The Gig Is Up

0:00 Over the last two generations,

0:01 we've seen work culture change from the expectation

0:03 of spending an entire career at one company

0:06 to the average Gen Z person expecting to have

0:09 18 jobs across six different career paths before retirement,

0:12 if they even get that lucky.

0:14 This trend is also stretching the definition of what

0:17 we consider a job in the first place, as gig work, side hustles,

0:20 freelancing, and forced entrepreneurship are

0:22 becoming increasingly common amongst people who

0:25 would have otherwise filled regular 9 toive jobs just a decade earlier.

0:28 In the process, this has been sold to us as liberating flexibility,

0:32 tearing down the rigidities and formalities that went with the set 40-hour week.

0:36 And in the interest of fairness, a lot of this is true.

0:40 The mandate to be in an office between two set

0:43 times a day has undeniably resulted in millions of wasted man-hour

0:46 every year that could have been better spent if work

0:48 only needed to be done when there was work to do.

0:51 But the way we are fixing this has not been ideal.

0:55 The rigidity of the 9to-5 may have boxed us in, but it also offered a lot

0:59 of people a level of stability that was

1:01 hard fought for just outside of living memory.

1:03 It probably won't come as a shock to you that the real motivation behind making

1:07 everybody their own boss was not really

1:09 so that they could set their own schedule.

1:11 In fact, a look at the data would suggest that for a lot of people,

1:15 it has actually done the opposite.

1:17 But understanding why this happened will also shine a light

1:19 on how we ended up getting the worst of both worlds,

1:22 all while undermining the numbers we run our economy off of.

1:26 Small business, it's a busy time of year.

1:29 As new data shows, retail sales jumped nearly 4%

1:32 in the holiday shopping period from a year ago.

1:35 That's according to Mastercard.

1:36 But small business owners still face, we know, a host of challenges.

1:40 I paid him over $12,000 for one-on-one coaching.

1:42 I still wake up like very early.

1:44 I'm like a 4:30, 5:30 person.

1:46 My weddings right now start at 4,500.

1:48 I would expect no income anywhere between like 6 to 12 months.

1:52 More than 40% of the US workers will be freelancers,

1:55 independent contractors or temporary workers.

1:57 When Uber started 3,000 a week, you know,

2:01 4,000 a week and literally now we are making like maybe like a quarter of it.

2:07 The gig economy has never exactly been flawless,

2:10 but some recent trends are throwing off a delicate balancing act between

2:14 workers and customers that might accidentally

2:16 be exposing some much deeper underlying problems.

2:19 On the surface, our unemployment rate looks really good right now.

2:22 Sure, it has trended up slightly in the wake of a long string of mass layoffs,

2:27 but by zooming out, we can see it is still hovering around all-time lows.

2:31 Sounds great, right?

2:33 Well, it's no secret anymore that jobs data

2:37 has had some reliability problems in recent years.

2:39 And one of the biggest blind spots is people

2:42 moving into the gig economy instead of becoming formally unemployed.

2:45 For a lot of people who have lost their jobs,

2:48 it's quicker and often easier to register as an Uber

2:51 driver than it is to register as unemployed.

2:54 And you only really need to look at the numbers to see this is happening.

2:57 According to the Bureau of Labor Statistics, over the last 5 years,

3:00 the total number of people classified as unemployed

3:02 has fallen by about 3 million, which sounds good.

3:05 But over that same time frame,

3:07 the number of active Uber drivers has increased by roughly 3 million people,

3:11 according to company financials.

3:13 Now, to play devil's advocate, even if these jobs aren't the best,

3:17 having readily available and highly flexible

3:19 work with low barriers to entry could actually be a good thing when

3:22 the alternative is people going straight onto unemployment.

3:24 And we will get to that.

3:26 But the problem right now for the workers entering the gig

3:28 economy is that there is a rapidly growing roster of drivers

3:31 looking to show for around a $50 burrito and a shrinking

3:34 pool of customers that are still willing to pay for it.

3:37 A lot of the data surrounding gig

3:39 work and even just regular employment is disjointed,

3:41 vague, and often downright counterintuitive.

3:43 Even something as simple as what it means to be employed is probably going to be

3:48 different for you than it is

3:49 to the statisticians putting all of these numbers together.

3:51 On top of that, when you think of gig work,

3:54 you are probably thinking about people delivering food

3:56 or driving people around in their fake taxis.

3:59 But depending on which organization is collecting the data,

4:01 it can also extend to renting out Airbnb properties or even

4:05 people like little old me here running a YouTube channel.

4:07 When a metric becomes a goal,

4:09 it's no longer a useful measure because the groups involved

4:12 will try to influence it in a way that benefits them.

4:15 The gig platform companies want to report that they have lots of people

4:18 working for them to show how important they are to their stakeholders.

4:21 The media wants big changes in job numbers one

4:23 way or another to make for good headlines and politicians

4:26 want to ignore the industry altogether so that they

4:28 can keep on pretending the job market is great.

4:31 This just adds additional murkiness to an already very messy collection

4:34 of numbers which can make it really hard to see what is

4:37 happening to a majority of the workers in these jobs which is

4:40 let's be honest mostly people who couldn't find a better job elsewhere.

4:43 So to unravel this all there are

4:45 really three components that need to be understood.

4:48 the fundamental platform economics that have

4:49 facilitated the growth of the gig economy,

4:52 what these services have covered up in the job market,

4:54 and what happens when they can't cover it up anymore.

4:57 Now, that first point is really just about a balancing act.

5:00 A platform like Uber Eats or Door

5:02 Dash coordinates transactions between a service provider,

5:05 the delivery driver, a goods provider, the restaurant, and a consumer,

5:08 which is you poking at pictures of cheeseburgers on your phone at 11 p.m.

5:12 If Uber Eatats wants to make more money,

5:14 it either needs to charge you more, pay their delivery drivers less,

5:17 take a larger cut from the restaurant making the food,

5:20 or just do more transactions in total.

5:22 In the early days of these services,

5:24 they were almost exclusively focused on that last point,

5:27 expanding their user base.

5:28 This meant that on any given transaction,

5:30 they would actually pay more to the restaurant

5:33 and delivery driver than they were taking

5:34 off the customer just to attract as many

5:36 of these three onto their platform as possible.

5:38 Back around 6 years ago, when these businesses were still blit scaling,

5:42 customers would get subsidized food that was

5:44 often cheaper than ordering in person.

5:46 Restaurants would get generous revenue splits,

5:48 and drivers were paid well above minimum wage,

5:50 even after accounting for their hidden costs.

5:53 But these good times were all financed by burning venture capital dollars.

5:57 Now, to play devil's advocate, again,

5:58 this is actually not that unusual when building out a marketplace.

6:02 Customers won't spend money on the app if there are no restaurants to buy from.

6:06 Restaurants won't register on a platform that has no customers,

6:08 and drivers won't make any money if there is no food to be delivered.

6:12 So, to get things started,

6:13 the market maker usually does need to sweeten the deal in every direction.

6:17 Nowadays, their mission has changed from growing the number

6:20 of transactions to growing how much they make from those transactions.

6:23 but how much they can push on each participant

6:26 really depends on how hard they are to replace.

6:28 All of these groups are still growing,

6:30 but while total revenue from customers increased

6:32 by around 35% in the last 2 years,

6:35 the total number of active gig workers on the platform

6:37 increased by around 80% over the same time period.

6:40 This would mean that even if there were

6:42 no changes in how this revenue was divided up,

6:45 there is simply less money per driver, even without considering inflation.

6:49 But the real point here is that drivers have

6:51 become the easiest group in this triangle to replace.

6:54 So it's easier for Uber to cut

6:55 costs from them without destabilizing their market.

6:57 Now I know that this is a lot

6:59 of numbers to confirm what you probably already knew.

7:02 Pay and conditions for the most common type of gig work is getting worse.

7:05 But by understanding these numbers,

7:07 you can see how this can very quickly become a dangerous feedback loop,

7:11 especially if these customers can no longer justify spending twice

7:14 as much on their food to have it hand delivered across town.

7:17 Now, maybe this could be written off as pure speculation

7:19 from people who have spent too long looking at company financials,

7:22 except for the fact that in a lot of markets,

7:25 it's already happening, and the results have not been pretty.

7:28 So, it's time to learn how money works to find out

7:31 what happens when there is no room left in the gig economy.

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8:34 Okay, so as the gig economy platforms are playing this little game,

8:39 the perfect outcome for the company

8:40 in the middle here trying to maximize their own

8:43 bottom line would be a large group of people with a lot of disposable

8:46 cash who are not very price sensitive and an even bigger group of people

8:50 over here without much negotiating power who

8:52 just need whatever money they can get.

8:54 And oh, would you look at that?

8:56 It's a statistic you are probably all getting sick of hearing me repeat.

9:00 The top 10% of households are now doing a record 50% of the spending

9:04 while the bottom 60% of households are doing a record low of just 20%.

