It is the custom on this first Monday of September to celebrate workers. However, given the current economic climate, it is also a good time to wonder whether the “worker” celebrated on Labor Day is a disappearing species.

Henry Ford created the modern American factory worker at the start of the 1900s by offering high wages in return for their effort and loyalty. This model quickly spread throughout the economy because increased wages generated increased demand for consumer goods, which created more customers for goods produced by the factories. To meet this increased demand, you built more factories and hired more people. The basis of an entrepreneur’s worth was his square footage and head count.

However this expansion started to plateau in the 1960s and 70s, so entrepreneurs needed to look for other ways to increase productivity. Increased mechanization started the decline in employment. Offshoring muscle-based jobs to cheaper countries increased the trend. Knowledge workers thought themselves immune to the trend because brain-based work stayed in-country until that too could be more cheaply outsourced.

In hindsight, the trend to producing more with less is totally predictable. Entrepreneurs are driven by the desire to create value for their customers by doing things cheaper, faster, better. Innovation is the leverage that allows us to do more with less. This is reflected in the traditional balance sheet business valuation, where machines are assets and employees are liabilities.

Politicians and economists now are piling the responsibility for creating jobs on the shoulders of entrepreneurs. I believe this is a grave mistake. ”Job creation” is not a priority for entrepreneurs. I have yet to meet an entrepreneur who is primarily motivated by creating jobs. If job creation is a by-product of increased sales, that’s great, but it’s not the goal.

In the past the entrepreneur’s power came from the size of the factory and of the workforce. Now you can serve thousands of customers from a laptop in your bedroom. Companies whose assets are a few office buildings have higher capitalizations than the big automakers, with all of their factories, machines and workforce combined. The power of today’s entrepreneur is in the number of users.

What does this mean for the prototypical wage-earner? If they hope to return to the way they were at the core of the economy in the 1940s and 1950s, it is bad news. This first part of the 2000s are all about an economic shift as profound as the shift from the agrarian to the industrial economy in the first part of the 1900s.

The solution to the problem of unemployment and the shrinking economy goes beyond just doing more of what was done in the past. The Old Economics leave too many intangibles off the balance sheet: ecological, societal, personal, familial. We need to invent a New Economics that includes all this and more.

The old rules are gone and the new ones are yet to be written. It may take 20, 30 or even 100 years to figure out a new way of measuring value and wealth.

The future we desperately need will be created not by politicians, or by the CEOs of the old guard, but by a new generation of citizen-leaders who are crystal-clear about their purpose, who are powered by the passion of a big vision, and who transform the status-quo by mobilizing communities of people to build systems that create profit and prosperity for all.

For more information

This line of thought is the foundation of my personal manifesto:
http://about.me/coachdavender

Image credit: Stefan Ray (slinky2000) via Flickr
Link: http://www.flickr.com/photos/slinky2000/2175943057
Used under Creative Commons Licence

Lately I’ve been accused of being a pessimist. In project meetings and with clients, I’m becoming the “what if” guy, pointing out obstacles and difficulties, bringing up the need for all kinds of expenses, pouring cold water on dreams of how big the profits will be and expectations of how potential customers will respond to the offer. Which doesn’t always make me the most popular guy in the discussion.

Entrepreneurs are necessarily optimistic. We need to be, it allows us to see the possibilities around us and act on them.

But the trap appears when we “fall in love” with the idea. Optimism then gives way to an emotional attachment to the idea, a state of “irrational exuberance” which can blind you to dangers that are otherwise obvious to someone who is not as emotionally invested in the project.

This is why I like Edward DeBono‘s Six Thinking Hats approach to thinking. The six hats are a creativity tool to help look at a situation from different perspectives. When you wear a specific colour hat, it gives you permission to think in a certain style:

