I want to keep this one simple if not short, since I’m sure all of you are inundated with COVID-19 related news and developments, both locally in your communities and in your corner of the globe. I want to focus specifically on the impact on the gig economy. Let’s quickly take stock of what we’re up against, and what to do about it.
If you’re in the gig economy, or planning to enter it, you face very unique and heightened risks compared to people in the paycheck economy. The gig economy is a feast/famine world of risks and volatility at the best of times, and times like we’re about to face are a case of double jeopardy. I’ve been through some rough patches myself over the years, but I don’t think any of them compare to what we’re about to run into.
March 1 was my ninth anniversary in the gig economy, and I’m now into my tenth year. It promises to be the roughest I’ve ever faced. Despite my confidence in my consulting skills, general history of resourcefulness, and my track record of having survived so far (or perhaps because of it), I have no problems admitting that I am worried. You’d have to be an idiot not to be, whatever your experience level.
Analysts are already flagging the extremely high risk to small businesses in general. Those at highest risk are of course in-person service business owners (restaurants, rideshare drivers, and the like) who rely on steady cash flow, have limited working capital positions, and rely on assumptions of ordinary risk management costs. Now this group is faced with demand collapse, heightened risk management costs (sanitization and hygiene protocols, greater risks of themselves falling ill), and rapid working capital depletion. Worse, most have no protections such as paid time off, a concept that only applies to paycheck types. In the United States, most don’t even have reliable, affordable health insurance, given the continuous undermining of the Affordable Care Act over the last few years.
For the most vulnerable, some large corporations in the US have already extended some enlightened protections. Many tech companies have committed to paying their hourly workers through this period even if their services are not needed. But it is unclear how long such generosity will last, given that all businesses will come under extreme pressure. In the US, it looks like small-business relief measures are in the pipeline, and other countries will likely offer similar relief.
None of this is likely to be anywhere near enough. They will be palliative measures at best. The outlook is somewhere between extreme stress and a bloodbath.
Expect many small businesses to go out of business around the world. This is going to be something of an extinction event.
For those of us in the gig economy proper — whether as platformers, contractors, or consultants — there are unlikely to be any significant protections on offer. On the flip side, our risks are also relatively lower, compared to in-person service business owners. We already mostly work remote/offsite on knowledge work tasks. Still, this is going to be something of an extinction event for us as well.
Paternalist businesses and states can’t even see us gigworkers legibly through their procedural-bureaucratic eyes, so they are not going to be able to take care of us even if they sincerely want to. Employees and traditional small businesses will come first. Gigwork is practically designed to fall through the cracks of institutional responses.
So start preparing. You’re on your own for the most part. Let’s look at the risks and how to manage them.
For us in the gig economy, there are many risks, including, but not limited to:
Falling ill: If you actually fall ill, you may be unable to bill for your time for an extended period, on any gigs you do have.
Spooked clients: Clients in the pipeline might back out of deals/gigs under discussion, or defer them indefinitely.
Canceled on-site gigs: These are often the most lucrative kind, since you can bill for large blocks of time/work at once. With travel restrictions, they are on the chopping block.
Reallocated budgets: Suddenly tightened budgets might be diverted to other higher-priority uses.
Staff reassigned: Your primary client contacts might suddenly get reassigned to other roles as people in our client organization fall ill or die (or worse, your own key clients might fall ill or even die).
Demand collapse: What you offer may be particularly vulnerable and demand for it may collapse. On-site workshop delivery is at high risk obviously, and may be difficult or impossible to reposition as a virtual offering.
Force majeure clauses: A contract you’re relying on may have a provision allowing clients to back out of commitments under force majeure clauses.
Cash-flow crunches: An ever-present threat for the gig economy, this risk doubles during a crisis like this. You may suddenly need extra cash to care for elderly dependents.
Delayed invoices: As organizations get overwhelmed by their own urgent crisis management efforts, payments on your invoices could easily get delayed. This happens even during normal times. Expect more of it.
