020 Is Self-Employment the Future?

The focus of today will be on self-employment. Is the future of work self-employment?  I read about this often. Last year I attended a conference about whether this is the future. Surprisingly, I was one of the only people that said no, it isn’t. Let’s discuss where this opinion comes from. More and more people are exposed to freelancers whether it be through their companies or even when ordering an Uber!

"There is a small percentage of people who are risk-averse enough to become self employed."

In IT we have companies that hire a highly trained, highly qualified IT project manager for three months in the first quarter, then maybe two months in the summer, and another month in October. When you sum it up, this freelancer is on the payroll for six months instead of 12, so it gives the company some flexibility. I see where this is coming from and I can also see where this ends. There is a small percentage of people who are risk-averse enough to become self employed. They are smart enough, can adapt quickly, and have enough market knowledge. One of the main problems that my customers have when I go and assess their companies is that the employees don’t give a damn! They are switched off and only execute what they’ve been tasked with. These people will never, ever become self-employed, and therefore I do not see everyone in the future transitioning away from the traditional type of employment. Being self-employed also requires extreme attention to detail as well as discipline and foresight. You will be responsible for your own taxes, your own pension, your own health insurance, and so on. Here in Europe the tax topic is especially difficult as, in my experience, many tax advisors struggle with simple which were quite evident. Much more pure administrative work is required on your part.

"No one will benefit from your knowledge and experience if you sit in your room!"

You must also be very forward-thinking and extremely responsible! Setting aside your own savings and pension is not something many people have the discipline to do. Moving on to marketing; no one will benefit from your knowledge and experience if you sit in your room. My company invests half of the money into marketing, especially now when we are growing.  It’s rare to have one big customer that refers you to another and so on. Enough of the negatives! Let’s get a more positive note. There is a lot of beauty in being self-employed, though I do know a lot of people are not made for it.

"There is a lot of beauty in being self-employed!"

You have a lot of freedom. If my calendar is free and the sun is shining, then I can decide to take a day off and who cares. In addition to the freedom a lot of money can be made because there is a market for freelancer, especially when compared to 20 or 30 years ago. The second thing is you can live wherever you want here in Europe. As an IT freelancer, with an internet connection you can do this from exotic places such as Spain or Thailand or Panama! The dark side for governments would be that these talented individuals take their companies, and taxes, abroad rather than paying at home. In conclusion: we asked if the future of work is self-employed. The answer is no. My advice is to do one and don’t forget the other. Have your business and in the background start a company you are passionate. Use the opportunities you have and give it a shot!

Stay in lead!

OLAF KAPINSKI 🙂

Transcript

Good morning, good afternoon, good evening and welcome back to the Live It Lead IT podcast.

So this is the podcast for leaders and for people who want to become better and better and better, And Musaab is back and again.

Hey, Olaf. How are you? Very good. You have a very interesting question for us today.

I do.

And it’s something that has affected me as well recently.

Do you think that the future of work is self-employment or almost independent contractors?

In a way, I read this so often, and I’ve even last year in 2018 attended a discussion of a newspaper about whether this is the future. Is the future of business self-employment. And I was mainly the only person that said no, it’s not.

It’s almost what they call the gig economy, at least in the US. I’m speaking about companies like Uber or like in the UK, JustEats or food delivery. Even Amazon has started hiring people as independent contractors or self-employed. They take packages, logistics companies where this one person company has their own Mercedes, and then he’s delivering the stuff and it’s his or her car; and there’s these big three letters of this company inside.

Let’s maybe from the from this angle of where does this come from? I mean, those conversations and those discussions come from somewhere?

And I believe they come from us seeing this more and more often. So for example, in IT we have this company who just, I don’t know, do one or two big IT projects. And this company hires a highly trained, highly qualified IT project manager for three months for maybe the first quarter then maybe two months in summer and another month in October.

So something like that.

So this person is highly trained freelancer. Quite expensive as well. But this person knows things. And over the year, it doesn’t make sense to hire this person, even if for sure he doesn’t want to. But leave this apart. When you sum it up well, I was listing up six months versus having this person on the payroll for 12 months. This still doesn’t count out, so gives us flexibility.

I myself have been in a company where they were panicking on head count numbers.

And that was so bizarre that they were comparing my service people in Hungary which was one head count, and my team leads in Germany were another head count, and the salary difference was, I don’t know, 10 times or something. This was ridiculously crap.

So we see more and more brain workers. It’s mainly brain workers that you need.

And you need this person only for this project for this introduction of whatever or for this translation whatever it is.

So we see these people receive this more often, and we see that these people who are very, very good in these things think about having a job which pays out, and I’m employed there for a year. But in this year, only three months are really exciting.