• White Hat: Analytical – What does the data say? Look at the available data both quantitative and qualitative. What are past trends? What can you extrapolate? Where is the evidence to support your assumptions? Where do you need more data?
• Red Hat: Emotional – How do you feel about this? Access your intuition, gut reaction, emotion. Talk about your feelings about the situation, where you feel good and not as good. How would others feel about this?
• Black Hat: Pessimist – What could go wrong? Think cautiously, defensively, why it might not work. Poke holes in the idea, look for the weak spots, all with the intention to identify what needs to be addressed in order to overcome any problems.
• Yellow Hat: Optimist - What if all goes right? Think optimistically, positively. Imagine all the opportunities, the benefits, the advantages. Reach for the stars!
• Green Hat: Creative – How can we make this better? Use your creative juices to think “out of the box”. Explore weird tangents, unexpected synergies, make it into a “purple cow” (something remarkable that stands out from the crowd).
• Blue Hat: Process – What do we need to do now? Direct the process of creativity so you don’t get stuck. When in “Blue Hat” mode, step back from the problem and consider if you are giving all of the other hats equal time.

Entrepreneurs seem to do quite well with the Yellow, Red and Green Hat approaches to thinking about an idea. There is more resistance to the White Hat (analytical) and definitely a big block around Black Hat thinking. Could this be because the Analytical and Pessimist are associated with external control?

There is nothing to fear from the Black Hat – actually it can be your friend. Wearing the Black Hat gets me out of cheerleader mode and forces me to examine my assumptions up close. Everytime I’ve had a project backfire on me (and yes, I’ve had a few) it could be traced back to an assumption that was not properly tested.

Black Hat thinking is what gives your project real traction, by foreseeing the difficulties and encouraging defensive planning. This makes the project more resilient and improves the probability of success.

As you explore your idea, put on the Blue Hat (Process) from time to time to see if you are considering all the perspectives of your project. And don’t be afraid to wear the Black Hat – you may find that underneath that gruff exterior there is a heart…that wants you to succeed.

It’s great fun to dream big, to reach for the stars. But if you want to make any progress, you need to keep your feet on the ground. This is what gives you the traction to power your Vision forward.

For more information

I recommend Edward DeBono’s book  ”The Six Thinking Hats” (Amazon.com http://www.amazon.com/Six-Thinking-Hats-Edward-Bono/dp/0316178314 – not an affiliate link). It’s a slim volume packed with practical examples.

Are we in a “recession” or in a “recovery”? Who cares? What real, practical impact does the state of economy as described by the media and the government have on solopreneurs like you and I?

An op-ed piece by David Brooks on NYTimes.com had me thinking about this. His column, titled “The Protocol Society” talks about the shift in Western economies from the 19th and 20th century focus on making stuff (corn, steel, trucks), to the 21st century basis of the economy: sets of instructions such as software, processes, and intellectual property.

In my opinion, what makes being a solopreneur possible in this day and age is that we can leverage our ideas and skills to create parallel streams of income. This is the distinction between a solopreneur and an artisan: the artisan is a self-employed person who makes things or delivers a personal service, and since only one thing can be produced or service delivered at a time, the earning of an artisan is linear. I’m thinking of some people I’ve coached in the past: a furniture reupholsterer, a plumber, even a dentist. No matter how advanced or specialized is their knowledge, the business model that they’re forced into creates linear income.

But when you take that knowledge or skill and transform it into “protocols” – organized information – then you can move from a linear income to a parallel income. Solopreneurs can leverage ideas and technologies to produce much more value from a time unit of work than if we were building widgets or serving customers on an individual basis.

David Brooks makes a a key distinction between the classic physical goods economy and the new protocol economy: physical things are finite, you can use them up, and therefore responds to the law of supply and demand. But the protocol economy, based on ideas, has no such limit.

What does all this mean for solopreneurs? Here are some ideas that came to me as I considered this concept:

- We are individually responsible for creating our own “economy”. In the “Protocol Economy” our personal economic health is ultimately dependent on our willingness to take action and get things done. Because what we offer (ideas, processes, intangibles) is not limited by finite supply or demand, overcoming the inertia of our business is solely dependent on the force of our courage.

- Prosperity is directly proportional to the speed of innovation.  To prosper in the “Protocol Economy” you need to be constantly innovating, trying new processes, ideas. Because the world is so complex, if you spend all your time trying to figure out all the variables before you launch, well, you will never launch. The faster you innovate, the faster you find what works. This goes straight to the basic formula for success as a solopreneur: “FIRE”,”AIM”,”FIRE”. Shoot first and then see what you hit. If it’s good, continue aiming there, otherwise abandon it and try something else. The other benefit of speeding up your innovation cycle is that you generate that many more ideas, and since ideas are the fuel of the protocol economy, you will always have something to move forward with.

