The Rise Of Rōnin and The Liquid Economy

Sara Horowitz, the founder of the Freelancers Union (through which I get my health insurance, by the way), makes the case that we are moving into a new US economy where rōnin (or freelancers) are becoming a significant force:

Sara Horowitz, The Freelance Surge Is the Industrial Revolution of Our Time

Everywhere we look, we can see the U.S. workforce undergoing a massive change. No longer do we work at the same company for 25 years, waiting for the gold watch, expecting the benefits and security that come with full-time employment. We’re no longer simply lawyers, or photographers, or writers. Instead, we’re part-time lawyers-cum- amateur photographers who write on the side.

Today, careers consist of piecing together various types of work, juggling multiple clients, learning to be marketing and accounting experts, and creating offices in bedrooms/coffee shops/coworking spaces. Independent workers abound. We call them freelancers, contractors, sole proprietors, consultants, temps, and the self-employed.

And, perhaps most surprisingly, many of them love it.

This transition is nothing less than a revolution. We haven’t seen a shift in the workforce this significant in almost 100 years when we transitioned from an agricultural to an industrial economy. Now, employees are leaving the traditional workplace and opting to piece together a professional life on their own. 

The term ‘free lance’ was originally coined by Walter Scott in Ivanhoe (1819), to represent a mercenary warrior not sworn to any lord’s service (and not that the warrior’s efforts would be free of charge). In the 1860s its meaning became figurative.

I favor the term rōnin over freelancer, perhaps because it hasn’t been tinged with 100+ years of use in US economics. Perhaps more of a consideration for me is that the term rōnin literally means ‘wave man’, suggesting one who is operating in a more liquid, less solid, sort of connection to the world and others. And this explosive growth of rōnin workers started with the rise of the web, which has lowered the costs of independent work, on both sides, for both the rōnin and the companies that employ their efforts.

The government isn’t doing a good job of monitoring the rōnin side of the economy, according to Horowitz:

As of 2005, one-third of our workforce participated in this “freelance economy.” Data show that number has only increased over the past six years. Entrepreneurial activity in 2009 was at its highest level in 14 years, online freelance job postings skyrocketed in 2010, and companies are increasingly outsourcing work.

[…]

We don’t actually know the true composition of the new workforce. After 2005, the government stopped counting independent workers in a meaningful and accurate way. Studies have shown that the independent workforce has grown and changed significantly since then, but the government hasn’t substantiated those results with a new, official count.

I suggest that we are rapidly moving toward an economy where the majority of workers will be rōnin. Companies have increasingly small incentives to take on full-time workers for many of the functions in their business, and the secondary costs of full employment are not just the full benefits of long-term employees, but many others:

Increased Agility — A company that can react and quickly act to changing conditions has to possess a different sort of balance. One way is to find or train a company of quick change artists: inventive polymaths. Alternatively, a company can bring together short-term teams of specialists to attack new opportunities, and if they fail, they can do so quickly, at low cost, and simply disband the team.

Swift Trust — Companies can avoid the high and seemingly inescapable costs of internal politics with permanent employees struggling for power and autonomy as soon as a hierarchy is created. Networked rōnin operate completely differently. Neil Perkin recently wrote about this is in The Rise Of Talent Networks:

Corporate down-sizing and technology have combined to create an influx of highly talented individuals into the market with the ready means to turn that talent into real value. There have always been freelancers of-course, but this is talent that is equipped with cheap, effective, readily available yet potentially transformational tools and technologies, and connected to inspiration, to opportunity, and to each other, like never before. It’s a world powered by ideas, enthusiasm, and know-how. But it is also a world powered by collaboration, supported by increasing numbers of co-working spaces and a whole raft of ‘unconference’ style meet-ups, events, and hack days that are both the originator for and a catalyst of innovation. The difference is that the number of people working in this way, equipped with the enterprise tools to enable it, means that perhaps for the first time, the possibility of a real ecosystem of talent networks operating at some scale has suddenly become viable.

Networks, whether of individuals or small firms, are naturally extremely efficient. You can select and partner with some of the best talent in the industry. You make use of the talent you need when you need it. And you don’t have to pay an overhead when you don’t. You benefit from a broad talent pool that brings diversity of thinking and ideas, yet is unencumbered by corporate habit or channeled thinking. And there are numerous pieces of research that prove the value of skill diversity in innovation.

Large organisations have a tendency to pull people into a vortex of internal focus. The smart ones are beginning to recognise that more flexible structures that allow them to interact with, learn from, and work with this external pool of talent will give them genuine competitive advantage. The smartest are structuring their businesses to be agile and flexible enough to allow collaboration of this kind to not be the exception, but the norm.

Impermanent teams operate as well as they do because of a well-researched — and profoundly important — social phenomenon, called swift trust, first detailed by Debra Meyerson and colleagues (see Swift Trust and Temporary Groups).

