Business Tech: Epic Fantasy

The land was full of those who trusted the multitude of soothsayers, prognosticators, and fortune tellers. They felt that the future could be predicted; be known. Then the Euro nearly collapsed while the U.S. Dollar seemed to be in free fall. And no one seemed to know if it was safe to start hiring again.

We live in a time of broken words, of assurances from those supposedly in the know, that showed us how little any of us knew. The epic fantasy of the various 1980's business models has been broken over and over again. At the risk of joining the crowd of people who have guessed wrong, here's my predictions for the emerging economy.

Buckminster Fuller Was Right

And there were monsters in that time, each with an appetite for eating up the jobs which people needed. Finally, one man arose who was brave enough to tell the truth about the vanishing jobs. It took some time before the people were brave enough to believe.

"We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory, he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living." — Richard Buckminster Fuller

There are several monsters lurking in the dark corners of the business world that are making it impossible for us to have a job for everyone who wants/needs one.

The biggest monster is mergers. One hundred small business means more senior — good pay — jobs than one mega-business. As the rules against anti-trust are being broken down globally, the pressure rises to break them down faster. After all, if France allows a monolithic company to rise, Germany has to have a behemoth ready to go toe-to-toe in the international markets. Once there are two, it only stands to reason that everyone needs one. The consequence is fewer jobs with a good wage on top of fewer jobs overall.

The next monster is efficiency. Fewer steps is more efficient. When you eliminate steps, you get the same results with less cumulative hours of work, i.e. less jobs.

Then comes the market forces: the stock market, the price sensitivity of your market, and the fear of shrinking margins. The biggest cost in most businesses is labor. How do you lower costs? Fewer employees.

Lastly, we are one of the monsters in the dark. We automate things which removed manual steps. We've already established that steps = hours and hours = jobs.

So, unless we make the leap away from capitalism — not going to happen in our lifetime — we are headed toward either an increasing percentage of permanently unemployed people or a massive downturn in population. Our role as monsters does not protect us from job loss. There are a lot of qualified tech people on the street already.

Employee-free Companies Will Become a Growing Segment

And the farm was empty of people, but the cows were still milked and the sheep were shorn. It was as if an army of ghosts had put aside their haunting and learned the value of industriousness.

I have two clients right now who have businesses with no employees. Everyone, owners included, are consultants and contractors. I have others where every employee is a part-timer with a full time job doing something else. While these models work well for some businesses, I predict that their cost/benefit ratio is going to encourage people to try them more widely than they should.

Despite the certainty of notable failures, I see this concept dominating certain industries. For those who make it work, there are tremendous upsides. Having a standing in two or three businesses like this allows you to protect your income from downturns in any one venture. Important: make sure each business is in a different market segment.

Good business for this model include most creative ventures or collecting. Think antiques, art, comic books, and the like, when you look at this category. Business software might also be a good fit, depending on the circumstances. I've found it a useful model in the chaotic publishing world.

Chaos is Good for Small Businesses

The world had gone all atilt and only the fleet of foot could scramble to the places where there was safe footing.

Speaking if chaos… The generally accepted wisdom that small businesses are more agile is largely correct. In a growing market, agility gradually becomes a fringe skill. In a failing market, or a market in upheaval, agility becomes critical. If you have an entrepreneurial spirit, you may want to "run toward the fire" and start a business in a market that everyone else is abandoning.

Business Technologists, like us, have an edge here. We know how to spin up flexible infrastructure and how to keep it from getting rigid. The hard part is recognizing when the market starts to mature. That's when you have to start switching gears and begin focus on stability over flexibility.

Giants Fall Slowly

While some found shelter from the storm, the biggest ones could not fit entirely and parts and bits of them were exposed to the full wrath of the whipping winds of change.

I think we are going to see a lot of giant companies decline over the next few years but they, for the most part, will drift down instead of plummeting. It used to be understood that the bigger they are, the harder they fall, but that wisdom is not as solid as it used to be. In the tech world, expect everyone to be in some sort of slow motion spiral in the next few years. If they aren't, they probably have significant revenue from semi-tech or non-tech components.

Advertising is Headed for Trouble

The heralds and jesters were used to a protection due their special roles in society, but even their safety was uncertain in this strange new world.

The ad world is based on getting the word out to customers. While the job market will rebound a little, the net percentage of the population with money to spend is shrinking. Fewer people worth targeting means a sea-change in how marketing works. The rise of the social network is also re-writing the Ad world's rules. Throw in the successes, and failures, of algorithmic marketing (think Google, Amazon, Facebook, for examples) and the implosions will only get worse. If there is any place where giants might fall faster, this would be a prime example.

Behind it all: The Dirty Secret of Capitalism, and Therefore, of Business

Pretend I pass a bad check for fifteen thousand dollars to Bob. My bank honors it by mistake. He spends half the money clearing his debt with Penny and the other half he invests in Sally's business. Penny owes Victor, so she clears a portion of her debt. Sally and Victor are customers of mine who can now settle up their bills. Stay with me, we are nearing the finish line.

The bank finds their error and demands that I cover the check. I take the money I got from Victor and Sally and make good. So, the check was bad but: (1) I owe Bob nothing, (2) Bob owes Penny nothing, (3) Bob owes Sally nothing, (4) Penny, Sally, and Victor EACH cleared over seven thousand dollars of her debt, (5) I am even with the bank, and (6) everyone, including the bank, has exactly the same amount of money they started with before I accidentally fixed the economy by passing a bad check.

Despite how fictional it all is, the people at each end of the economy, the rich and poor, feel real-world effects. What does that mean? Economies are fiction, but poverty and wealth are real. That's the dirty little secret of capitalism.

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Jul/Aug 2013