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!
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?
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
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!).
· 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
It’s a horrible phrase so I’ll try to explain the thinking. I started the above diagram about 6-7 years ago and I’ve been adding to it ever since (and it’s nowhere near complete as it will continue to grow and change. It represents three shifts which are occurring at the same time, and which the Covid appetite for freedom has really accelerated, although these are not new.
Firstly, there has been a desire for more work-life balance for years (I’m tempted to say decades) with people looking for ways to make their day less structured and prescribed. That’s the ovals here – with the outside the least structured, ie you can do the activity whenever you like (and in many cases it doesn’t take that long!).
Secondly, and I think this is at the heart of the revolution I’m seeing is the shift towards bringing in money in new and differing ways. If the industrial revolution was about what work we were doing, this revolution is about how we, as individuals, finance the cost of living. So I’ve identified (thus far at least) 4 buckets of activity which people are using to bring in money. The first is employment – that’s pretty familiar to most although it too is changing. The second is talent leverage – that’s where the familiar concept of entrepreneurs sits – people who use their own talents to create a business. But it is now so much more. The third is assetleverage – think Uber or Airbnb or Ebay. Making money from things that you items that you have and you either no longer want/need or you are underusing. The fourth is investment – which again is not new, but how it is being done today, and who is doing it has changed hugely.
The third shift is that increasingly a portfolio income – made up of several of these at any one is becoming more common, and has been enabled by the ability to many of these in what used to be ‘leisure time’, or at least without them consuming the whole day. And this fits neatly into what Lynda Gratton and Andrew Smith in their book/site 100 year life suggests – that we need to think about work in a completely different way. Not a single career, but something which flexes with our point in life, and the life style we want and can afford. Employment has usually in the past been seen as secure – and that will be key for parts of our life. Freedom to travel, to develop and explore is much more of a characteristic of those in their late teens, twenties and increasingly healthy 60’s-80’s. There is so much scope here for choice.
Which brings me onto the big driver for all of this – connected technology. Those labels in brown are those which are only possible at scale through connective technology – internet and mobile to date but with more to come. And the caveat remains that this is not available to all – the key will be making those choices available across society as a whole, not just those with the relevant financial cushion.
The question of food security and the planet’s ability to feed it’s projected population has been around for a while, cumulating in the UN’s second sustainable development goal being ‘Zero Hunger’. And whilst it is clear that ‘the number of undernourished people in the world has been on the rise since 2014, reaching an estimated 821 million in 2017’ (The state of food security and nutrition in the world, 2018), it is equally true that obesity is becoming an increasing problem. Together they represent a major problem today for almost all areas of the globe. Both have huge implications for health, economic growth, the environment (particularly rural areas), climate change and societal welfare. But both have been widely discussed for years without significant behavioural shifts or changes in agricultural practices. Is that about to change?
During 2018, just in the UK, we have seen:
Tesco, McDonalds, KFC amongst others selling plant based meat and burger substitutes, looking, tasting and smelling like the originals.
And all before we look at some of the wider signals such as product marking with climatic impacts, questions of waste or predictions such as the end of animal farming. The latter makes clear how difficult predicting the timing of changes can be when the levers and barriers are predominantly behavioural – but, as we’ve seen in our connected world, once a tipping point is reached, demand and appetite can change remarkably fast. And what seems immutable today, can with hindsight appear to be entirely the wrong approach!