I’ve written about this recently, building on Myerson’s explanation, that impermanent teams can come together and accomplish projects with the least amount of politics, because a/ the participants are all aware that the project is of limited duration, b/ the team members are able to assume functional roles based on their previous experience with a minimum — or zero — training, c/ the project is based on distributed, complex, non-trivial tasks that require deep expertise, and ongoing coordination or work activities, and d/ people can suspend their need to build deep trust because it is a project comprised of other rōnin.

Stowe Boyd, The Meaning Of Work, Connectives, And Swift Trust

These techniques that resemble deep trust, but are lighter-weight and faster to adopt, can be used to quickly get down to business in an ad hoc team, and focus on doing what is needed to get done; instead of getting bogged down in actual trust development, which can take weeks or months to build.

I believe that swift trust is becoming the default for creative work, and that we are all increasingly operating as if every activity we are involved in is impermanent. Increasingly, at least for most creatives, that is the case anyway. But some people, like me, are intentionally adopting the ad hoc project team as the form factor for all creative work.

Partly this is to take advantage of swift trust — where deep trust activities are deferred or completely put aside — and the team members operate in a social demilitarized zone, putting aside long-term obligations and politically-negotiated power arrangements. Instead, we join such teams and rapidly assume the role that fits us, people interact based on the nature of the roles that all members play. We suspend our disbelief and agree to trust within the confines of the groups narrowly defined goals.

And just as important, as a consequence of deferring the complex and involved discussions of personal purpose, every ad hoc team member can cast the project in terms of how it lines up with their personal meaning for work. The members do not need to collectively agree to a single shared reason for existence. That is shelved, since the team members will be going forward on their own life paths, as soon as the project is completed.

This last point is where the liquid economy is most central to the discussion. The rōnin does not have to be 100% committed to the long-range strategic plans of the company behind a short-term project: his goals are his own. The company and the rōnin are just walking down this next few miles of road together, and after that, they will part ways.

The rōnin is perfecting her art, pursuing a muse, developing a long-range scheme for a better bank, pruning ax, or sailboat, while working for companies in completely different lines of business.

And this non-convergence, this lack of long-term collective agreement, is not a detriment: it is in fact the reason that the friction in short-term projects is so low. Because the participants are only cooperating as short-term ‘connectives’ — when considered in any timeframe larger than the duration of the project — they avoid the social inertia of forming long-term ‘collectives’ (as styled by @shiftctrlesc). The externalities of deep, long-term social integration are avoided, or at least dramatically decreased.

This is where the social liquidity comes from. People avoid the costs of developing deep trust, and the tiered social ties that necessarily grow from that. Instead of organizing our work, communications, and social ties around slow-forming, slow-changing, and inflexible crystalline work matrices, the liquid economy is based on an increasingly quick-forming, quick-changing, and flexible liquid medium for work, based on streaming social communication models, and a hybrid sociality where an increasing proportion of connections are short-term and reliant on swift trust.

This is a form of superlinearity for business to aspire to, where doubling the amount of work performed — and revenue received — grows at a better than linear rate. And it’s clear that liquid work — given a population of rōnin capable of making it all work — surpasses the productivity of solid work. That’s why a million individual decisions — of rōnin and their handlers with businesses — are trending toward a liquid economy: it’s more productive and less restrictive.

[This is one of the major themes of the book I have been researching this year, soon to be a Kickstarter project: ‘Liquid City: A liquid, not a solid; a city, not an army’.]

Looking Good: How Attractiveness Plays In Business

There is mounting economic evidence that being better-looking than others translates to making more money. Note that having a higher income translates to a long list of other characteristics in the world of business: more autonomy, more say in business activities, and a greater likelihood that others report to you.

Daniel Hamermesh wrote about this recently, in stark economic terms:

Daniel S. Hamermesh, Ugly? You May Have a Case

Being good-looking is useful in so many ways.

In addition to whatever personal pleasure it gives you, being attractive also helps you earn more money, find a higher-earning spouse (and one who looks better, too!) and get better deals on mortgages. Each of these facts has been demonstrated over the past 20 years by many economists and other researchers. The effects are not small: one study showed that an American worker who was among the bottom one-seventh in looks, as assessed by randomly chosen observers, earned 10 to 15 percent less per year than a similar worker whose looks were assessed in the top one-third — a lifetime difference, in a typical case, of about $230,000.

Beauty is as much an issue for men as for women. While extensive research shows that women’s looks have bigger impacts in the market for mates, another large group of studies demonstrates that men’s looks have bigger impacts on the job.

Why this disparate treatment of looks in so many areas of life? It’s a matter of simple prejudice. Most of us, regardless of our professed attitudes, prefer as customers to buy from better-looking salespeople, as jurors to listen to better-looking attorneys, as voters to be led by better-looking politicians, as students to learn from better-looking professors. This is not a matter of evil employers’ refusing to hire the ugly: in our roles as workers, customers and potential lovers we are all responsible for these effects.