9:09 This growing divide is not great, but for a company like Uber,

9:13 it's been a golden opportunity to squeeze more money for a worse service out

9:16 of customers while simultaneously squeezing more service

9:19 for less money out of its contractors.

9:21 Also, let's be honest with ourselves.

9:23 A lot of that gap is being bridged by pushing for tips harder as well.

9:27 For the first three years of the company,

9:29 they didn't even have a direct tipping option

9:31 because the company itself called the practice tacky.

9:34 Today, it's the expectation, and it's pushed very hard.

9:37 Firsthand reports from drivers and restaurants have backed

9:40 up what the big picture numbers are suggesting.

9:43 A lot of locations are doing record volumes of deliveries,

9:46 but individual drivers are finding it increasingly

9:49 hard to find consistent deliveries or rides,

9:51 which means they can spend hours a day just waiting for an opportunity to work.

9:55 When they do get jobs,

9:57 it's clear that the platform is taking a larger share of the pie.

10:00 Like this example of a $64 ride here in LA, paying out just $1243 to the driver.

10:06 Of course, this is just one example, but it is a pretty damning one.

10:11 Another factor that has allowed these companies

10:12 to squeeze harder from every direction is interest rates.

10:15 For a while, competition was actually quite

10:18 fierce in the delivery gig work space

10:20 as dozens of regional startups tried to take

10:22 market share away from the primary players.

10:24 Today, most of them have either become the incumbents,

10:27 been acquired by the incumbents, or they have gone out of business.

10:30 The blit scaling business model of burning billions

10:33 of investor dollars until cementing market share only really worked

10:35 in a low interest rate environment where it didn't

10:38 cost much to just keep on piling in more cash.

10:41 If a competitor wanted to enter the market today

10:43 to offer a better service or pay gig workers more competitively,

10:45 they would not only need to cover

10:47 their operating costs while taking market share,

10:49 they would also need to cover interest payments that would be three times higher

10:53 than they were back when a lot of today's incumbents were doing the same thing.

10:56 Now, where this could get really bad

10:58 is what could happen if job losses continue.

11:00 If even more people are forced into the gig economy,

11:03 that would mean that even more people would end up competing for the same gigs.

11:07 And that's without even considering that if people lose

11:09 their regular jobs and end up delivering for Uber Eats,

11:12 they won't have as much money to spend on Uber Eatats.

11:16 Now, this process alone is actually not that unusual.

11:19 It's basically how every demandside economic downturn ever happens.

11:22 Businesses lay off people, so households spend less money,

11:25 so revenue falls, so businesses lay people off.

11:28 If anything, it could almost be argued that gig work like

11:31 this offers an additional layer of protection to people who lose their jobs,

11:34 which is kind of what is happening right now.

11:36 The problem is that if this becomes widespread enough,

11:39 it can cover up the problem for a lot longer than

11:41 it would otherwise take to realize something might be going wrong.

11:44 And if things do go very wrong,

11:46 the gig economy offers far less friction for this loop to spin.

11:50 Typically, businesses need to fill out a lot of paperwork to lay people off.

11:54 It makes them look bad to investors, and they will also need to rework

11:57 internal processes to operate with fewer staff.

11:59 Yeah, sure, they still do it, but it's not an instantaneous or painless process.

12:04 This means we at least have time to see

12:06 something going wrong before it's a full-blown crisis.

12:09 For gig workers, all of this can

12:10 happen instantaneously and automatically through the algorithms.

12:13 If the apps are getting fewer orders,

12:15 drivers get fewer jobs and less surge pricing.

12:18 The automated nature of their employment throws a bottle of baby

12:21 oil into the mix anytime the economy loses its footing.

12:24 Uber, Lyft, Door Dash, and companies like it are now collectively

12:27 some of the largest employers in America.

12:29 And if Uber drivers were counted as actual employees,

12:32 it would individually be the largest employer in the world,

12:35 easily beating out the largest defense

12:37 departments and more traditional employers like Walmart.

12:39 This is also just counting the people working

12:41 in the largest and most obvious sectors of the gig economy.

12:44 We have covered the story before, but starting around 5 years ago,

12:48 there was a massive increase in the number

12:50 of new businesses being registered in America.

12:53 Now, spoiler alert, this was not

12:55 because people suddenly became more entrepreneurial.

12:57 It was mostly because people had lost their regular

13:00 employment and were registering a company to do gig work.

13:03 Fiverr, Etsy, Amazon Flex, and the naughtier platforms also saw

13:06 a massive uptick in people selling their services.

13:09 Even the number of videos uploaded to YouTube

13:11 expanded significantly at this time according to research

13:13 published in the journal of quantitative description as people

13:16 were looking for new ways to make money.

13:18 And yes, this was just counting long- form

13:21 content as short form would have skewed the results.

13:23 The challenges faced by individuals working at the mercy

13:26 of the gig economy are now well understood and well documented.

13:29 But what we may soon figure out is that even

13:32 for the people who never individually have to experience those conditions,

13:35 they could still become a big problem for all of us.

13:39 In fact, it's kind of already happened.

13:41 China's gig economy might represent a glimpse into our own future.

13:45 And that future is bleak.

13:47 As a result of various factors like headwinds from the real

13:50 estate and financial industries as well as a glut in recent graduates,

13:53 the youth unemployment rate in China got so

13:55 bad that the government simply stopped posting that data.

13:58 Uh yeah, 2 years ago when they did this, we

14:01 were actually in a position to judge them for it.

14:04 But anyway, these young workers with few other options have flooded

14:08 into the gig economy completely over supplying the system with drivers.

14:12 Today, according to estimates from The Economists,

14:14 compiled from available company financials,

14:16 there are 200 million gig workers in China,

14:19 representing as much as 40% of their total urban workforce.

14:22 This massive number is even scarier when you realize that just 15 years ago,

14:26 these platforms didn't really exist at all.

14:29 This has become a real problem in the last 3 years in particular,

14:32 as already frugal Chinese households are cutting back

14:35 on service spending due to faltering economic conditions.

14:37 The end result is that gig workers have reported spending 10 hours a day waiting

14:41 to earn as much money as what would have taken them just 3 hours in the past.

14:46 Large groups of brightly colored riders waiting outside shopping

14:48 malls have become a very visible sign of bigger

14:51 issues impacting average people in an economy that by the headline

14:54 numbers still looks like it's doing very well.

14:56 Even workers who are active for 10 hours a day,

14:59 7 days a week are still not earning enough to afford a dignified

15:03 lifestyle in the country's major urban centers

15:05 where most of this work is available.

15:07 In some cases, competition for work has become so fierce that groups

15:10 from opposing apps have gotten into altercations with one another on the street,

15:14 and that is clearly not a sign of things going well.

15:16 Now, we are still a little ways

15:18 behind a similar situation in most Western countries,

15:21 but there are not major structural differences that mean we couldn't.

15:24 The point is that this should be a scary story

15:26 with a lot of things that sound very familiar, which is not great.

15:31 But it gets worse.

15:33 Rich people buy time.

15:34 Poor people sell time.

15:36 How many times have you heard some variation of this phrase?

15:41 Don't sell your time for money.

15:43 This is a finance bro way of saying don't make money exclusively from a source

15:47 where you get paid x amount of dollars for y amount of work,

15:51 which is basically every job.

15:52 There are various reasons given for why selling

15:54 your time for money is a bad idea.

15:56 Like you only have so many hours in a day you can work.

15:59 So a trading your time for money limits your potential income.

16:02 B, trading your time for money also makes you

16:04 more financially vulnerable if you are unable to work.

16:07 And C, it's really hard to sell a course

16:09 on trading your time for money unless you're a college.

16:12 Although maybe don't say that last one out loud.

16:14 The alternative to trading your time for money is usually investing,

16:18 starting a business, living a wildly alternative lifestyle,

16:21 or some combination of all three of these things.

16:24 But I am here to tell you that while

16:26 this very broad phrase might have some merit in specific situations,

16:29 it's probably very much complete[ __] and you

16:32 really shouldn't take anybody who says it too seriously.

16:35 At best, the phrase, "Don't sell your time for money," is

16:38 just another example of hustle bros needlessly

16:40 bashing on regular day jobs that provide

16:43 stable living to a majority of Americans.

16:45 It also perpetuates the idea that simply

16:47 working a full-time job is not good enough and that a side hustle or whole extra

16:52 business is mandatory to get ahead these days.

16:54 They might not be wrong, but we will get to that later.

16:58 Most importantly, the thinking behind the line of don't

17:00 sell your time for money is just wrong.

17:03 Without being a trust fund baby,

17:04 there really is no way to reliably make money without investing some time.

17:08 And more importantly,

17:09 trading your time for money can be a genuinely great way to build wealth.

17:13 So, as long as you're doing it correctly, an employer will buy an hour of time

17:17 from an employee for a predetermined amount of money.

