September 2013

The Leyendecker View

The Future of Work is History

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"For the most ambitious young people, the corporate ladder is obsolete."

- Paul Graham, founder of Y Combinator

Publisher: Douglas Leyendecker
Managing Editor: Kelly Griego

Welcome to the Leyendecker View
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"If we are to bring the broad masses of the people in every land to the table of abundance, 

it can only be by the tireless improvement of all of our means of technological production."

- Winston Churchill


That may have actually worked in your era, Mr. Churchill, but it seems to be breaking down in ours.


In the span of just a couple generations, the nature of jobs and work has changed dramatically. "The tireless improvement of all our means of technological production" seems to have advanced so far that it may have fundamentally and permanently changed the structure of work, and as a result, our livelihoods.


Before looking forward to how work might look in the near future, it's probably useful to look back at its history.


Prior to the Industrial Revolution, consistent work and pay were something few people could count on. There were no large corporations to offer stable work. Most people had to detect needs, hone skills and find ways to make themselves valuable and useful to others who could pay for their expertise. (As a brief history lesson, supporting and protecting royalty had historically been the only source of consistent work, but few people scored those rare jobs. Most fended for themselves.)


The Industrial Revolution changed this. Instead of a family butcher, baker or candlestick maker, industrialization enabled, for the first time, immense production scale, and that scale necessitated an enormous number of workers. The very scale of production reduced the cost of many goods, making them more affordable, in turn increasing demand, which then required more labor for production. For the first time in history, many people had sustainable jobs. Incomes grew, then demand grew, and a virtuous cycle began.


Industrialization would soon require the development, construction and maintenance of an enormous new socioeconomic infrastructure. The entire economy shifted towards supporting large enterprises that could manage scale.


Over time, work supporting large enterprise evolved into the era of corporate jobs that today we consider "normal" employment. This is the type of work familiar to most of us - climbing the corporate ladder at large companies. But none of these large companies was around before the Industrial Revolution, and most were not even around before WWII, which means the work, the jobs and the careers we consider normal have a very short history.


Our perception of job security, work benefits and retirement are primarily a product of the post-WWII era. This is the story we know, the expectation we grew up with until 2008, when the simmering changes in how we work became impossible to ignore.


The cracks in the armor actually started to reveal themselves in the 1970s, when median income for men began a downward slide. 


Men's wages started falling when technology began raising productivity in the industrial industries, causing a need for fewer workers, and, in growing numbers, displacing them entirely. Furthermore, as technology enhanced globalization, cheaper labor and manufacturing alternatives were found abroad. Men, more likely to be found in a manufacturing plant, were particularly vulnerable to early technological innovations.


Since the 1970s, technology has continued to disrupt the work we do, and recently at a rapid fire pace.


Consider the field of marketing, those good old days of "Mad Men." For decades, marketing was about coming up with clever ways to communicate a message to target customers through all the "traditional" channels.


Now because of the Internet, we have created dozens of new marketing channels, from the broad to the highly targeted. Email, Facebook, Twitter, Instagram, Pinterest, blogs, Tumblrs, websites, mobile apps, banner ads, affiliate marketing. Who can keep up? Who truly understands these channels when they are in constant evolution and proliferation? How can they be taught and learned when they are not yet fully understood, or even fully developed? What is the classically trained marketer to do?


If you're a traditional marketer who's been in the field for decades, your head probably spins when you work. That is if you're still at work. You very well could have been laid off in favor of someone half your age, savvy with digital media, and the flexibility and willingness to work on a project basis rather than full-time.


Marketers aren't the only ones seeing their functions implode and splinter. Thanks to technology, jobs and many skills once considered traditional and secure are being rendered obsolete. The once preferred general domain knowledge is being replaced by the intense knowledge of a small and narrow subject. Just like in professional sports, each position is highly specific and not interchangeable.


And then there is the relentless drive to replace more and more human labor with robots and automation. Why is this happening? For one, companies have to keep ratcheting up productivity to remain competitive in the global economy. For another, you as a worker are expensive, especially in the developed economies that are overloaded with rules about minimum wage, healthcare, retirement and job security programs (read: unions). Robots and computers, by comparison, are a lot cheaper, and for many jobs even more reliable. Robots don't take vacations or get sick, they won't ask for raises, and they don't have pensions that need to be fed. Robots save employers millions in benefits and wages and often increase productivity.


Yet, companies still need brains, particularly those with the skills to keep up with the pace of technological change. But instead of hiring full-time employees, more corporations are looking to freelancers. A report released this month showed that demand for freelancers rose 11.5% since the start of 2013, and the average freelancer assignment value has risen 23% since 2012. Total freelancer earnings for 2013 are projected to be 72% greater than that of 2012. In 2012, there were 42 million freelancers - that's a whopping one-third of the entire workforce. Intuit speculates that freelancers will comprise 40% of the workforce by 2020.