Deflation/cost of debt: The economy is at serious risk of deflation, which means it will be a bad time to take on debt. Take theatrical interest rate cuts by central banks with a huge pinch of salt. Even credit at 0% may be too expensive in a world of negative real interest rates.
I have faced many of these risks over the last decade, but never all at once, or with the intensity and duration we can expect now. This is new territory even for the most experienced independents. At best, people like me will be like the one-eyed leading the blind. And though I’m presumptuous enough to write a newsletter providing advice to other indies, if I’m being honest, I’m as much at risk as any of you. I’m probably only marginally above the median in terms of probability of continued survival in the gig economy.
I am personally fortunate in that I have a few months left in my current fellowship, so I have some time to prepare before I have to face this thing head-on myself. But I have no illusions about what I’ll be up against. It’s going to get tough, and I’m already taking my own advice in this newsletter and making risk mitigation plans.
Managing the Risks
There are lots of highly situation-specific things you may be able to do to manage your risks, but there are also a few general principles. As a mnemonic for these, I want you to remember three words:
Cash, Control, and Community.
It is an extension of the Cash+Control mnemonic offered by Bill Janeway in his book on venture capital/startups, Doing Capitalism in the Innovation Economy, (recommended as a generally good read) adapted for us in the gig economy.
CASH: During a highly uncertain crisis, cash is king. Prioritize it in every way possible. Conserve it, prioritize gigs that give you cash now over cash later, even if it means less of it, focus on hardening your more passive and steady cash flows. Choose cash over in-kind compensation where possible. Avoid debt as much as possible. Defer or cut discretionary spending where you can.
CONTROL: Do your damndest to maintain control over your business model and working life. Obviously this is easier the stronger your cash position. Keep control the IP you produce. Hold key operating assets like websites and SaaS accounts close. Pay attention to the terms of gigs. Do not accept exploitative terms for long-term arrangements that you might regret in better times. Prepare to accept some hardship to retain control.
COMMUNITY: Do NOT become part of the problem. To the extent you have surplus cash and control over your own gig-economy position, and enjoy some security, do your best to support others in the gig economy. Keep those subcontracts flowing. Pay people doing stuff for you promptly. Look for ways to keep the gig economy going internally. If you can afford to, pay people even if you do not use their services, such as cleaning services.
Cash. Control. Community. Tattoo those 3 words into your brain for the next 18 months or so.
Beyond these general principles, you have to stay plugged in and maintain high situation awareness. Look out for any source of leverage, protection, or opportunity in your local geographic and economic environment. This is not the time to unplug and retreat under a rock, even though the stress might tempt you into doing so. That’s a luxury for the more protected classes of society. You’re out facing the elements.
That said, pay attention to your mental health, and make time for escapist diversions like reading fiction, watching television, and whatever other leisure activities you can safely continue. If you’re subject to quarantine or isolation, establish disciplines like light at-home exercise regimens, relaxing cooking sessions, and so on. If you’re not, but are still avoiding cafes and coworking spaces, get outdoors to take walks when you can.
Cultivate the obvious kinds of stress-management habits. Pay particular attention to your relationships and avoid dumping your own stress onto others. In theory, spending more time with family is always a great thing. In practice, too much time together can create enormous stress. Give each other space as needed, even if you’re all cooped up in a small apartment or house.
Be prepared for sudden spikes of emergency action (if you, a family member, or a neighbor falls ill and your local hospital is overwhelmed, what do you do?).
And don’t be afraid to ask for help from people in stronger positions than yourself, or proactively offer it to those who might be in need.
Should You Quit?
Should I quit is a serious question right now in both the ways it can be asked in the gig economy:
If you have a paycheck job should you quit now to go free agent?
If you’re a free agent, should you take a job to weather this rough patch?