Yeah, the other nine months, I’m just burned down with, sticking to this project manager example, with projects that were average. This is rubbish. I mean, everybody could do this.

They’re not excited. And then somebody comes along and says, “Ah, you know, I need a project manager, but we can’t find one.”

And this person sits there and thinks, “Oh, what about this?”

So then you have another self-employed person.

I see where this is coming from and I can see where this ends.

So this is a focus and you called a gig economy, is on the brain box on this percentage of mankind who is risk averse enough to go and be self employed; who is smart enough, who can adapt fast enough, who has knowledge where the market competes for.

And I have no numbers, but I would be surprised if this is majority of mankind. So I see now we’re going back to my customers. The main problem that my customers have when I go into their companies in the night. We talk about objectives and we talk about organization of IT departments. None of these things is that. The employees sorry to say, don’t give a damn!

And I know this is especially in Germany. We have a clear enemy and the enemy is the company, the manager and it’s like in the fairy tales.

It’s always the employer is the good one, and the manager is always the bad one. So this is how the story goes, especially in Germany.

I call this crap. This is simply this. It’s sometimes true, but not usually.

It’s people on both sides, and we have enough lazy employees who come to work switched off. They switch off their brain.

Sometimes they just don’t forget to switch it on in the whole life, they just go there. They do the stuff that they’ve done for eternity and they plan to do these things for eternity. They don’t give a fart. They execute what they’ve been tasked.

These people will never, ever become self-employed.

So I cannot see that everybody in the future gets self employed. So additional thoughts on this.

Being self-employed is a hell of a lot of work. A lot of work. And if you listen and if you are employed, so think about taxes. Yeah, you just make your taxes.

But when you run a company, when you’re self-employed, this tax thing in Europe gets ridiculously more complicated.

I call it chicane. I seriously call it chicane because it’s not predictable, and it’s not predictable because my tax advisor sucks.

But my tax advisors which I had were always struggling on one answer or another which I believe was quite evident.

This makes me call this route. Just she came. It’s not there to be understood. It’s just there, it’s a trap.

So you need to deal with all of the beauty of this road.

So, the taxes are a big part.

I mean as I mentioned,  I’ve done independent contracting before, and I’ve been self-employed.

It’s definitely something that, as you touched on, all off, a lot of people don’t know the answer.

You go to these people that you expect to know, and because they deal with people that are already employed or because they deal with businesses or things like that, they don’t have the answers.

A lot of times the people that write these laws are not even sure what the process is!

You can get stuck, you can have a lot of problems.

Just to close this down, I’m not against taxes. You know when I understand what my taxes are doing and where I pay taxes, cool. I’m not cool with when these laws are made in a way that it’s just I can see. The only reason is that this is about bribing me. So this is the one thing, taxes.

Now marketing. It doesn’t help when you sit in your room with your genius knowledge.

So there is a reason why my company invests half of the money in marketing, and maybe this would be reduced once we grow.

But for the moment, it’s this ridiculous amount.

So when you say I am this introverted IT expert, and I’m the best in, pick one of these nerdy topics, and I hate to go on stage. Sorry.

You will die starving because nobody knows you.

Sure, we all have these stories when you have this one big customer and he refers you to another, and then you know, this avalanche goes on.

It’s rare. It’s seriously, really rare.

Then all of your things that our insurance connected. When you have a fixed job, you have health insurance, and you have a pension. None of that exists when you’re self-employed. So a lot of more pure administrative overhead that you need to face. Not saying that this is impossible. I say you need to be aware that if you make yourself self-employed because you are introverted geek, I doubt that you’re gonna make it. I seriously doubt it.

You have to be very forward-thinking and extremely responsible.

Because there, as an independent contractor, there are no sick days, there are no off days. You don’t get paid. There’s no vacation time. You can take a day off, you can choose not to work, but then you don’t get paid on that day or that week or that month.

That’s a very big thing. You have to look at even something like a pension. You have to look forward 20,30, or 40 years in your future.

And you have to kind of make your own savings and set your own things aside, which a lot of people do not have the discipline to do.

So now let’s leave the black side where it is. I think we’re now down enough. Let’s go for the white side.

This is a topic because it happens, and it happens because of two reasons. So the first reason is that companies understand that we are, let’s say, dynamic enough.

We need this developer for this project. There is no reason for keeping this developer in the company at all, but we need these skills for this project.

So we hire an external person from somewhere or we have an agency or whatever.

Additionally, even when agencies are hired, and I know what I’m talking about as we run this agency. This agency usually works together with certain people, with a network of freelancers, which they can throw onto these projects because this works.

