April 2022 – Curious about change

And what’s government’s role in all of this?

Well the question of tax, and how much of the newer forms of income are identified is already an issue. Some trading on eBay will inevitably hit UK capital gains thresholds but not all by any means. Airbnb rentals are absolutely akin to historic house rentals but if the owner provides (and charges for) additional services like a guided tour of the locality, cooking demonstrations, language teaching – does this become more of a formal business? The lines of distinction between business / personal; capital/income; incidental / regular will become significantly harder to define if portfolio income takes off.

And that’s before the question of where this activity will take place. Digital nomads were, at least until Covid interrupted, becoming more common. As more of our lives become virtual the question of where an activity is genuinely taking place becomes greyer. If a 3D print design is created by someone in the UK, but only drives revenue when it is used to print the item in say, USA – how does that work?

And above all there is the shift in mindset needed here. If portfolio income becomes the norm, then so many of our fundamental assumptions about the relationship between work and income will need to shift – where, who, how, what time of day, how the income is defined . . . . the list is endless. And will the complexity of these arrangements be left to the individual to sort out? Or will government need to educate, enable, facilitate and support – if for no other reason than to ensure equality of opportunity?

I’m quite sure that isn’t a definite list – more the tip of the iceberg. And I think there are many more new opportunities to come. So watch this space!

Photo by Maarten van den Heuvel on Pexels.com

And what about wider society?

If you go back to my historic parallel of the industrial revolution it’s here that we will see the most radical shifts. And yet in some ways they are the most difficult to predict. Here’s a few that I can see today:

Almost certainly, left to the open market, leveraging one’s earnings potential will depend on financial status, range of contacts and knowledge, confidence and risk appetite amongst other attributes. Those are all criteria which favour those who already have. And few of them are hugely susceptible to tangible actions like opening up university places – indeed we are already seeing a trend where the most independent are eschewing university for real life experience. I fear therefore that inequality of opportunity will increase without some as yet unclear form of positive intervention.

Financial management of a career based on portfolio income becomes much more a matter for the individual – and again few are well equipped for this innately. A key element of education would therefore need to be around risk, financial arrangements, the purpose and availability of savings, changes to how debt is viewed today etc.

And many financial institutions would need to become much more sophisticated and integrated in their approach – mortgages, pensions etc today are predicated on some very simplistic assumptions: mortgages are predominantly assessed on regular employment income; pensions assume a steady working life (with employer contributions) with a key end date and lack of employment thereafter

Human nature and inertia of established institutions will look to maintain the status quo (think back to office working and broadening of IR35 as two signals today) – but I suspect the genie has well and truly left the bottle. The question therefore is what are our 3 wishes?

And is that compatible with how organisations will be affected?

For corporates, as Liz Edwards has highlighted in an earlier comment, the transfer of power or at least decision making to the individual has a multitude of implications. Firstly as we are seeing today, the nature of the competition for talent has changed already. It is not simply a corporate’s peers or that high profile startup which are in the war for the same talent – it’s all the other ways that talent might earn money. It is probably inevitable that the best talent has the widest opportunities in general terms.

·Secondly in identifying and attracting talent it could be as much about understanding the life cycles, and stages of life of the target audiences. Those who are poised to prize security of income above novelty or flexibility or who have a low risk appetite. This could, but probably isn’t true definitively, mean that young graduates or those starting out in the world of work are not the most obvious choice, at least for jobs that require some longevity. The whole concept of a career path may need to encompass spells, potentially long spells, outside the corporate world. And perhaps most interestingly, there may be a decline in the availability of experienced leaders and managers who, with a degree of financial security, look for other novel, and more flexible ways to work. Covid may have demonstrated the pluses and minuses of working from home, but there are other compelling possibilities to maintain it.

Thirdly, the offer corporates make will need to be relevant in the concept of the wider earnings portfolio not simply as measured against market norms for that job. What development is offered? How will it help build a network of valuable relationships? What business acumen will someone get? How flexibly can someone work – can they continue with different aspects of their portfolio whilst in full time work? These are not new issues, but they could become massively more complex.

In short, corporates are going to have to be able to see through the eyes of the talent they seek to attract – more so than ever, and what they see there may feel increasingly alien from their own world

So what is the impact on individuals?

I’ve set out what I see as the revolution towards individual’s commercializing their own earnings power in multiple ways. There are already many signals that this is happening – recent data suggests one third of the US workforce is involved in the gig economy, many alongside full time or other employment. And that’s only likely to be a sub-set of those involved in this – many of the traditional ways we measure how people work are dependent on tax status – and many of the newer ways to earn money aren’t easily picked up by tax assessments.

So I’ve been thinking about what the commercialisation of earnings power means for individuals, corporates, government and society: here’s some of the impacts that are likely from the evidence today (these will be the tip of the iceberg as we look back over time I suspect!).

Individuals

· People will have a broader perspective on the range of possible income sources they could have: – choosing how many to engage with, and which routes to earn money will depend on their risk appetite, their stage of life and economic / social circumstances, their knowledge of those opportunities and skill sets accessible to them.

· Purpose has been discussed a lot as a driver – it will definitely come into the equation, but what the term will cover for each individual will I suspect be very broad, and not easily classified. Values may well be a more pertinent label – but even that probably will be hard to define. Nor do I think it will be the sole driver – just one of the multitude of variables that people will consider when making their choices

· Influencers and communities of interest will I think become increasingly important in those decisions: – for example, at a very crude level, gaming and esports as a revenue generator is attractive partly because of the community involved – very much a community of shared interests. And, where those with highly developed competitive instincts can hone and apply those rigorously.

This then raises all kinds of interesting questions around relevant skill sets and how to continue developing those, financial responsibility, access to (and information on) potential opportunities, where networks and relationships fit in etc etc