17:20 This amount could be anything from minimum wage to hundreds

17:23 of dollars an hour for highly skilled and very senior employees.

17:26 I'm pretty sure you all know how jobs work.

17:29 So, why am I telling you about this in such basic detail?

17:32 Well, because jobs are not the only way that we sell our time for money.

17:36 Sorry about that.

17:37 People will often spend hours clipping coupons, avoiding toll roads,

17:40 and spending their weekends trying to sell used junk

17:43 from around their house to make a few extra bucks without

17:46 realizing that the time they spent doing this was worth

17:49 a lot more than the money they made or saved.

17:51 If they were doing this to have more money

17:53 in their pocket at the end of the month,

17:55 then they would have been better off picking up a few extra hours at work.

17:58 I get it.

17:59 Some people work fixed schedules and don't have

18:01 the option to pick up more work on a whim.

18:04 But we have already seen that gig work has exploded in popularity.

18:07 So that could offer an alternative.

18:09 If you're a high-inccome earner,

18:10 gig work might struggle to match your regular income.

18:13 But then clipping coupons is likely to put you even further behind,

18:16 and so will most other activities for that matter.

18:19 Amongst financial professionals,

18:20 there is a type of investor called the sophisticated idiot.

18:23 A sophisticated or accredited investor is someone

18:26 who has more than a million dollars

18:28 in assets outside of their primary residence or earns more than $200,000 a year.

18:32 American financial regulators have decided that people making this kind of money

18:37 are smart enough to have enough financial security to make riskier,

18:40 less regulated investments.

18:41 Medical professionals like doctors and dentists fall

18:44 into the sophisticated idiot category all the time

18:47 because they frequently make big investments that take up a lot of their time.

18:51 A dentist developing an apartment complex might be able to make a lot of money.

18:55 But investments like this can take hours of planning and oversight.

18:58 Even if they are successful,

19:00 they often walk away with less money than had they just

19:03 taken on a few more cases and stayed in the operating room.

19:06 Doctors and dentists are very smart people,

19:08 but because they don't think they're selling their time for money,

19:10 they often undervalue the money they could have

19:12 made if they weren't trying to make passive income.

19:15 Now, if you love flipping properties, selling stuff on Craigslist,

19:18 or seeing how much money you can save at Walmart with your coupons,

19:22 then by all means, go ahead.

19:23 But just remember, if you are only doing this to save money,

19:26 then you are just selling your time for money in a different

19:28 way and probably not getting a great price for it in the process.

19:32 What do you want from me, man?

19:33 People not realizing that they are always going to be selling

19:36 their time for money also make the exact opposite mistake to this.

19:40 They overvalue their time.

19:42 There are things you could do right now that would only take an hour and would

19:45 save you a lot more money than you would make in an hour at work.

19:50 Renegotiating insurance, utilities, and mortgages,

19:51 canceling subscriptions you never use anymore,

19:53 or applying for a new credit card with a sweet signup bonus.

19:57 All of these will take a bit of time,

19:59 but will put much more money back into your pocket than doing an extra

20:02 hour in the office because you waste time on things that never pay you.

20:07 This segus us nicely into the next reason

20:09 why you should sell your time for money.

20:11 It's going to be a better way to invest for a lot of young people.

20:14 There are investments that are more passive than others.

20:17 For example, if the doctor would have just used

20:19 their money to buy a bunch of dividend stocks,

20:21 then it would have likely only taken them

20:23 a few hours to do some research and make

20:25 the purchase trades to get a well- balanced

20:27 portfolio that will pay them for decades to come.

20:29 If a dentist could earn $1,000 an hour while practicing,

20:32 and it took them 5 hours to consult with a financial planner

20:35 that charged them another $1,000 on how

20:37 to structure a million-doll stock portfolio,

20:39 then the dentist would need to make up $6,000

20:41 for this to have been a good use of their time.

20:44 A million-doll portfolio should return between $50,000

20:46 and $100,000 per year over the long term.

20:49 So, it would take roughly a month

20:51 for the dentist to get ahead on this investment.

20:53 This was a good way for the dentist to sell their time for money.

20:56 And that's using very generous figures for how

20:58 much that dentist could make at their practice.

21:00 But the math doesn't work like this for most people.

21:03 Most people earn much less, but also have less to invest.

21:07 A regular professional making $15 an hour

21:10 with $1,000 to invest really shouldn't overthink things.

21:13 Even if they make phenomenal returns of 100% per year by day trading

21:17 using techniques they picked up from some totally legit guy on the internet,

21:21 that's still only $1,000 a year.

21:23 And before you start talking about compounding returns in the comment section,

21:27 may I remind you that the greatest hedge fund

21:29 of all time only made 60% annualized returns before fees.

21:32 So, if you really think some random guy is going to make 100%

21:36 annualized returns after watching a tutorial

21:38 from some random guy on the internet,

21:40 then I have truly failed to teach you how money works.

21:43 Anyway, the problem is that because working for money gets such a bad rap

21:47 and passive income is continuously held up

21:50 as the holy grail of financial success,

21:52 a lot of people choose to make small investments with money

21:54 that would have been way better spent increasing their earnings power.

21:57 $1,000 can pay for qualifications to do a lot

22:00 of jobs that pay significantly more than minimum wage.

22:03 Now, I'm not talking about online courses or college degrees.

22:07 I am talking about real work qualifications

22:09 to do work that require specialized training.

22:12 If you have some technical skill,

22:13 a coding boot camp can get you an entry-level job as a software engineer.

22:17 It might not be Google, but you could still be earning a lot more than

22:21 minimum wage plus the passive income from a $1,000 stock portfolio.

22:25 Working on acquiring qualifications and marketable skills is not

22:28 as sexy to most people as picking the next Tesla,

22:31 but it's a much more reliable way to make money.

22:33 And hey, once you are selling your time for more money,

22:36 you can use that extra money to work on building passive income.

22:39 But maybe you want to speed up this process by starting your own business.

22:43 Well, then understanding that you are always selling your time

22:46 for money is going to be even more important.

22:49 In my career as an investment banker, I've been lucky enough to talk with a lot

22:53 of successful company founders about what made their business work.

22:56 Starting a business is always going to take a lot of time and energy.

23:00 And as an early founder,

23:01 you will need to accept that you are going to basically be doing everything

23:05 from the sexy stuff like product design

23:07 and marketing to the boring stuff like accounting.

23:09 As a business grows,

23:10 a big mistake that a lot of business owners make is either trying

23:14 to continue to do everything themselves

23:16 or delegating away everything but the fun stuff.

23:18 A business can only get so large before it

23:20 can no longer be operated by a single person.

23:23 And letting go of something that you control can be hard.

23:26 The finance gurus are absolutely right when they say that you

23:29 need to leverage other people's time and experience to scale a business.

23:32 But this isn't the excuse to forego the boring stuff either.

23:35 If a business owner has a background in design

23:37 and no experience at all in business management,

23:39 then they should hire a business manager to delegate the day-to-day operations

23:43 of the business to them because

23:45 their time is better spent designing new products.

23:47 Similarly, if a business owner has a decade of experience

23:50 as an operations executive and no experience whatsoever as a designer,

23:54 they should hire a designer and delegate that work to them,

23:57 even if they think they would have more fun thinking of cool new products.

24:01 Understanding that you are always selling

24:02 your time for money will really help you

24:05 if you decide to go into business for yourself because it will always remind you

24:08 to stick to the task to where you are worth the most and delegate

24:11 the tasks that you can't do to a professional

24:14 standard even if you really want to.

24:16 Despite the few stories of college dropouts starting billion-dollar companies,

24:19 the average age of a billion-dollar founder is 47 years old.

24:23 And that's because they spent decades in a career that gave them skills,

24:26 which meant they could leverage their time

24:27 to build a company worth a billion dollars.

24:30 So, if selling your time for money is not such a bad plan,

24:34 then why does every personal finance bro on the internet[ __] on it so much?

24:38 Even the infallible Warren Buffett has been quoted saying

24:40 that if you don't make money while you sleep, you will never be wealthy.

24:44 Oh, damn.

24:45 So, are all of these guys wrong?

24:47 Well, not really, but they aren't getting to the point

24:51 I think they're trying to get across very well,

24:53 and they are definitely reading their audience all wrong.

24:56 Let's start with Warren Buffett.

24:57 I struggled to find an instance of him actually saying this quote.

25:01 So, it's entirely possible that someone falsely credited him with this line

25:05 and everybody else on the internet just went with it.

25:07 But, that doesn't matter.

25:08 He has definitely said some similar things at one of his many talks.

25:12 Anyway, he is totally correct.

25:13 Wealthy people should have passive investments

25:15 that make them money while they sleep.

25:17 But that doesn't mean that the best way

25:19 they become wealthy is by focusing on those investments.

25:21 It's a classic rich people eat caviar,

25:23 but eating caviar won't make you rich scenario.

