Nearly a decade of near-zero interest rates have finally kicked the U.S. economy back into gear. Unemployment is down, inflation is creeping up, and the stock market has soared, so it’s time for the Federal Reserve to start raising interest rates again. That, at least, is the consensus of Fed officials, who announced a widely-expected quarter-percent rate hike today (Bloomberg).
In the short term, that will mean higher rates for credit-card borrowers and home and auto loans. (But don’t hold your breath waiting for better return on your savings.) In the long run, it may mean conflict between the independent Fed and the new administration: President Trump has made sky-high promises for economic growth and job creation that are probably impossible to make good on anyway, but they’ll be even harder to fulfill if the Fed is boosting rates.
Airbnb, Approaching IPO, Could Face an Identity Crisis
Photo: Airbnb Open 2016 — Trips Keynote.
Whenever Airbnb does choose to make its entry into the public markets, there’s one group of people outside of Wall Street that will be paying close attention: some of Airbnb’s hosts. There’s no doubt that many of the millions of Airbnb hosts will see the occasion as a victory and an important milestone for the company that has afforded them an income stream. But some are starting to feel that they should get some shares, too. They helped build the business, after all, and they control the product and experience that makes the entire platform possible.
Hans Penz and his wife rent out two rooms in their house in Staten Island, New York. Penz, thirty-eight, is a baker and originally started hosting as a way to raise money to grow his business; now, the couple do it because they like the extra income and having people from all over the world stay with them. Penz loves hosting and is one of those people who genuinely believes Airbnb “is making the world a better place.” He also feels that hosts, or at least the most engaged hosts, should be able to get pre-IPO shares. “The hosts are the company,” he says. He says he’s talked about this with other hosts and with the company. He says that if he were one of the company’s existing investors, “I would definitely ask the company how they’re going to make sure hosts stay with Airbnb and don’t decide to start their own business.” When I ask Chesky about this issue, he says the company has looked into it and talked about it internally. He says it’s hard to give a million people equity in the private market, where every investor must be given access to the company’s financials. “It’s not without its complications.” This same issue came up way back when eBay went public, but that company in the end did not end up granting shares to its sellers.
Brexit, Britain’s exit from the European Community, was supposed to tank the British economy. But so far it hasn’t. In fact, Britain had a great 2016, economically speaking. The economists called that one wrong, just as, a decade ago, they failed to predict, or help us prevent, a massive financial crisis and recession.
Why do economists get so much wrong so often? John Lanchester (The New York Times) looks at the current crisis of confidence among economists, as represented in recent papers by the chief economists at the World Bank (Paul Romer) and the Bank of England (Andy Haldane). The problems cluster around macroeconomics, the discipline that studies the workings of the economy as a whole. As Lanchester puts it, macroeconomists would like us to view them as plumbers, behind-the-scenes tinkerers with reliable systems. But in practice they are more like a bomb disposal squad, summoned in emergencies to prevent catastrophes like the Great Depression.
As we’ve been saying here since the election, neutrality is becoming nearly impossible for American businesses in Trump’s America. You are either with him or against him, and if you try to sit on the fence, circumstances will push you off.
Look at the L.L. Bean brouhaha (here’s Digg’s summary): The venerable outdoor-wear catalog merchant emphatically insists it’s apolitical. But Linda Bean, a scion of the family that owns it, is a major Trump donor and supporter. That landed the company on an anti-Trump boycott list. In response, Trump himself sent out a tweet Thursday urging people to “Buy L.L. Bean.” Free advertising! But with a catch.
Stephen DeWitt has had the kind of career that used to end with a gold watch, a comfortable retirement, and a slow decline into old age. He’s held senior positions at HP, Cisco, and Symantec, and took Cobalt Networks through one of the highest flying IPOs of the late 1990s. But instead of retiring, in early 2015 he took the position of CEO at Work Market, a fast-growing platform that is reimagining the relationship between labor and business.
