise of senior executives.  He wanted to publish a US version, but his publisher said he needed a US co-author.  Once I read the book, I understood the publisher’s constraint.

Although we were in the same industry, his book did not speak to my marketplace.  His book was far more about the tragedy of British Managing Directors (MDs) who needed to find a new purpose in life.  The MDs came off as somewhat pathetic fellows who were cut down in their business prime of life and needed to craft an alternative.  I say” fellows” deliberately, since Dennis apologized in the book for using only male pronouns.  It made sense, you see, since no MDs in those days were female.

The US story and particularly the San Francisco Bay Area story was one of empowerment and success.  My MDs, the independent consultants with whom we worked, were not folks who needed a shot in the arm after getting laid off from a financial firm.  Rather, they were competent, pedigreed individuals who made a career choice to go into business on their own.  They were relatively evenly split male and female, although certain expertise areas could have a higher concentration of one gender or another.    This was not a business by default but rather one by design.  The stories I told were of incredibly accomplished individuals who were best in class at what they did.  Additionally many of them pursued other interest at the same time; our consultants were playwrights, pilots, sculptors, musicians and entrepreneurs who were crafting a professional life that enabled them to pursue all of their goals, not just business ones.

It didn’t take me long to agree to be the coauthor. In M Squared I had the perfect laboratory to do my research.  I could do deep data dives on our network of 12000 consultants, and I could also select several consultants to profile in a far more in depth way, capturing their stories, and adding the essential dimension of authenticity to what could be a rather dry business book.

It was an interesting process. My editors at Butterworth Heinemann kept quitting — not due to me but by happenstance.  Later, an Inc. Magazine editor for whom I had written several articles gave me hell for not pressing the publisher for a consistent editor.  “They help you write the book”, he  said in an exasperated tone, after the book was in final proof stage.  I guess I just didn’t need the help.

Ultimately, my book was very different than my colleague’s book because our worlds were different.  Now 14 years later, the world is different from what it was.  when I wrote the original book, social media were two words seldom found together in a sentence.  Linked In did not exist, so the online connectivity and access that is taken for granted today was not a factor in how that market operates.  The marketplace is now fundamentally different.  It needs a new book…

All you have to do is ask

I was driving out to a business meeting in the California Central Valley listening to The Last Lecture audio book. A wonderful book filled with life lessons that author Randy Pausch offered for his children and as his legacy,  I would not recommend it for long drives, since I frequently found myself brushing away tears as I changed lanes.

One of his lessons was that sometimes you just need to ask.  I had to smile because as he was telling that story which revolved around a Disneyland ride, the phone rang interrupting the passage.  It was the CEO of an interim management firm in Southern California.  I had called her last week and left a message explaining who I was and that I was considering reprising my book, and since she was in the space I wondered if she would be willing to be interviewed.  I was disappointed to have not received a return call, so her call while I was en route to Lodi was an unexpected pleasure.

We talked for quite awhile and she was highly supportive of my potential project.  Toward the end of our conversation she paused and asked a bit tentatively if I had thought about a co-author and would I consider her. At that point my mind raced.

One issue I know I will have in updating my book is that I know longer run M Squared.  M Squared had provided the laboratory for my work.  I had surveyed our network of consultants for data about this demographic .  Then I chose 16 of the most interesting and diverse consultants to interview in depth about their careers, motivations and aspirations.  This yielded rich stories that added depth and texture to my book.  I hadn’t been quite sure how I could gather those same insights.

Being a truthful person, I immediately mentioned this to my colleague, and she agreed that her network of over 50,000 consultants could absolutely be used for the project….50,000, I thought, that will certainly do.  This is clearly a partnership to explore.

Randy Pausch was right.  Sometime all you need to do is ask…

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