25:26 When Buffett gives his speeches,

25:27 he's normally talking to rooms of Berkshire investors or people

25:30 that could afford to attend an event that Buffett was speaking at.

25:33 They are by and large already selling their time for lots of money.

25:36 So passive investing is the next step.

25:38 Nobody is reasonably choosing between a4 million investment in Berkshire

25:41 and a course that can make them an extra $20 an hour.

25:45 Now, as for all the other financial influencers on the internet,

25:48 at least 50% of them are just saying

25:50 that earned income is trash and passive income

25:51 is the bomb because they want to sell

25:53 you a course on how to make passive income.

25:55 I don't think anybody should be surprised

25:57 by scams and dubious claims on the internet anymore.

26:00 But what about the other 50%.

26:02 The other 50% of people making personal finance

26:04 content really are trying to do their best.

26:07 But financial content given to a general audience can only be so good because,

26:11 well, it's general advice.

26:13 Invest into a portfolio that will make you passive income is not bad advice.

26:17 And yeah, eventually, if you want to retire,

26:20 you will need most of your money to come

26:22 from a source that requires very little time input.

26:24 The problem is that broad statements like this perpetuate the idea that making

26:27 money one way is inherently good and making money another way is bad.

26:32 This good advice makes no considerations for someone's age, qualifications,

26:36 income, existing assets and liabilities, obligations, time horizon, and goals.

26:40 You shouldn't watch a Dr.

26:42 Mike video instead of getting a checkup.

26:44 So, you shouldn't watch a Graham Stefen video in lie

26:47 of making a personalized plan

26:48 for improving your own personal financial situations.

26:50 Unfortunately, not everybody can make money for doing nothing.

26:54 The world does need people to work.

26:56 No matter what you do, you are always going to be selling your time for money.

26:59 It's up to you to make sure that you do everything you can

27:02 to make the hours in your day a highly sought-after and marketable product.

27:06 Nobody gets home from a long day in the office and thinks to themselves,

27:10 "I can't wait to drive drunk people home from the bar

27:13 or deal with customer complaints on my eBay store." No,

27:16 people need side hustles.

27:18 And if they are lucky,

27:19 they have convinced themselves that they don't totally hate them.

27:23 You have probably heard platitudes like, "In order to be successful,

27:26 you need multiple streams of income or nobody ever

27:29 got wealthy off a 9 to5." And these ideas

27:32 really support the idea of getting out there

27:34 and working on something more than your career.

27:36 Side hustles and hustle culture in general might look harmless.

27:40 After all, what's the problem with motivated individuals doing a little

27:43 bit of extra work to put some more money in their pockets?

27:47 Maybe side hustles can do some good.

27:49 And I promise I will look at some examples

27:51 that do genuinely make some sense in this video.

27:54 But as always, my main goal is to try to ruin a good thing and show you

27:58 that this push to normalize and incentivize side hustles

28:01 is something we probably shouldn't be too excited about.

28:04 Now, a side hustle should ideally

28:05 be able to accommodate four important parameters.

28:08 It has to make money, otherwise it's just a hobby.

28:11 It has to be doable outside your regular working hours.

28:14 It has to be something you have the expertise and resources to accomplish.

28:18 And if it accomplishes this, then why not make it your full-time job.

28:23 Conveniently, these requirements give a wouldbe side hustler a checklist

28:26 of very important questions they should ask themselves before starting out.

28:29 But I am getting ahead of myself now.

28:32 Let's start with the first one.

28:34 Most side hustles are just very small businesses

28:36 and making money in business is surprisingly difficult.

28:39 There is a reason why most of them fail.

28:41 You can go for the easy options like driving for Uber and you will be guaranteed

28:46 a basic level of income so long as you pick up rides as they become available.

28:50 But there are obviously problems with this system.

28:52 You will be giving a fair chunk of your income

28:55 away to the company that facilitates this work.

28:57 And even if you do fully commit yourself to driving in your off hours,

29:01 the income you receive from doing this is likely going to be lower than most

29:05 regular jobs after factoring in additional insurance

29:07 and the extra miles you put on your car.

29:10 I have already made an entire video about

29:12 the shortfalls of starting a business with apps like Uber,

29:14 so I won't dwell on these for too long and instead

29:17 I want to look at side hustles that are more self-driven.

29:21 Flipping things in online marketplaces, consulting,

29:23 or doing chores like gardening are other popular options that give

29:27 you the opportunity to make money without an app-based middleman.

29:30 Let's go with something very simple like

29:33 mowing lawns for your neighbors on the weekend.

29:35 This can make money, so it passes the first test.

29:39 It's also done outside of regular working hours, so it passes the next test.

29:43 And you might think that you wouldn't need

29:45 much expertise and resources to set this gig up.

29:48 But you might be surprised.

29:50 Most lawns only need to be cut once every 2 weeks,

29:52 which means if you want to make this a consistent hustle,

29:55 you are going to need more than just the lawn mower and a gallon of lemonade.

29:59 Before you start making any money, you are going to need to go door

30:02 todo asking people if they want their lawns mowed.

30:05 It sounds easy, but going door todoor to sell

30:08 something is a terrifying experience for 99% of people.

30:11 And even people confident enough to do it would

30:14 be surprised how hard it would be to find

30:16 enough people to agree with your services to make

30:18 wasting your weekend worth it in the first place.

30:21 And yes, before you write about it in the comment section,

30:24 I did have a job for 3 weeks doing door-to-door sales in college.

30:27 Please don't hate me.

30:29 Anyway, let's say you are made of the right stuff to go out and drum a business

30:33 for your weekend lawnmowing gig and it goes so

30:36 well that you are fully booked out mowing lawns.

30:38 You have to ask yourself the question of why

30:40 you don't just make this your new full-time job.

30:43 If you make more money at your regular job,

30:45 then perhaps you would have been better served just doing some overtime.

30:48 If overtime isn't a thing in your office,

30:51 then perhaps finding a part-time weekend job

30:53 in the same field would work for you.

30:55 If you do make more money mowing lawns,

30:57 then maybe your answer to this question is that you just

30:59 don't want to mow lawns for more than one day a week.

31:02 That's fair.

31:03 But then why the hell are you doing this to yourself?

31:06 If you enjoy mowing lawns less than your day job,

31:09 then you have just signed yourself up for some well-paid torture.

31:12 But there is a solution to this, which is to focus

31:15 on where you added the most value in your hustle.

31:18 In this example, that would be in the doortodoor sales.

31:21 If you didn't hate that, then you would be

31:23 best focusing on and pursuing a career in sales where

31:26 you can just focus on where you're good at without

31:29 a need to push a lawnmower around all weekend.

31:31 Of course, this is just one example amongst

31:34 the plethora of different side hustles available to you.

31:37 So, don't take this as career advice

31:39 on building your lawn care empire, but instead,

31:41 let it demonstrate that most value comes from specializing

31:44 in one thing and then doing that thing extremely well.

31:48 An extremely good salesman who spends most

31:50 of their time pushing around a lawnmower is not

31:53 going to make as much money as an extremely

31:55 good salesman who focuses on closing deals.

31:58 A website developer will on average make more money building websites all day

32:02 than they would by building their own website to try and sell socks online.

32:06 This advice goes directly against what you might have

32:09 heard about most millionaires having seven different sources of income.

32:12 So, who's telling the truth here?

32:14 Well, this claim originally comes from a 2002 study published by the IRS,

32:19 which tracked 6,53 wealthy individuals who had died between 1996 and 2002.

32:25 The study looked at their tax returns and found

32:29 that these millionaires had seven distinct forms of income:

32:32 investment income, earned income, rental income,

32:34 royalty income, capital gains, profits, and interest income.

32:38 Immediately, you can start to see the problem here.

32:41 Most of these income types are simply the result of being

32:44 rich to begin with, not from going out and hashtag grinding.

32:48 The study also showed that most people built their wealth

32:51 by building one business or focusing on one highly compensated career,

32:54 which they could then use to buy up

32:57 assets that would provide these other income streams.

32:59 The claim that the average millionaire has an average of seven income streams is

33:03 also pushing the wording of this report to the level that it's an outright lie.

33:08 Only 29% of millionaires in this study reported five

33:11 or more streams of income with the majority having just three.

33:15 Still impressive, but it's not out of the ordinary

33:17 for a wealthy person to have a job,

33:19 get some dividends, and earn some money from interest in a savings account.

33:23 This rather disappointing reality is a far cry from what some

33:26 people might want you to think when they say this phrase.

33:29 But I'm sorry, nobody really gets rich by doing half a dozen jobs.

33:33 There is also one other problem with drawing any conclusions from this study,

33:37 which is becoming a common theme for this channel, and that is selection bias.

33:41 This study looked at people that died between 1996 and 2002.

33:46 Most people die when they're old.

33:48 Older people, especially rich older people,

33:50 have had more time to accumulate assets to diversify

33:53 their income away from their primary earned income.

33:56 Most of you watching are a long way from death, hopefully.