- Money is not essential to create money. In the traditional economy, you need capital to start up, in order to underwrite the means of production and cover the cost of sales. But in the “Protocol Economy” the cost of production is so low that you can make a much better return on your investment of time and money. What is especially interesting is that you can start even before you are clear about the “revenue model”. More and more businesses are going this route (Twitter and Facebook are the highest profile examples). So throw away the rule book that says you need startup capital, bypass the banker and the government subsidy, and start making offers. Sell first, then design, build and deliver. That way you can see if there is any interest in what you have to offer and adjust your processes to meet what people are looking for (connects to the previous point).

- The protocol economy is not rational. In the protocol economy, the buyer acts first on emotion then “justifies” with reason. The buying decision is driven by the emotion of desire, since we’re operating higher up on Maslow’s hierarchy of needs (belonging/esteem/self-actualization). Therefore the buyer chooses their provider based on the level of trust (= emotional) and also how the provider can enhance the fulfillment of their desires (referring again to Maslow’s hierarchy).  This means to stop focusing on the features of what you offer and focus on how it helps the purchaser fulfill their desires.

- Be the “Top Gun”. The expression “Top Gun” comes from a course I took with Master Coach Bea Fields. When you are perceived as the Top Gun, you become seen as the expert in your field, and you attract more and better clients who appreciate what you have to offer and who are ready to commit. As you become more outstanding, you command a larger and larger sphere of influence, and you get to “cherry pick” clients who are the right fit for you. This demolishes the old “supply and demand” economic model, especially for services (“protocols”). The old models assume equivalent competency between providers (and therefore no differentiation). When you are the “Top Gun” you create your own economy, independent of supply and demand, because clients will beat a path to your door…you are that good!

- Success in the protocol economy comes down to one word: “Systems”. Systems differentiate, define and duplicate. First, systems differentiate how I provide my training, coaching and consulting service from a colleague’s similar offering. How I define and execute my systems will give you, as the buyer, a different experience from the other person.  Second, systems define.  If you go to the same restaurant today and next week, you expect a similar result. You also want your order prepared correctly, predictably and with high quality. You can have the most brilliant chef in the back, but if the systems are not in place and properly executed, then the trust is broken and the diner will go elsewhere. Highly reliable and consistent systems take care of all of the little details and free you to build a relationship of trust with your clients, which defines the value they perceive you to provide. Most importantly, well implemented and executed systems take the knowledge and skills out of your head and into the world: this is the key to leveraging your time and creating parallel streams of income, basically duplicating your ability to produce.  Because systems design and execution is so important, this year I will be making it a top priority for my own business as well as the businesses of my clients.

We need to get out of the old way of looking at business – finite markets, supply and demand, competition – and adopt a new way of thinking about what business in the 21st century is all about: innovation, collaboration, connection. The beauty of the “Protocol Economy” is that because success is no longer dependent on the physical resources you possess or control right now, prosperity is within the reach of each one of us – it only depends on our courage to move into action. There is a revolution happening in our economy and our society, and all of the trends point to the next decade being a wonderful playground for bold Solopreneurs.

To me, the closing paragraph of David Brooks’ article sums this shift beautifully: “When the economy was about stuff, economics resembled physics. When it’s about ideas, economics comes to resemble psychology.” Because Solopreneurs are light and agile, we are perfectly positioned to prosper.

In what way does this idea help you create better results in your business? I’d love to discuss this with you. Please share your comments below…

For more information:

Read the original article by David Brooks here: http://www.nytimes.com/2009/12/22/opinion/22brooks.html

David Brooks mentions a book about this idea, “From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and the Lasting Triumph over Scarcity” by Arnold Kling and Nick Schulz
Amazon.com link (no affiliate): http://www.amazon.com/Poverty-Prosperity-Intangible-Liabilities-Scarcity/dp/1594032505

Reason.tv features an interview with Arnold Kling and Nick Schultz:

View directly on YouTube: http://www.youtube.com/watch?v=–QaJ-VEXXU