So there is a lot of beauty in being self employed and said, I know a lot of people are not made for it.

So there is this. You have enough, we have a lot of freedom. You can say the pro is the con. When you say if you make a day off, then you’re not making any money; I say I can make a day off whenever I want and I really mean it with a pre-warning time of, I don’t know, two minutes or something. If my calendar is free and the sun is shining, then I can decide and who cares.

Screw them all. I just parked this. I go out so.

A lot of freedom is there, a lot of money is made there because we have a market.

The market means: the companies are not, I mean, go back 20 years. Let me pick an example. Let’s go 30 years. Let’s go 30 years, before IT nobody in, I don’t know, the automotive industry, would hire somebody with technology for this one project.

They would all hire them because they need this.

So today we are a bit more relaxed because we know if we hire this person to introduce this earpiece system, for example, we need this knowledge to set it up once and afterwards we only need this agency to support us with the operations. But we don’t need these programming suits, this whatever anymore. And brackets, this is wrong, dear company. You will need this developments, goods, whatever. So companies are open for it and pay for it. Companies understood that external help on this one, or this other thing has a price.

And it’s not what you pay your own people, because these freelancers have this additional overhead.

So there is a market, this is the one thing. The second thing is now going back to the 20th century, 21st century plus Western Europe.The borders are free. You can live wherever you want. There is no reason when you run a tech freelance company, that you can’t do this from Spain, where it’s nice and warm, or even Thailand.

You just need an Internet connection. So this is the beauty of things.

That’s the beauty of the 21st century internet economy. We can do these things and it works because I could put my marketing effort into the Internet.

I don’t do book and newspapers for six digit euros cost.

Now I just do this podcast. So you can do this from wherever you want. And I bet we will have episodes in this podcast, which we will do from wherever we are.

Yeah. So this is the beauty of things. It works. We have times where we envy that which is accepted, that we can only buy for from the free market and all of these things.

So, dear governments, I see there is a dark side for you, and I’m now more addressing to to these successful Western European countries who stare into the last 40 years and they assume they are as successful as the last 40 or 50 years. They would be in the next 40 years, and they were not. So here’s the down side of things. The brain box make the most money. These are the top of the pyramid of the income pyramid. These people are flexible in brain and usually flexible in location.

Yeah, nothing stops them from running their own business in Thailand.

They pay the taxes in Thailand or in Panama or wherever, but not in bloody Germany anymore.

So this is what we as a society, that’s an ironic sentence, have to have an eye. These people pay a lot of taxes, and it’s not a good idea to let them go, and this is what will happen because the borders are open.

So I see this on a society level as a heavy risk that these people who really make the big money that they just disappear because we have more and more opportunities than 20 or 30 years ago, where we just didn’t have this.

So confusing. Is the future self employed? No. Let me give you away. And the way goes like this, do the one and don’t forget the other. I know I’m talking about. I started with prepping my “self-employedness” with prepping this company and all of this where we are at the moment.

In November 2014, when my German podcast launched and I was employed there I was. I just had a full busy job first as team lead, then department lead, then head of.

And I did German podcast in parallel with this. Why not? That’s enough. For one. It was really, really clear that this is the start into self employment. This is the start into a company, all of these things.

So, this is the way to go. If you say I am a big fan of aesthetic income, okay, and your a leader or whatever you are, then there is an opportunity to ask your boss or your company for reducing from 40 hours to 30 or 20 hours, whatever it is.

So if you’re really good, then they accept that they hate it. But they accept that because this is even better than you quitting, right?

Use the opportunities. Give it a shot. Give it a try, will the beast fly? Yeah, well, why not? I mean, if it will fly, lucky you. If it doesn’t fly, then well, you had a good nice time. What’s the point? If you have still your job in the background and you start this business and it doesn’t get off the ground ,and you find it’s a labor of law? Then either you continue or you throw it away and try something different so we can do these things today.

So I believe it’s either or. It’s not an either or it’s. I think it’s an and. You can do this and your job. Absolutely. I invite everybody to do that.

I even believe that this is healthy for your soul to have two or three different jobs.

And I’m not now not talking about this iconic, self-educating mom with 12 kids and no home, but 14 jobs.

And she’s commuting for 20 hours every day to work an additional 40 hours. This is all rubbish.

I talk about solid business, I talk about solid job, but you have, and you like it. And you’re an expert in this. And you take this expertise, bring it to the market or take something completely different where you’re good at like a hobby. And you bring this on the market as well. Give it a try. Does this create income? Does this create freedom? Absolutely! Does this create flexibility in your brain? 200%. And this is what I seriously recommend. Try. Give it a shot. Nothing to lose.

Thank you, Olaf. Bye.