33:59 And 99% of people that achieve massive financial success at a young age do

34:04 it by maxing out one income stream or you know getting a nice inheritance.

34:09 That works too.

34:10 So if the common belief about multiple income streams is not true,

34:13 why then do you see it repeated everywhere?

34:16 The cynic in me wants to say

34:18 that a lot of people spouting this nonsense have some

34:20 kind of hidden interest in selling you a course

34:23 or something on building out your next income stream.

34:25 And that's definitely part of it.

34:27 But honestly, I think that most people that perpetuate

34:30 these ideas are people who genuinely need to believe it's true.

34:33 Young workers have never known a world with the level of job security,

34:37 career progression, and opportunities available

34:39 to the generations that came before them.

34:41 Having a backup form of income in case you get fired

34:44 out of the blue one day no longer sounds like doomsday prepping.

34:48 It's just prudent advice.

34:49 I am also well aware of people that need multiple gigs to support

34:53 themselves and their families because they don't

34:55 receive enough income from their main job.

34:57 But to be fair, this should be called what it is,

34:59 which is working multiple jobs.

35:01 To call what someone is doing in these situations

35:04 a side hustle is just sugar coating a shitty situation.

35:07 The 9 to5 was invented so we wouldn't have to work multiple jobs just to get by.

35:13 But that was a different economy,

35:15 one built around manufacturing and physical labor.

35:18 You're probably not doing that anymore.

35:20 So why are we still living by the same schedule?

35:23 The 9to5 was created by American labor unions in the 1800s and became

35:27 mainstream over 100 years ago when jobs looked like this and this.

35:31 It was revolutionary for its time.

35:33 But how many of the modern problems in corporate America are caused

35:37 by trying to make an outdated system fit with every single modern job?

35:41 A report by the management consulting firck

35:44 company found that twothirds of the average

35:46 human's wealth is in the work they can do over their lifetime.

35:49 Everybody has time, effort, and experience they can trade for money.

35:53 And those tradable commodities are worth twice as much

35:55 as all the other assets that the average person possesses.

35:58 A regular 9 to 5 job has been

36:00 a great way for billions of people to safely exchange

36:02 a predictable amount of their time for a predictable

36:05 paycheck with predictable career advancement as they gain more experience.

36:09 But this one-sizefits-all model for work doesn't fit with every job.

36:12 and trying to make it work has been bad for employees and bad for companies

36:17 for three reasons which is causing three

36:19 equally terrible trends in the job market.

36:22 The first trend is that it makes time a worthless asset.

36:26 The Ford Motor Company was one of the first businesses

36:29 in America to adopt the 9 to5 40hour work week.

36:32 Henry Ford did this to make his company the most

36:35 attractive place for auto workers to get a job.

36:37 This allowed him to pull talent away

36:40 from other automakers without paying his workers more.

36:42 In order to compete with Ford, other automakers were forced to offer

36:45 the same 40-hour work week with paid overtime.

36:48 Eventually, in order to compete with the automakers,

36:50 other companies were also forced to offer 9 toive jobs so that their best

36:54 workers didn't quit and go and work on the car assembly line.

36:57 These auto workers had tightly defined and repetitive tasks.

37:00 So, unless the workers succumb to exhaustion,

37:02 they could do a consistent amount of work

37:04 for every hour they spent at their post,

37:06 and every additional hour would produce the same amount of output.

37:10 If you work in a modern office job,

37:12 you will know that your work is nothing like this.

37:14 Sometimes there is a lot to do and sometimes there is nothing to do.

37:18 But you still need to be there 8 hours a day looking busy no matter what.

37:22 Back when the 40-hour week was being fought for by workers unions,

37:26 most Americans worked in manufacturing.

37:27 But today, most people work in the services sector,

37:30 which is more diverse than you might expect.

37:33 Unless you are working on a farm or in a factory, you are a service worker.

37:37 And your job could be anything

37:39 from making strategic corporate decisions to making coffees.

37:41 Clearly, these jobs are very different and should have a different schedule.

37:46 But most of the corporate world has tried to make the 9 to5 fit all jobs.

37:51 But this doesn't work because no service jobs

37:54 have tasks consistently delivered on a fine-tuned production line.

37:57 Work comes and goes as internal and external customers make demands.

38:01 And that means when people are busy and need to do

38:04 more than eight hours in a day to finish their work,

38:06 they are expected to work quote reasonable unpaid overtime.

38:09 According to an ADP Research Institute study of office professionals,

38:13 unpaid overtime jumps to an average of 9.2 hours per week in 2021,

38:17 more than a full extra day to keep up with employer demands.

38:21 But when there is little to no work to do because

38:24 a project has just been completed or sales are seasonally slow,

38:27 workers are still expected to put in the 40 hours

38:29 a week because that's what the business is paying them for.

38:32 If you are in this kind of job,

38:34 your best option is to try and find something that makes you look busy.

38:38 But if you don't have something to work on, you are probably

38:41 going to be given meaningless tasks just to fill the mandatory 8-hour day.

38:44 If this was just another story about companies

38:46 screwing over their workers with outdated business practices,

38:49 it wouldn't need a video.

38:51 But the 40-hour work week isn't even good for companies.

38:54 According to data from the US Census Bureau,

38:56 McKenzie and Company and compiled by Statista,

38:59 growth in gig work and freelance jobs have outgrown

39:02 typical permanent jobs by 500% over the last decade.

39:05 Gig work apps have become very popular with unskilled workers

39:09 due to their low barrier to entry and flexible working arrangements.

39:12 Someone with a phone and a bike can start

39:15 working for a food delivery service like Uber Eats, Postmates, Door Dash,

39:18 GrubHub, or all of them all at the same time

39:20 in less than an hour by filling out an online form.

39:22 This has been a highly appealing alternative to minimum wage jobs

39:26 that still rely on the antiquated process of handing in a resume,

39:29 spending weeks doing job interviews, only to still get ghosted by a fast food

39:34 joint offering 725 an hour for an unpredictable schedule.

39:37 Gig work jobs usually also pay terribly,

39:39 but people get to work as much as they want when they

39:42 want and they can work around another full-time job for extra money.

39:46 Even with all of the problems of gig work,

39:48 you can see why it has become so popular.

39:51 The popularity of freelancing and private contracting has also exploded.

39:54 This is more popular among skilled workers who can

39:57 sell their services to businesses just like an employee,

40:00 but with no ongoing agreement.

40:02 They are only paid when there is work to be done.

40:05 Private contracts are usually an agreed upon price for an agreed upon outcome,

40:09 like $10,000 to build a company website,

40:11 but they can also be built hourly for roles like security,

40:14 administrative assistance, or ondemand workers.

40:15 According to a report by the management consulting firm Oliver Wyman,

40:19 healthcare workers have been one of the fastest growing groups of workers

40:23 ditching typical permanent roles in favor of working as private contractors.

40:27 On call nurses, doctors,

40:29 and hospital support staff already work unpredictable hours,

40:32 so they don't sacrifice much by working

40:34 as contractors instead of a direct employee.

40:36 According to the report,

40:38 some nurses have elected to work in the temporary staffing market,

40:40 so they can take on fewer hours as mental health

40:43 has become a top priority for workers in the industry.

40:46 Private contractors in all industries are usually

40:49 paid more for their time than permanent employees because the business only pays

40:53 for the hours of services they actually need.

40:55 Which means most of the time their total out of pocket will be lower.

40:59 With mass layoffs dominating the new cycle,

41:01 people are also finding out the hard way

41:03 that if they work in an outwill employment state,

41:05 their 9 to5 doesn't give them much security anyway.

41:07 So workers at all skill levels are seeing they can make

41:11 more and businesses are realizing they can cut down on expenses

41:14 by doing away with the rigid 9 to5 workday which is

41:17 the second reason it's slowly becoming a relic of corporate history.

41:20 But the death of the 9 to5 is not going to be a good deal for everybody.

41:25 Unfortunately for now businesses are going to be

41:27 the biggest winners out of this shift even if they have to pay their contractors

41:30 and gig workers slightly more per hour.

41:32 The first loss is benefits.

41:34 If you work as a private contractor, you are becoming your own boss,

41:37 which means that even though you are making more money,

41:40 there is overhead that you become responsible for.

41:43 Benefits like paid time off, training, retirement plans, accounting,

41:46 and health insurance are going to come out of your pocket.

41:50 Health insurance through a regular employer is

41:52 normally far more affordable than private options.

41:54 For gig workers, this can be especially tough because

41:57 health insurance premiums for people who ride motorized scooters through

42:00 late night traffic to deliver food to people's homes

42:03 is simply unaffordable on the income of a delivery driver.

42:06 Even if you are doing highly skilled contracting,

42:08 if you don't manage these expenses carefully,

42:10 you will end up with less in your pocket

42:12 than if you just stuck with a regular permanent position,

42:15 and your loss is their gain.