This inequity between the beautiful and the homely has been written about extensively, and seems to click with our sense of how the world works. But if this is true why don’t people do more to enhance their looks for business advantage?

Well, maybe they do. Americans spent more than $10 billion on cosmetic ‘procedures’ — both surgery and non-surgical procedures like Botox — last year. Maybe they are thinking of this as an investment, like buying better clothes to get ahead.

Catherine Hakim, a professor of sociology at the London School of Economics, goes even farther, suggesting that we should use every iota of our ‘erotic capital’ to get ahead. I am uncertain that all ‘attractiveness’ equates to ‘erotic capital’, because it is possible to admire a good-looking person and to be drawn to them without a sexual agenda, but I certainly grant that a great deal of attractiveness is grounded in sexuality.

Jessica Grouse recently interviewed Hakim, and after sparring with Hakim about her apparent biases — like thinking that the French are smarter about erotic capital than the Brits, and whether women have less sexual desire than men — we return to economics:

Grouse: In your book you repeatedly mention the penalty that overweight women pay in the workforce—they make less money than slim women. So it seems that even though women might not be rewarded in the same way men are yet for having erotic capital, they are already being punished for not having it. Don’t you think that women are aware of this prejudice?

Hakim: It’s possible that Americans are much more aware already of the importance of grooming, of being slim, of not being fat and obese. I would say that even if people have a general idea that it’s better to be good-looking and better not to be fat, not many people are aware that you actually earn a lot more if you are reasonably good-looking, and even more if you’re positively attractive. I think a lot of people are not aware that there is a sex difference in returns to attractiveness and men are making more money from it than women. And that is something I think that women do need to address. And I also think that people overlook the fact when they say, “Oh, you should invest in qualifications”—that that’s somehow more morally dignified.

I don’t know the exact numbers for the U.S., but in Britain, roughly 25 percent of people get a college degree, while roughly 20 to 25 percent leave secondary school with either no qualifications or none of any great value at all. And I know that in America you have high-school drop-outs. So focusing exclusively on education as the sole ladder to success seems very narrow to me, given that huge numbers of people will never make it through the educational system. And therefore, they are necessarily looking to alternative routes to success. And it’s reasonable to say that makes sense. It might be sport. That has always been a major one for people from poor countries and poor backgrounds. Another one is the music and entertainment industry. And erotic capital is a third. And for a lot of people, that will be an important and alternative route.

Grouse: I know that you think that women should exploit their erotic capital more than they already are, but do you think it is appropriate that people who don’t have erotic capital should be penalized as they seem to be?

Hakim: I can’t see any problem here. People who are stupid are penalized. Discrimination is part of life itself. Discrimination is part of being an intelligent and thinking person. And I can’t see any possible reason for saying if erotic capital has genuine social and economic value, then those who don’t have it will not be winning in that area. They may win in other areas. They may be very intelligent, and therefore getting that advantage. They may be very gifted in music or sport or politics or some other area of activity, but they’re certainly not getting the benefit of high erotic capital.

In her book, Hakim makes an argument for non-physical aspects of attractiveness, like a sense of humor, as well as non-innate elements of attractiveness, like good grooming, intentional posture and poise, and showing off your best attributes.

My take is this: if we are wired, inescapably, to choose to work with attractive people, then it’s better to be conscious of that bias, on several levels.

First, we live in a world filled with biased people, who can’t help being biased toward the more attractive of the species, and who may not be particularly aware of how this bias impacts their judgment. But you can be aware of how that all works, and take it into account, to counter the bias in your own thinking to the degree that is possible. I am uncertain as to how much we can actually do that, however.

Second, and this is Hakim’s thesis, you can choose to leverage this bias to your personal advantage, which at a basic level is sensible, like good grooming, trying to make a good impression in interpersonal interactions, and being friendly, smiling, and being funny. This can be amped up to a nearly unbounded level, where a lots of time, effort and money can be invested in fitness, expensive clothing, and cosmetic procedures. At some point, there is a point of diminishing returns, but Hakim argues that we are — in general — nowhere near that boundary.

In the world of work, a tremendous amount of social signalling goes on through self presentation, most of which we have internalized to such a degree that we don’t notice explicitly. For example, recent research shows that men who break social rules are perceived as more powerful.

We live in a world of social messages, like ants following paths channeled by pheromones. Everything we do can have more than the obvious superficial meaning, and so the way we look, walk, and talk is silently broadcasting much more than we are even consciously aware of.

I am intrigued by the notion that our attractiveness can be passed through online interaction, as well, even when the visual cues are absent. Do the attractive interact online differently? Could we determine if someone is more or less attractive just by online interaction via Twitter or Facebook? Certainly there are obvious cues like avatars and photo galleries, but I wonder if an experiment was made, where these physical elements were suppressed, if people can reliably judge the attractiveness of people online. My bet is yes.