Tag Archives: robustness

Lifespans and personal risk management

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Tim Kastelle published an interesting set of numbers on his blog this morning.

Whether they’re precisely right or not isn’t what matters. The trend line is well established: human lifespans keep going up (making the question of how long you’ll work and how long you’ll have to live off your savings relevant to you) and company lifespans keep shrinking (making the question of how secure your position is relevant).

Kastelle believes more innovation is required to keep companies going. I agree with that, up to a point, but that’s because I’m also sure the reason we’re seeing such a short lifespan for companies these days is due to the waves of merger and acquisition (M&A) sweeping the planet.

That phenomenon is the sign of an exhausted business model, and an exhausted economy. When the best use of your capital is to buy up your competitors, it means you’re running out of new markets, new customers, and new ideas.

Plus, as we all know all too well, the bigger an organization gets, the more sclerotic it gets. In a smaller firm, Fred looked after X and Mary looked after Y. Your personal relationship with Fred and Mary (and you knew them, as the place is small enough to know everyone you need to know) moved ideas along. Innovation (which involves a lot of safe-to-fail experimentation and thus a lot of things that never come to market, much less make a market) flowed.

Now you’re in a large organization (you succeeded and grew!) and knowing Fred or Mary, even if they are Senior Vice-Presidents, doesn’t help. They have hundreds, maybe thousands of people, working for them. All of them act like sand in the gears: the innovative idea “wasn’t invented here”. You, in turn, can’t know all of them, nor do you have the years required to persuade each in turn.

That’s why the bigger guys aren’t great innovators. They’re generally pretty good at extending existing products, especially when they can be sold to existing customers. But breaking true new ground is hard for them, and especially when that new ground will cannibalize existing sales and relationships.

That’s why the big get bigger by buying up the other fish around them, and we end up with an economy that contains a few global giants and a raft of micro- to small businesses, but not much in the middle. (The big guys also get a lot of their innovation by buying up the growing up-and-comers: indeed, for some companies like Cisco, they’d say their competitive advantage is “identify, purchase, and integrate the next generation”.)

If you’re measuring individual names, it looks like they’re falling like dominoes. In reality, most are simply being acquired. KGHM (from Poland) replaces Quadra FNX (from Vancouver, Canada). Barrick (Toronto, Canada) replaces Placer Dome (Vancouver, Canada). It looks like two flags fallen, until you realize there are still people working in both Vancouver offices.

But fewer of them, no decision-makers of note, and many career ladders now with a “move or get out” clause attached. Add a little offshoring and outsourcing to the mix, and those offices can shrink immensely.

I remember my father appalled at my having resigned from IBM. He worked for entirely two companies his entire conventional working life — a year as a shoe salesman at Eaton’s department store, and then his entire career at Bell Canada (until, at age 56, he was given one of those lovely mandatory early retirement programs as they went through a wave of shedding management salaries). “How could you leave a good secure job with a big company?” he shouted (and that I was going to the Canadian Imperial Bank of Commerce, bigger in the context of Canada, meant little in mid-rant).

You can still make your career in a big name company: ownership may change a few times, as may the name, but the thread is unbroken. But the whole thing is relatively fragile. All the decisions that affect your future are taken far away from you. Often, corporate headquarters will move away from you, and you’ll be forced to uproot your family (always a joy in this era of two-career households) simply to stay on the safe track.

Small companies and startups, on the other hand, have all sorts of traumas: there’s a reason more fail than succeed in the first five years. On the other hand, the sector is robust. Individual firms come and go, but the startup community in a city is relatively immune to the economy (only who’s winning and losing today changes). It’s much like the restaurants in a business improvement area in a city: they come and go, but the total number of tables doesn’t change much from one year to the next. If you depend on restaurants either as a customer or as a member of staff, you can enjoy the same 10-15 blocks of the city for your entire lifetime.

In an economy where so much seems to be at the “eat our competitors to carry on” stage, that’s a strong suggestion that careers now come in two flavours: those that dance from small player to small player, and those that ride the waves of corporate consolidation. Both can provide some decent security from risk, and both hand you a pile of risk to take on.

Choosing which suits you better is something PDD can help you with.

A portfolio of micro-ventures

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If there’s one thing public policy at all levels of government doesn’t really understand, it’s the notion of the micro-venture. Neither do human resource departments.