42:17 According to a survey conducted by Forbes,

42:19 small and medium enterprises were hiring more contract workers because it

42:23 simplified their accounting and reduced

42:25 the everinccreasing expenses of human resource management.

42:28 It's not just small companies either.

42:30 According to CNBC, contract workers have

42:32 outnumbered direct employees at Google and other

42:35 large tech companies since 2018 and the ratio became even more skewed during co.

42:39 Google already has large human resources and accounting departments.

42:43 So they are pursuing contract work for two other reasons.

42:46 The first is that the most talented engineers have

42:49 realized that they can make more money working off

42:51 one-off projects for lots of companies than they could

42:53 by being a full-time employee with just one company.

42:56 The demand for talent during the good times meant that these companies

42:59 just had to pay what these top engineers were asking.

43:02 Some highly specialized engineers could bill up to $10,000

43:05 an hour for their work to these companies.

43:08 Even for a company as rich as Google,

43:10 it was better to pay them only for the hours.

43:12 they really needed them instead of paying them millions of dollars a year

43:15 as a permanent salary for the odd project where their skills would be needed.

43:19 The second reason is that during bad times like right now,

43:22 getting rid of contractors doesn't count as layoffs.

43:24 So, companies can easily cut expenses without technically laying off any staff.

43:28 Big layoffs signal to investors and other employees

43:31 that the business is in a bad shape and that they would be better off investing

43:34 their money or building a career somewhere else.

43:36 There are three groups that are really going

43:38 to benefit from the death of the 9to-5.

43:41 But their gain is all at the expense of one

43:44 big group that statistically you are a part of.

43:47 The regular workers.

43:47 Entry-level workers who can get gig work are not paid well.

43:51 But they weren't paid well in minimum wage jobs either.

43:54 They have just gained some flexibility to work when they want.

43:57 Highskilled workers who can move to contract roles can make

43:59 a lot of money by working for the highest bidding company.

44:02 They only lost the idea of job security.

44:04 that never really existed for them.

44:06 Anyway, companies are also taking full advantage of the death

44:09 of the 9to-5 by cutting down on their biggest expense center.

44:12 The losers are regular workers right in the middle who are in roles

44:16 that can't be gigified but aren't in demand enough to be contracted out.

44:19 The fixed expenses of operating as a contractor,

44:22 health insurance, business licensing, accounting,

44:24 and everything else means it's only worth it

44:26 for people earning well over the average wage.

44:28 If you are earning $60,000 as a permanent employee,

44:31 you would have to charge $80,000 a year as a contractor to break even.

44:35 And not many businesses are going to pay

44:37 that $20,000 premium for a standard job.

44:39 New regulations intended to protect contractors and workers are another problem.

44:43 If a contractor files for unemployment after

44:46 their job is completed with a company, they can file an SSA form with the IRS,

44:50 which can trigger an audit to determine if that contractor and other contractors

44:54 working for the company meet the requirements

44:56 to be counted as a permanent employee.

44:58 If they do, then the company has to cover their unemployment benefits and has

45:02 to provide other benefits to every other contractor in the business as well.

45:05 Businesses don't want to take that risk,

45:08 so they use staffing agencies to handle all the compliance for them.

45:11 According to data from the American Staffing Association,

45:13 most contractors now work through middleman staffing companies.

45:17 For contractors working through these middlemen,

45:19 it can combine all the problems of permanent employment

45:21 with none of the benefits of being a private contractor.

45:24 And that's the third reason why the 9to-5 is going extinct.

45:28 It lets companies pull some creative business maneuvers.

45:31 Of course, big companies are going to use every

45:34 dirty trick in the book to avoid additional costs.

45:37 Then you might be thinking it would be better to be more like Europe

45:40 and have a lot more small businesses so

45:42 the big businesses don't have as much leverage.

45:45 Well, we've been doing that.

45:46 But it's not exactly what it seems.

45:49 Small business is the backbone of our economy.

45:52 Or at least that's the story.

45:54 Entrepreneurs taking a chance on themselves to start

45:57 a business have provided employment to millions of people,

45:59 created innovative products and services that you enjoy every day.

46:02 And in return, they can achieve levels of financial success

46:05 that would be impossible with almost any regular old day job.

46:08 You would be silly not to give it a go at least once in your life, right?

46:12 Well, that message has been heard loud and clear

46:14 by millions of people because if you look at the numbers,

46:17 it would seem we are living through a golden age of new entrepreneurs.

46:21 There are now twice as many new business applications

46:24 being processed every month than there were before the pandemic.

46:26 Politicians on both sides of the aisle have been quick to take

46:29 credit for this trend as the personification of the American dream.

46:34 Unfortunately, this record- setting business creation has made a lot of people

46:37 very angry because those new businesses are being started by poor people.

46:41 So, instead of being an indication of a thriving business environment,

46:46 it's instead a sign of everything wrong with our economy.

46:49 if you believe the numbers.

46:51 So, new businesses being formed is normally a really

46:53 good sign that the economy is doing well.

46:55 People normally only start a new business when they feel confident about

46:58 their future and the future of the market they want to operate in.

47:02 If you thought a recession was all but guaranteed and you

47:04 weren't sure how you were going to pay your bills next month,

47:07 you probably wouldn't be starting a business.

47:09 Launch of new business creation is also a sign

47:11 that people have achieved a certain level of financial security.

47:14 Starting a new business often means making some

47:17 significant upfront investments into renting some commercial space,

47:20 buying equipment, purchasing inventory,

47:22 and for a lot of businesses, hiring some staff.

47:24 Most new business owners should also expect to go for some time

47:28 without taking any income while their business builds up sustainable cash flows.

47:32 This means if lots of people are starting businesses,

47:34 lots of people are in a comfortable

47:36 enough financial position to bear these costs.

47:38 Lots of new businesses is also more than a sign that things are going well.

47:43 They actually make things go well.

47:45 New businesses create employment for people who just want

47:48 a job and they improve productivity in a few ways.

47:51 Business owners, especially new business owners on average,

47:53 will put in more time and effort working

47:55 for themselves than they would in a regular day job.

47:58 This means they're making more output than they would

48:00 be if they were just working a 9 to5.

48:03 New businesses can also become successful businesses

48:05 that bring valuable products or services to market.

48:08 If you start a businessto business company that develops a new

48:11 type of software that streamlines AI generated LinkedIn appreciation posts,

48:14 then you could save millions of wasted man-hour across the country,

48:18 which means workers could actually do something

48:19 better and more productive with their time.

48:21 Likewise, if you start a business selling a consumer product,

48:24 it could add competition to the market for similar products.

48:27 Or if you develop a new product altogether,

48:29 it could make people happier, healthier, smarter, or just keep them entertained.

48:33 Of course, most new businesses fail.

48:35 But for society at large, the few that succeed are usually a good thing.

48:39 So then why is this record level

48:41 of business creation in America not exactly great news?

48:44 Well, there are actually three reasons.

48:46 The first is simply why these businesses are being started.

48:50 A 2023 paper by Ryan Decker of the Federal Reserve Board and John

48:54 Halawinger of the University of Maryland found

48:56 some interesting patterns with these new businesses.

48:59 The first was that these new businesses were largely

49:02 being formed in states and counties with lower average incomes.

49:05 Now, most counties saw an increase overall, but the outskirts of cities,

49:09 particularly hard-hit states, outpaced the rest by a significant margin.

49:13 The authors of this paper suggested that a lot of this business formation,

49:16 was just existing businesses closing in city centers

49:18 that didn't see much foot traffic and reopening

49:21 in suburbs where the rent is lower and they

49:23 can cater to a market of people working remotely.

49:25 This wouldn't actually really increase business activity because it's

49:28 just moving it around from one place to another,

49:31 but closed businesses can stay registered

49:33 for a long time after they physically shut down.

49:35 Now, this move to the BBS might not actually be doing any good,

49:39 but it's not doing any harm either.

49:41 Unfortunately, it doesn't account for the entirety of this trend.

49:44 And a lot of the other people starting

49:46 a new business aren't doing it to follow their dreams.

49:48 They are doing it because they have no other option.

49:51 And it's probably making things much worse than we realize.

49:54 So actually figuring out how our economy is

49:57 going is something that our governments really struggle with.

50:00 Collecting data on hundreds of millions of people,

50:02 millions of businesses, and billions of transactions is actually really hard.

50:06 So they often make some calculated guesses based on historic patterns.

50:10 As impractical as it would be for the Bureau of Labor Statistics to scrape every

50:14 job posting off Indeed and look through every

50:16 classified section to find new jobs being created,

50:19 it wouldn't even be that accurate.

50:20 The rise of ghost job listings means that there are almost

50:23 twice as many job postings as there were 5 years ago.

50:25 But as anybody who has tried to get a job in the last 24 months will tell you,

50:29 businesses aren't exactly in a rush to hire.

50:32 That's a problem because government agencies use job creation

50:35 data to make very important budget and interest rate decisions.

50:38 So, we really shouldn't be making[ __] up.