Scores of online freelance market places, like oDesk.com or Freelancer.com, have begun to crop up to connect freelancers with employers looking for an exact expertise, just on contract, not salary.


This graph from oDesk shows the high specificity of freelance jobs employers are posting on oDesk and the frequency of each (and freelancers are filling them):


So what does this mean for those of us whose jobs might be classified as tenuous in the new employment market? It means those with a knack for self-sufficiency and adaptability will survive and thrive. Those with the initiative and discipline to develop a highly nuanced understanding of a specific industry and/or task may have the most "job" security.


Those with intense domain knowledge and capability can then market themselves with the promise of creating real value in exchange for the higher earnings that typically follow expertise. Given that the average worker has not had a wage increase in ten years, building specific domain expertise seems the only reliable path to higher wages in the future.


The corporate ladder will always exist in certain industries (even if the guise of job security doesn't), and certain jobs will always need to be performed in an office. But for those in industries where it is turning obsolete, the successful and prosperous will be self-sufficient, flexible, highly skilled free agents, liberated from the confines of the linear corporate ladder and willing to adapt repeatedly. The end result could possibly be a society that becomes much more personally responsible, much more adaptable and much more capable.


What did work and careers look like before the corporate ladder set our current expectations? Well it looked a lot like self-sufficiency, flexibility, tenacity and adaptability in applying value-add skill to different scenarios. With no corporations to offer a false sense of security, most people had no choice but to observe problems around them and find solutions. And look at the prosperity that created over time.


We've done it before. We can do it again. Necessity isn't just the mother of invention, it's also the mother of get up and get after it.


Read on for more about how our workforce is evolving and ways to thrive in the new Commission Economy.     


"The consuming desire of most human beings is deliberately to plant their whole life 

in the hands of some other person. I would describe this method of searching for happiness as immature. Development of character consists solely in moving toward self-sufficiency."

- Quentin Crisp


General Economic Perspectives
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For weeks, every investor, economist, CEO and politician anxiously awaited the next episode of "The Taper Caper." Ben Bernanke had been indicating a contraction in the Fed's mortgage purchases. But then he up and changed the narrative. "What, no taper?!" Most everyone would have breathed a sigh of relief had we seen something like a $10B monthly reduction, but instead we got nothing, nada, zippo. From that day, markets have been in a funk.


Of course the Fed had its important reasons not to taper, but why weren't they in mind when they were setting different expectations? Unfortunately, the Fed's decision only adds confusion to an already highly confused economy. 


It wasn't but a few weeks ago the president appeared to embark on a grand new agenda to alleviate the economic challenges that are shrinking the middle class and putting more and more on the government dole. But where's the follow through on that new grand journey? Another nothing, nada, zippo.


The president's focus quickly moved to challenges in the Middle East with political spin doctors now trying to put lipstick on that pig. When an Iranian leader chooses not to meet an-anxious-to-look-good American president, it says something about who is growing and who is losing influence.


In the midst of all this, the president's chosen successor to Ben Bernanke abruptly pulls his name from consideration.


Onto the looming budget and debt ceiling debate. Radicals in the House are supposedly holding the American economy hostage in order to unravel the enormously bureaucratic Obamacare that was passed without partisan negotiation. Is it not naïve to expect cooperation when the first thing the president does after being elected is cram something down another's unwilling throat?


One has to feel sorry for our president, as his leadership capability is becoming clearer to more people. And we have three more years of this? Hmm...Maybe there is a reason why the Fed decided America can't live without its monthly dose of economic heroin.

The Hiring Market
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The "crummy" jobs that are at the core of employment growth have finally hit the mainstream economic and financial press. According to the American Staffing Association, the trade group for temporary employment agencies, fully one-third of the jobs created since 2009 have been low wage temp jobs. This does not suggest a robust economic environment.


Maybe Bernanke and crew finally stumbled upon this data and thus decided our economy can't live without significant monetary stimulus. If it did take this long for the Fed to understand the weakness behind our job numbers, then economic insecurity certainly should continue. How can we feel secure when the Great Oz himself hasn't gotten the right data?


But let's not fret too much about those crummy jobs because there is a positive economic catalyst working its way through our economy. There is hope in sight, particularly in certain parts of the country. Once voters in tree hugger states get tired of economic malaise, they may accept a different view about how an economy really works. You have to chop down trees to make stuff, and it's the making of stuff that is the foundation to all economy. Prudence in production, or course, but Chicken Little hysteria will get us all back to living in caves.


Can our country's current natural resource boom really lead to broader economic prosperity, meaning more high paying jobs that ultimately support those low paying jobs we keep creating? Time will tell. But if our country's economic policy could get a little common sense behind it, we might find ourselves back in some tall organic economic cotton.