Yet micro-ventures — from intermittent pop-up shops, to hobbies turned into product lines, to from-home work, to coding for a smartphone app — are an increasing part of the work world.

In fact, a growing number of newly-minted graduates find themselves moving from and through micro-ventures and never actually establishing a “career” in the traditional sense. In this, they’re joined by parents trying to return from home care to the work world (and discovering no one finds their gap compelling) and all those forcibly early retired trying to make a second life (since they’re not able or ready to actually retire).

Trying to fit this into a standard one or two page résumé is almost impossible. It doesn’t take more than a year or two before a micro-venture life takes up all the room, and its endless overlaps make the story hard to sort out.

Hand that résumé off to one of those websites that “helpfully” parses it for you, and you have an unholy mess on your hands. That’s because the program that reads your file wasn’t designed for any sort of situation that wasn’t linear.

So what is a micro-venture? Simply put, it’s a venture that involves not more than a handful of people — often, it’s a solo affair — and it’s probably located in low commitment spaces. From the consultants for whom “that table in the corner” of a neighbourhood coffee house is their true office to those working from home (often in violation of zoning and business licensing rules) to those who spend a year crafting items and then renting a pop-up space just for one weekend to sell them, micro-ventures come in all shapes and sizes, but mostly under the scale required for a small business.

Most micro-venture types actually have a portfolio of things on the go. I, for instance, have PDD, but I also have relationships with three companies (all of which I am a part of the team, but not on payroll), do some independent consulting, have two different paid writing assignments, and submit other articles on spec for paid publication.

Now, do I want one business — or are these separate ventures? Do I then need multiple business numbers, need to file multiple GST/HST and other tax forms, have multiple business licences? Or do I try to cram all of this activity under one roof.

Before you answer, remember the magic number: $30,000. Below $30,000/year in any venture, you don’t have to worry about the GST/HST. No filings, no collections, nothing. Running six independent proprietorships (under law) none of which hits that magic number makes a raft of paperwork go away.

And let’s face it: in a micro-venture world, you don’t have staff to do it. You probably can’t afford a lot of professional services to take the place of that staff, either.

When you make $250,000 from self-employment, spending $10,000 on accounting and tax services makes perfectly good sense. But you don’t get $1,000 accounting on $25,000 brought in, nor — frankly — do you have the $1,000 to spare out of $25,000. That’s because all your other costs don’t shrink proportionally.

Is it any wonder so many these days decry government burdens? What’s easy to take with one business of size, or in a salaried position, is a true burden on someone managing a portfolio of micro-ventures off a corner of their kitchen table.

So an awful lot of micro-ventures go “off the record”, simply to save on unnecessary paperwork. (I remember, living in Vancouver, making my consultancy “legal”. I didn’t begrudge the $149.00/year the city wanted for a business licence. I did begrudge the regulation that said it had to be at an address other than my home. I rented — at $269/month — an “office service” for really no other reason than to have a “business address” to fit their regulations. Talk about encouraging people to fly under your radar!)

Still, portfolios are becoming a bigger and bigger part of working life. They point out that although jobs may be in short supply, work is plentiful. They point out that there’s more to bringing in the necessary to house, feed, clothe and entertain a family than a career.

Micro-venture portfolios come with one big plus, in this economy. You don’t have all your eggs in one basket.

That’s important. Think about how many major corporations are stretching their accounts payable these days (P&G announced recently that no bill would be paid until it had ripened by at least 75 days — if you’re an independent or small business supplier to a company like that, you’ve essentially been turned into their banker, all for the benefit of P&G management bonuses and shareholder dividends. It’s hard to lay down outstanding invoices at the checkout in Safeway and get groceries in return.)

Elements of your portfolio may come and go; you may get stiffed or slow paid here or there; but you don’t risk everything. That’s a form of security no paycheque, no title, and no single venture can bring you. It’s more robust, even if it’s harder to describe to anyone.

If you’re hiring, don’t look down your nose at a micro-venture CV. (Don’t even do it if you bump into your portfolio neighbour at a BBQ — just because they don’t have a title for you to glom onto, doesn’t make them a loser.)

Micro-venture portfolios are one emerging answer to how we manage risk.