50:41 One of the other historical assumptions has

50:43 been more business creation equals more job creation.

50:46 Businesses need employees.

50:47 So, this makes sense.

50:49 Except the data has actually started saying the opposite.

50:52 In the report on the rise in new business applications,

50:55 Decker and Halawinger found that counties with a higher rate of business

50:59 creation were actually correlated with a higher rate of job destruction.

51:02 This data really just confirmed what a lot of people already suspected.

51:06 People weren't starting businesses to take

51:07 advantage of some amazing opportunity.

51:09 They were starting them because they had no other choice.

51:12 According to a broad market survey,

51:14 36% of the American workforce is now engaged in the gig economy.

51:18 Some of these people are doing this in conjunction

51:20 with their regular day job as a way to earn extra money.

51:23 But whatever the exact details,

51:25 that is still a significant increase from just 5 years ago.

51:29 Gig workers are encouraged to register a business and keep

51:31 track of their revenue and expenses just like any other business.

51:34 But unlike other business, none of these people are going to be hiring employees

51:38 or investing a lot of money into the broader economy.

51:41 In the past, people starting a new business usually had a bit of experience

51:44 in their field and a bit of cash in their pocket to get their business set up.

51:47 At the very least, they had some investors that were willing

51:50 to trust them with upfront capital to get their idea off the ground.

51:53 Most of these new gig economy businesses today are started by people

51:57 without enough experience to land a job and without any cash at all.

52:00 Now, it's not all bad.

52:02 For a lot of people, being able to sign up instantly to perform

52:05 work in the gig economy instead of going through

52:08 the outdated hurdles of job interviews is a big

52:10 reason why these platforms have become so popular.

52:12 But these jobs also shouldn't be sugarcoated.

52:15 They are insecure, don't pay well, and are quite dangerous.

52:18 This technology is truly unprecedented, and in the short term it has existed,

52:22 it's already reshaped what we think of as work.

52:24 It's really up to you if it's been for better or worse, though.

52:28 So, you might think this is just another example of a slow government

52:31 struggling to keep up with changes

52:33 in technology that have redefined the labor force.

52:35 But there are two reasons why government agencies

52:38 have tried really hard to intentionally ignore this trend.

52:40 The first reason is that headlines about job

52:43 creation and business development are great for reelection.

52:45 Nobody wants to be in charge when the data collectors change

52:48 their methodology and reveal that millions

52:50 of jobs we thought exist actually don't.

52:52 The second reason is that it makes

52:54 it look like big programs are actually working.

52:57 Late last year, the Small Business Administration made a press release

53:01 bragging about the success of a business loan program made to minorities.

53:04 In it, they highlighted how previously underrepresented groups

53:06 had been starting a record number of businesses.

53:09 Now, before a whole big thing starts in the comments, yes,

53:13 these loans probably should have been made based on socioeconomic need,

53:16 but statistically they show the same thing.

53:19 Anyway, the Small Business Administration thought they had

53:22 successfully empowered a new group of business owners.

53:24 What they had actually done was just

53:26 record these groups registering for Uber Eats.

53:28 Even highly skilled workers with a lot of experience

53:31 have not been immune from this trend either.

53:33 The number of people working

53:35 as independent contractors jumped significantly as businesses

53:38 moved away from full-time hires and the worker protections that came with it.

53:42 Typically, independent contractors should have the freedom

53:44 to work when and where they want as long as they deliver the agreed upon product

53:48 or service within the agreed upon time frame.

53:50 But a lot of businesses have not so subtly mandated

53:53 that their contractors be in office just like any normal employee,

53:56 just without the security or benefits.

53:58 A study by the National Employment Law Project found that a lot

54:02 of these independent contractors were forced to sign

54:04 non-compete agreements as part of their contract.

54:06 This meant they had all the independence of an employee

54:08 combined with all the safety of someone in business for themselves.

54:11 Now, for certain people, especially those at the top of their field,

54:15 being an independent contractor is a great

54:17 opportunity to provide services to multiple different

54:19 companies and charge a much higher hourly rate than 9 to5 employees ever could.

54:23 These kinds of private contractors didn't

54:25 suddenly become twice as common, though.

54:27 Most of this growth is simply explained

54:29 by people working full-time jobs with contractor conditions.

54:32 It also means that job opportunities aren't as plentiful as the numbers

54:35 would suggest because even if lots of new jobs have actually been created,

54:39 they are likely being worked by someone who already had a job and just

54:42 needed a second or third source of income to keep up with living expenses.

54:46 Now, I know for a lot of you watching,

54:49 you already know this, but ignoring this issue

54:51 will probably end up making it worse.

54:53 These charts aren't just here for me to make depressing videos every week.

54:56 They should inform policy.

54:57 If we can't even acknowledge a problem, it makes it much harder to fix.

55:01 Now, if we want to encourage genuine business activity, that's great.

55:04 And there's a lot we can do.

55:06 Actually banning non-competes,

55:07 making it easier for business owners to save for retirement,

55:11 and making access for healthcare easier for people

55:13 who don't get it through their employers.

55:16 But these things are hard.

55:17 So, with everybody having to either take on a side

55:20 hustle or start their own business to make ends meet,

55:23 are we heading towards doing even more than the 9 to5?

55:27 Greece introduced a 6-day, 48 hour work week.

55:30 The country did this at the same time as its

55:33 European neighbors have been successfully

55:35 experimenting with shorter 4-day work weeks.

55:37 But the Greek government has insisted that this new change is the key

55:41 to turning its economy around by simply working harder than everybody else.

55:45 It's a bold strategy and for the sake of working conditions everywhere,

55:49 we better hope it doesn't work.

55:51 Unfortunately, it just might.

55:53 Greece has an aging and shrinking population.

55:56 According to the country's statistics authority,

55:59 over 500,000 young educated citizens left the country

56:03 to find work with better paying conditions elsewhere.

56:05 It's very easy for Greek workers to find jobs that pay

56:09 better in other countries because as members of the European Union,

56:12 they are free to reside and work across borders with very few restrictions.

56:16 In order to correct for this loss of manpower,

56:18 the government has decided to introduce a 6-day

56:21 work week to make up for all the workers

56:23 who have left the country and to support all

56:25 the elderly people who can no longer support themselves.

56:27 By raw arithmetic, their logic makes sense.

56:30 Kind of.

56:31 Output is the hourly productivity of a worker

56:34 multiplied by how many hours they work.

56:37 If Greece has fewer workers, it can increase its output by getting those who

56:41 are left to work even longer and harder.

56:43 What they have failed to account for though is that a lot of the productive

56:46 workers still left in the country might decide that they would rather go

56:49 and work 4 days per week in Belgium for double the average salary than

56:52 stick it out grinding 6 days a week for half the pay in Greece.

56:56 If your country has a problem country has a problem with young people

56:58 with young people leaving to find better leaving to find better work elsewhere,

56:59 work elsewhere, the solution is probably the solution is probably not

57:01 to make not to make working conditions even working conditions even worse.

57:03 But their worse.

57:04 But their new plan argues that by new plan argues

57:05 that by getting on their getting on their hashtag grind, they can hashtag grind,

57:07 they can bring people bring people back by just

57:08 paying them back by just paying them more.

57:09 There is more.

57:10 There is also an argument that also

57:11 an argument that longer hours tend longer hours tend to be the hallmark of to be

57:14 the hallmark of highly compensated highly compensated professions.

57:15 If your professions.

57:16 Seauite executives, medical practitioners,

57:18 investment bankers, corporate lawyers,

57:20 and senior tech workers all regularly put in long hours

57:23 and they are all generally well compensated for that time.

57:27 These professionals are expected to be on call all the time

57:30 and meet the demands of their clients and patients who simply can't wait.

57:34 Hospitals have been routinely understaffed and have been relying

57:37 on staff working longer overtime to keep operations running.

57:39 These long hours have been linked to unnecessary

57:42 patient deaths and worker burnout across the country.

57:45 But doctors and nurses who are willing to stay on call

57:47 for these odd hours can make an absolute[ __] ton of money.

57:51 Investment banking teams are doing much less important work

57:54 than medical professionals and they spread their teams even

57:56 more thin so that fees on transactions only need

57:59 to be spread between a few overworked team members.

58:02 In my own personal investment banking experience, even on very large deals,

58:05 we never had a team larger than five people because managing directors

58:09 knew that the analysts and associates had to grind it out anyway.

58:12 And why would they share their bonus with more headcount?

58:15 If Greece can become the place where people work harder,

58:18 they should attract these kinds of high-paying jobs, right?

58:22 Well, not really.

58:23 Greece already has high unemployment, and anybody who could work in these roles

58:27 has likely already left to somewhere like London,

58:29 Frankfurt, or come here to America.

58:32 For most jobs, there is absolutely no need to be in the office 6 days a week.

58:36 If you work in an office,

58:38 you know that you have a set of tasks to do and once they are done,

58:41 your new task becomes looking busy for the rest of the week.