Managing the Modern Day
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As we've discussed, the nature of jobs and work is going through an extraordinary and challenging transition. As odd as it sounds, technology is the culprit. It is rapidly turning our legacy economic infrastructure upside down, and in the process, destroying jobs faster than our natural economy - whatever that is - can replace them.


Technology has also created a great leveling of economic circumstances, as economy now plays out on a global scale where resources, which include labor, are allocated at an increasing and increasingly productive pace. Labor seems to be growing in supply faster than we can find worthwhile things for people to do.


The dramatic shift in labor can be described as such: Workers that do are of diminishing value, while workers that think, do and create value are of growing value. This could be one way of describing the growing income gap. So many of the historical jobs in economy were about doing. Now these jobs are being replaced by robots and automated information management, telecommunications and process control systems.


The takeaway for everyone is that in order to maintain a hockey stick career and income path, you must build domain expertise of such value that you become the go to source for a specific kind of work. Unfortunately not everyone is capable of being, or even staying, in the front end of the bell curve. Many would be wise to ratchet down lifestyle and consumption expectations, as just being able to do something continues to lose value. Create value, get paid. This is the new work paradigm. Welcome to the Commission Economy.

BLS Corner
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Multifactor productivity trends for detailed industries in 2011: An overview

Multifactor productivity, defined as output per unit of combined inputs, increased in 55 of the 86 four-digit NAICS manufacturing industries in 2011. This was down from 2010, when multifactor productivity increased in 63 of those industries. However, more industries recorded increases in multifactor productivity in both 2010 and 2011 than in any year since 2004.


Three manufacturing industries recorded double-digit percent increases in multifactor productivity: semiconductors and electronic components, other transportation equipment and electric lighting equipment.


Multifactor productivity indexes relate the change in real output to the change in the combined inputs of labor, capital, and intermediate purchases consumed in producing that output. Multifactor productivity growth measures the extent to which output growth has exceeded the growth in inputs, and reflects the joint influences on economic growth of a variety of factors that are not specifically accounted for on the input side, including technological change, returns to scale, enhancements in managerial and staff skills, changes in the organization of production, and other efficiency improvements.

Chart of the Month: Labor Force Participation Rate 1980 - 2012
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Labor Force Participation Rate: 1980-2012 


The labor force participation rate counts the percentage of citizens with full-time or part-time employment. From 1980 to 2012, the rate peaked in 1997 at 67.12%. Since the 2008 crash, it has steadily been declining, hitting 63.2% this past month. However, some believe that freelancers, steadily on the incline, are being excluded from this data, as they technically don't meet the definitions for full- or part-time work.

Source: Bureau of Labor Statistics

The Future of Work is History
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"Analyzing what you haven't got as well as what you have is a necessary ingredient of a career."

- Orison Swett Marden


Gallup: In the U.S., fewer young adults holding full-time jobs in 2013

Americans 18 to 29 have suffered an on average higher unemployment rate than the rest of the workforce since the 2008 crash. Today, those in this age group with at least a college degree are nearly two times more likely (65.4%) to have a full-time job than those in this age group without a degree (38.6%). But even fewer young adults with college degrees hold a full-time job now than they did in 2012 (68.9%) and 2010 (67.9%). Many of these young adults will never experience the corporate ladder, and all they will know is self-sufficiency and hustle as the means to career success.


Are unemployment numbers missing the big story - the freelance economy?

Most recent BLS employment data showed that the labor force participation rate slipped down to 63.2% from 63.4% the month prior. The question is, what are all these workforce "drop-outs" doing to earn money? Some might have retired or might be collecting disability. But there is a concern that the BLS is missing the big picture about the shift towards more freelancers, which don't technically qualify as full- or part-time. The questions that the BLS asks in their labor surveys tend to be worded in a way that exclude freelancers unwittingly.


TED: What will future jobs look like?

Andrew McAfee, economist and author of Race Against the Machine, believes that robots will take most of the jobs we have today. He also happens to believe this is great news; as more robots go to work, humans will be liberated from "drudgery and toil," and free to innovate, create, imagine and solve problems. In his mind, this will be a far more inspired and enlightened society, one centered upon creativity and solutions (and hopefully solutions that create real value for people and businesses). McAfee believes that the best way to prepare people for success in this economy "heavy on technology, light on labor" is to inform them that it's coming to encourage adaptation and readiness.