Backed by legendary investor Fred Wilson, New York-based Work Market helps large enterprises create “labor clouds” that connect skilled workers with tasks companies need to complete. The platform integrates all types of workers — contractors, full-time employees, and vendors — and parameterizes tasks and workflows against any number of data points and business rules. In short, Work Market hopes to instrument a wholesale rethinking of how work gets done in our society — from a world of traditional corporate employment to a world where every skilled worker can act as an enterprise of one.
As regular readers of NewCo Shift, you’ve come to expect an eclectic mix of stories covering the biggest shift in our economy since the Industrial Revolution. In the past two months we’ve been brewing up something new. Starting on Monday we’re experimenting with a fresh idea, and I want to tell you about it, and also seek your input.
Andy Stern spent his career leading the Service Employees International Union, but he left in 2010, convinced that the nature of work was changing faster than unions, or anyone else, could handle. Now Stern is one of the most prominent advocates of a universal basic income — a kind of Social Security payment for everyone that could “ease the transition and provide a floor for people” whose jobs are automated out of existence (Vox).
With changes in transportation alone likely to eliminate millions of driving jobs in the near future, we’re going to need to do something. Stern emphasizes that the basic-income concept is not a pipe dream: “All the resources and assets are available to make it real. It’s just that we have a huge distribution problem.”
Economic growth is about value added. In manufacturing it was adding value as a transformation process from raw materials to goods. Economic growth today is still about value added but the transformation process is often very different. The industrial process was a linear, sequential chain of predictable acts. The problem to be solved was known and the solution to the problem was clearly defined. In creative work, the transformation process is a non-linear, complex movement of thought from unclear problems to developing solutions. Work is exploration when defining problems as well as for creating solutions.
The worlds of mass manufacturing and contextual, problem-based work require very different thinking and skills. In the learning-intensive world we live in, it is not about reductionist job roles and narrow, clear responsibilities any more. Everybody needs to take part in the common movement of thought.
The stage coach lands in the ditch. It’s nuts, the sheer scale of this story: Since 2011, Wells Fargo employees created 1.5 million bogus bank accounts and another half a million fake credit card accounts to meet sales quotas and earn incentives (The Wall Street Journal). They signed people up for these accounts, and even moved money into them, without customers’ knowledge or consent. As these practices began to be investigated by Los Angeles prosecutors and federal regulators, the bank ended up firing 5300 employees, or about one percent of its workforce. Wells Fargo was one of the few big U.S. banks to get through the big bank bust of 2007–8 relatively unscathed; now it has been fined $185 million by the Consumer Financial Protection Bureau (the watchdog agency set up after that banking collapse). Remember how hard some defenders of the banks fought to keep the CFPB from being established? Banks, they said, could regulate themselves. If that card ever worked, it just expired. Banking (and all business) depends on trust; the more stories like this people hear, the faster they will flee big old institutions and seek new alternatives.
Facebook plays the censor. If you were looking for a test case illustrating exactly why people argue with Facebook when it says things like “we are not a media company,” you couldn’t invent a better one: After someone posted Nick Ut’s famous Vietnam War photo of an anguished young girl running down the street after a napalm attack, Facebook took it down (The Guardian). The company told him to “remove or pixelize” it (the girl is naked). When he refused — he’d included it in a gallery of images that had “changed the history of warfare” — Facebook suspended him. In protest, many others reshared the image — among them, Norway’s prime minister. Her post was deleted, too. You can expect more follow-ups, reversals, and contorted press releases as Facebook tries to extricate itself from the mess it has stepped into. Policing online content boundaries is a challenging business, and the bigger you get, the harder it becomes. Facebook still has a lot of learning to do.
Recently, organizations large and small have radically rethought company design by embracing human-favorable policies including establishing livable wages, developing creative equity plans, offering paid parental leave policies, and even pulling out of an entire state in protest of discrimination. In addition to sending a strong signal that people come first, these organizations are also making an economic argument to investors that these policies pay dividends in reduced turnover and improved business outcome.