58:45 But that's exactly the point.

58:46 This law isn't really targeting office jobs.

58:49 In fact, most of them are explicitly excluded from this law.

58:53 Instead of magically creating high-paying jobs like promised,

58:57 what this new law is really about is squeezing the most

58:59 out of workers on the other end of the pay scale.

59:02 Retail, transport, construction,

59:04 and hospitality are jobs where companies just need someone behind a counter

59:09 or on the tools for as many hours

59:11 of operation as possible to serve customers periodically.

59:13 A large share of what's left of the Greek workforce are in these types of roles,

59:18 and businesses are already demanding a lot of extra hours from their employees.

59:23 Greece may have a reputation for a laid-back lifestyle and 3 PMCS does,

59:27 but according to data from the OECD,

59:30 the average Greek actually works a full 80 hours per year

59:33 more than the average American and we are already way above average.

59:37 The average German, on the other hand, works 500 fewer hours every year,

59:41 and they are still more than twice as productive as workers in Greece.

59:45 High unemployment has meant that employers can ask a lot

59:48 from their employees because finding another job is extremely hard.

59:51 and replacing a worker that isn't willing

59:54 to work some unpaid overtime is extremely easy.

59:56 This new six-day work week is really being sold as a way

59:59 to formalize what's been going on in workplaces across the country already.

1:00:03 To make matters worse, the wording of the law makes it all sound very optional.

1:00:07 DW reports that while the 40-hour work week is still officially in place,

1:00:13 employers are permitted to require staff to work up to two unpaid

1:00:16 hours per day for a limited period in return for more free time.

1:00:20 The problem is that if businesses have the option to ask their staff

1:00:24 to work 2 hours of unpaid overtime every day and those staff can't say no,

1:00:28 then that's just going to be the new normal.

1:00:31 In the same article, an ameritus professor of labor law is quoted as saying,

1:00:35 "Law 5053 2023 will kill off the 5-day work week for good,

1:00:40 so it's probably not as optional as politicians would like workers to believe.

1:00:45 Some people may leave, but most of those who can already have.

1:00:49 Better opportunities exist in other EU countries,

1:00:52 but a lot of Greeks don't have the resources to move their families across

1:00:55 Europe to compete for a job against a local in a country like Germany.

1:00:59 This is about squeezing what is left from who is left.

1:01:03 Look, I normally try my absolute best

1:01:05 to form a rounded argument that represents both

1:01:08 sides when addressing stories like this, but this 6

1:01:11 day work week is just[ __] dumb.

1:01:15 It won't make workers work harder.

1:01:17 It won't create high-paying jobs.

1:01:19 It won't improve productivity.

1:01:21 It will drive away what few young workers the country has left.

1:01:25 It will lower hourly wages and create

1:01:28 terrible working conditions for the whole country.

1:01:31 It's all around terrible policy.

1:01:33 But unfortunately, it's not just Greece doing this.

1:01:36 It's easy and sometimes even fun to laugh

1:01:39 at dumb decisions made by outofouch politicians.

1:01:42 But the Greek problem is not just a problem in Greece.

1:01:46 Greece is a very expensive country to live in because

1:01:49 it's so popular with wealthy tourists who make their money elsewhere.

1:01:52 But the minimum wage is only €830 per month according to wageindicator.org.

1:01:58 That means the average Greek needs the extra work anyway,

1:02:01 whether it's legally mandated or not.

1:02:04 But let me make a big bold claim here.

1:02:07 Wages haven't kept up with living expenses anymore.

1:02:10 Crazy, I know, but the way we are dealing with it is kind of strange.

1:02:14 The good news is that the average employee almost everywhere

1:02:17 is working fewer hours than we used to in previous generations.

1:02:21 According to data from the OECD,

1:02:23 annual hours worked per worker have declined significantly since the 1950s,

1:02:27 but you would be forgiven for thinking that it doesn't really feel like that.

1:02:31 And you would be kind of right.

1:02:33 The amount of time workers are spending at work has gone down,

1:02:36 but the total number of people has gone up a lot, too.

1:02:39 Put it simply, what this means is that even though

1:02:42 the average individual worker is spending less time on the job,

1:02:45 the average household is spending more time working because it's now much

1:02:49 less likely that a woman in the household is a stay-at-home parent.

1:02:52 Now, women having the ability to enter the workforce

1:02:55 in a meaningful way has been positive progress.

1:02:58 But it's also now become a necessity.

1:03:01 Having a stay-at-home partner, man or woman,

1:03:04 is an unaffordable luxury for most households in America,

1:03:08 especially younger workers.

1:03:10 This means the average household is dedicating time to more work.

1:03:13 And household chores are not taken care

1:03:15 of by a single person while another person focuses on work.

1:03:18 So, while these numbers might look like we are moving in the right direction,

1:03:22 the reality is a little bit more complicated.

1:03:24 You might have also noticed that the number

1:03:27 of people in the workforce is actually going down.

1:03:29 But that's largely because as a larger share of our population gets older,

1:03:33 some of them can retire while still of working age.

1:03:35 This was accelerated by a huge drop at the start of the pandemic when a lot

1:03:39 of people who were almost ready to retire were

1:03:42 laid off and just never went back to work.

1:03:45 This is also great.

1:03:46 People should be able to retire and enjoy their twilight years.

1:03:50 But with an aging population,

1:03:52 this also put more pressure on younger people to pick up the slack.

1:03:55 What this means is that there is a bit of a disconnect

1:03:58 between what these charts show and what the average worker will experience.

1:04:02 According to a study conducted by ADP Research,

1:04:05 the average American worker is now doing

1:04:07 9.2 hours of unpaid and often unreported overtime.

1:04:11 That is a number suspiciously close to the extra

1:04:14 hours that are going to be demanded of Greek workers.

1:04:17 The only difference is they were dumb enough to say it out loud.

1:04:21 That also doesn't account for the growing

1:04:22 number of people working in a full-time role.

1:04:25 and then doing informal gig work or freelancing on the side.

1:04:28 The number of new businesses created in America has exploded in recent years.

1:04:32 And while this is normally a sign of a healthy,

1:04:35 prospering economy, there might be a little bit more to this data.

1:04:39 According to the US Chamber of Commerce,

1:04:41 5.5 million new business applications were filed

1:04:44 with them in 2023, an all-time high.

1:04:47 But suspiciously, these new business applications were coming

1:04:50 from the states with the worst employment problems.

1:04:53 People are not really starting businesses anymore because they

1:04:56 have a great idea and want to capitalize on it.

1:04:59 They are starting them to formalize income from informal work like Fiverr,

1:05:03 Uber, and yes, even YouTube.

1:05:05 According to a bank rate survey, more than one in three Americans now have

1:05:09 a side hustle on top of their full-time job.

1:05:11 And more than 30% of respondents said they expected to need the extra

1:05:15 income their side hustle brings in for the rest of their lives.

1:05:18 The number of people doing a side hustle

1:05:20 jumps to almost 50% amongst genzers and is

1:05:23 obviously significantly lower amongst baby boomers who

1:05:25 either just have one job or are retired.

1:05:28 Picking up a side hustle in addition to your full-time job can be

1:05:31 an amazing way to start a business

1:05:33 while maintaining the safety of a stableish income.

1:05:36 I did it while starting this channel.

1:05:38 and Richard from La Plain Bagel made

1:05:40 an amazing video recently about why he still

1:05:43 works his full-time job instead of just focusing

1:05:45 on his almost 1 million subscriber YouTube channel.

1:05:48 The key difference here is that it was a choice rather than a necessity.

1:05:53 Mr.

1:05:53 Bagel is probably doing well for himself with his YouTube channel,

1:05:57 but that's not your typical side hustle.

1:05:59 Ted Rossman, the credit analyst that ran the survey,

1:06:02 said that while it's admirable that so many Americans are

1:06:04 putting in extra time and effort into their side hustles,

1:06:07 it's unfortunate that most are doing so simply to fund their expenses.

1:06:11 This is especially troubling since if side hustles are just a way

1:06:15 to increase income as opposed to building up a business or monetizing a hobby,

1:06:18 then they are mostly a pretty terrible waste of time.

1:06:21 Most people with a side hustle who were surveyed were effectively

1:06:24 just working another job that paid well below the minimum wage.

1:06:28 So, while looks like the amount of time you spend working has gone down,

1:06:32 and you might even be lucky enough to live

1:06:34 in a place experimenting with a 4-day work week,

1:06:36 we haven't filled that extra time with leisure

1:06:39 or just getting a good night's sleep.

1:06:41 We have split domestic work, taken on second jobs and side hustles,

1:06:45 and just stuck around answering Slack messages off the clock.

1:06:48 A lot of us are working 6 days a week.

1:06:51 Greece was just the only one to admit it.

1:06:54 But go and watch this extended cut video next to see

1:06:57 why a whole class of people are becoming basically unemployable.