Why your company should blow up the corporate ladder

With technology disrupting industries, companies and careers left and right, companies constantly need to invent (and eliminate) job roles to keep up. Adhering to the traditional corporate ladder results in missed opportunities in talent, competitive advantage and strategy. Workers would be wise to adapt. Cathy Benko, Vice Chairman of Deloitte, suggests a new structure, The Corporate Lattice. Under this paradigm, careers can move laterally (people can try new functions) or take pauses (e.g. for personal reasons) and people are freed from persistent "up or out pressure." Lateral moves allow people to broaden exposure to different business operations, making them more well-rounded workers. The issue here, though, is that the lattice seems at odds with the immediacy with which companies today need adept task completion.


Re-imagining work: Shifts in the digital revolution

David Coplin, Chief Envisioning Officer at Microsoft, discusses how technology allows tremendous freedom in where we do our work. Many of our jobs require us to perform disparate tasks, some necessitating in-person collaboration, some best performed in the quiet of our own homes. Coplin believes that leveraging technology to enable greater choice in where we work can be a powerful tool for more productivity, inspiration and innovation. Importantly, he points out that a critical component to working remotely is trust. The employer must trust the employee to select his most productive work location. The employee must trust that his coworkers trust he is working productively when remote so mind-space is freed from worry and instead put to effective use. (Compensation tied to performance is a great tactic here.) 


Freelancer or employer: Identifying your next career move

In this article, Investopedia lays out a list of factors to weigh when considering a departure from the corporate world to the freelance world. Certain industries are more accustomed to hiring freelance workers, and certain job functions are widely perceived as freelance jobs. (Freelancing is also more customary in certain states, with California, Texas, New York, Florida and Pennsylvania rounding out the top five.) Read on for some thoughts on determining if freelancing makes sense for you, your skills and your long-term goals.


"I've never been one to look up the ladder. I've always looked down the ladder.

As long as there's one guy down there, I'm fine."

- Ron White

News You Can Use
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The Economy


19 photos from the golden days of the Texas oil boom

Ok, well not the present economy. But a fun look back, particularly for us Texans, at the oil industry decades ago.


Poverty rates stay flat, but elevated, in 2012

For the past 30 years, the poverty rate has averaged between 12% and 15%, peaking at 15% during recessions and falling quickly in recovery. For the past three years, it has hovered at 15%, and recent Census Bureau data shows that is where it stayed in 2012. See below for an interactive map showing poverty rate data by state. 



22 quotes on success and leadership from T. Boone Pickens

Some highlights:

  • "A plan without action is not a plan. It's a speech."
  • "I learned early on that you play by the rules. It's not fun if you cheat to win."
  • "Show me a good loser and I'll show you a loser."

Many employees feel uncomfortable taking advantage of workplace flexibility

While two-thirds of employed adults say their companies would accommodate a request for flexible work schedules, 47% feel that making this request will harm their odds of advancement. This indicates a communication breakdown, one that could benefit from a frank conversation about how critical trust is to a successful flexible work policy. 


Management & Hiring

10 ways you're making your employees less productive

Avoid these ten traps for standing in the way of your employee's success. Common pitfalls include:

  • Not communicating clear expectations. As a manager, clearly defining what success will look like for a role or a project is one of your most responsibilities. It will help reduce lost time and energy and keep morale high.
  • Not asking people what they need to be able to do their jobs better. Accept that many people won't speak up if they need more resource support. As a manager, ask your team now and then how you can help them be more impactful.

Sir Richard Branson: Hire for personality

Richard Branson believes resumes are a waste of paper. Instead, he conducts interviews that aim to get a candidate to reveal her true personality. He looks for flexible team players. "If you hire the wrong person at the top of a company," Branson says, "they can destroy it in no time at all." 


The New America

Kevin Spacey takes down the television industry

This speech by Kevin Spacey - which quickly made the rounds in the television and tech worlds - captures how some traditional industries are failing to adapt amid digital disruption, to their detriment. Spacey's hit show "House of Cards" was nominated for several Emmys, and it is viewable only through Netflix. Spacey explains that the show's producers chose Netflix because it was the only platform that didn't demand a pilot. Last year, networks commissioned 113 pilots. Thirty-five were aired, and only 13 were renewed. The cost to make all these pilots was somewhere between $300MM and $400MM, making the Netflix plan look far more cost effective.


How living alone became totally normal

The rise in the number of people living alone has been one of the sharpest change in the American household in the past 40 years. In 1970, just 17% of American households were comprised of only one person. Today that number is 27%. Also in 1970, 81% of households were family, meaning they were comprised of spouses, children or other relatives. Today, that has dropped to 66%. Married couples with children have dropped from 40% to 19%. Click the link for more interesting data about the ever-evolving American household.

Thanks for reading The Leyendecker View. We hope you find these perspectives unique, insightful and valuable.

We at Leyendecker & Associates are committed to the highest standards of value creation. 
Doug Leyendecker Jim Ford David Prodoehl Kelly Griego