If you have a paycheck job and were planning to make the leap to free agency, reconsider very carefully. Take all the advice in my 5-part series on making the leap, and reassess the playbook for the heightened risk environment.
I don’t want to discourage you from making the leap if you’re ready and excited for you, but don’t be dumb about this environment. Courage is good, foolhardiness is not. I myself made the leap while we were still in the very slow recovery from the Great Recession (2011), but I probably would not quit a job right now. 2011 was not a great time to quit either, but it was a predictable environment without the Great Weirding going on all around, and I felt comfortable making the leap. If you are feeling wary or developing cold feet, listen to those instincts even if you don’t act on them.
On looking for a regular job if you’re already in the gig economy, don’t let false pride about being part of the gig economy blind you to the risks. There is no futuristic honor in being a starving gig-worker. If you find that you’re struggling too much, be willing and prepared to look for a regular job sooner rather than later. Stay on the lookout for part-time jobs or quasi-job-like gigs too, such as fellowships and residencies. Being in the gig economy is merely an expedient lifestyle based on specific tradeoffs that change with the circumstances, not a dogmatic religion. You can always take another stab at it in better times if this weather is too stormy and rough for you.
That said, if you do decide to stay in the game, you may want to consider making lemonade from lemons.
Lemonade from Lemons
There are going to be many localized, specialized kinds of demand surges for expertise around very specific things in the next 18 months, including, but not limited to:
Rapid response/emergency operations
Scenarios and workshops around the risk environment
Analysis of impact on trade
Expertise on supply chain disruptions and shocks
Expertise on service hardening for pandemic conditions
Expertise in business continuity
Organizational restructuring for distributed ops
Field data collection and analysis
Even if you have no immediate interest or expertise in any of these, take some time to brainstorm the possibilities and think through low-hanging fruit options. There may be surprising things for you to do. And you may need these options later even if you’re not under immediate stress.
Many of these demand areas will present opportunities for everything from special products (a report or online course on sourcing goods from China for example), to spec work (like doing a paper-napkin level analysis of the supply chain of a specific company and sending it to their COO to pitch a more detailed study), to searching for openings/RFPs in the right places, such as hospitals and healthcare systems that need unusual services urgently.
For some of you, there may even be an opportunity to pivot or reinvent what you do around the opportunities created by this pandemic.
We are in the gig economy corner of what Naomi Klein called disaster capitalism. The phrase is almost always used in a pejorative way to describe profiteering, especially by larger cronyist companies that enjoy backing from influential political actors. But taken in a non-pejorative way, disaster capitalism has both a necessary and good side, and an ugly, profiteering side. Extreme risk environments do create unusual market conditions of demand and supply. Under such conditions, many problems should perhaps not be solved by markets at all, and instead taken over by states at least temporarily, to protect the most vulnerable from exploitation.
But that said, there is both room for, and value in, market-based responses to crisis conditions, including from the gig economy. So you do not need to feel guilty. Nobody will fault you for thoughtfully and conscientiously looking for opportunities in the crisis, and becoming part of a market-based solution to the problem we’re all in the middle of. Many will in fact be very grateful if you do something that addresses a pressing need.
But equally, there is no denying that there is plenty of room for grifting, bullshit, and exploitation of vulnerable and panicked counterparties. Be honest with yourself and resist such temptations, which will be especially attractive if you’re under financial stress yourself, as you’re likely to be.
We are in a heightened risk environment for the gig economy
There are many specific risks you must think about and manage
Approach the risks focusing on cash, control, and community
Take the “should I quit [my job/the gig economy]” question seriously
It is okay to look for ways to make lemonade out of lemons
Don’t be a profiteering grifter
Stay safe, wash your hands, flatten the curve, and be smart about the next 18 months. This is going to take a while.
I’ll be doing my bit to contribute helpfully via this newsletter, and I am open to suggestions and ideas for things I could do. For starters, I have decided that anything I write that’s directly about the risk environment we’re in right now will not be paywalled.