The Craft Movement: Swiss Maker Edition (#23)

The Craft Movement: Swiss Maker Edition,
w/ Marc MAURER and Arthur VIAUD

This episode focuses on two Swiss companies rising in the maker movement. First we interview , COO, and co-owner of the sports shoemaker, . On is a brand preferred by Roger Federer which taking on Nike and Adidas with a high-end, high-tech trainer — also known as sneaker — that is so lightweight that ‘it feels like you are walking on clouds’. After Marc, you will hear from , co-founder and CEO of — a craft brewery that is taking on the giants in Switzerland, and it’s starting to expand internationally. This beer-maker prides itself on being part of an industry with a heart and a smile, brewing beer with love, passion, and Swiss quality standards.

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If you’ve been listening to this podcast for a while, then you may have noticed an observation woven through some of our episodes, and that is the idea that a combination of access to more information, online distribution channels, and rising affluence have killed the idea of the mass consumer. Now, we all want better quality goods, specially crafted and tailor-made for us. In this episode, we delve into this topic.

Full podcast transcript:

 
 

A craft brewer is someone who focuses first and foremost on the quality of what they deliver. — Arthur VIAUD

The market hasn’t seen any innovation in the last 20 years. So, if you look at running shoes back in 2010, they all look the same, and they all feel the same. — Marc MAURER

[00:02:55.05] Ben: Marc, maybe let’s just start with you just telling us, for our listeners’ sake, what is On?

Marc: On is basically a sports company that started out with running shoes back in 2010 and it started with a cushioning technology. So, On has a very specific cushioning technology that allows you a soft landing and a firm push-off. And the way we do that is with holes in the sole, which we call ‘clouds’. So, it’s the only engineered cushioning solution and it comes with very innovative and sleek designs. So, it’s a very approachable and a very versatile product that you can not only use for running but also for casual wear. That’s how it started and it started with running-only and in the last 10 years we went into outdoor, we went into lifestyle, On went into apparel — so it’s become a full-fledged sports company.

[00:03:53.26] Ben: And when the three founders came up with the idea and they came up with the technology, why were they confident they could be successful? Because it’s a very big market — I think I read that it’s something like a $370 billion market for performance footwear, but it’s clearly one that’s dominated by 10-ton gorillas in the form of Nike and Adidas. So, how come those guys thought that they could take on the giants and be successful?

The mission comes to life when you step into or when you wear our products. — Marc MAURER

Marc: I think when you stepped into the first product, you felt something different. So, it was a completely differentiated product from everything else that was out there. And the market hasn’t seen any innovation in the last 20 years. So, if you look at running shoes back in 2010, they all look the same, and they all feel the same. So basically, we felt there’s an opportunity in this market — it hasn’t been any innovation and no strong direct-to-consumer brands. And the market is huge, you’re absolutely right, but that’s an advantage because it means if you only get a relatively small share in that big market, that’s already quite sizable. And it’s a growing market. So, this is why, back then, in 2010, the guys decided to start the company.

[00:05:03.23] Ben: And what’s the company’s mission?

Marc: The mission comes to life when you step into or when you wear our products. And, originally, we always said we want to put the funding to the run. So, the idea is that you have a very different running feeling or a very different feeling when you’re moving and that, eventually, allows you to move more and that eventually allows you to run more. So, you’re spending more time outside, you’re spending more time being healthy. And we really believe in what we call ‘the human spirit’, and that people can do amazing things when they’re given the opportunity to, and On’s products are allowing you to do so.

[00:05:41.19] Ben: The technology is really at the heart of the shoe and the lightweight running sensation you feel when you’re outside and it came out VTH in Zurich, it’s patented, but how difficult would it be for somebody to imitate it or get close to the technology?

Marc: I think it would be relatively difficult because when you look at running shoes, actually, the way you produce them, you need tooling, you need molds, there’s lots of 3D drawings going into it, you have the foam that needs to have a specific kind of cushioning level and so on. So, there’s quite a bit of engineering that goes into it to come up with the same running feeling. So, it’s quite difficult, but we always knew, at some point, eventually, someone will do it. So that’s why On always said, “Hey, we need to reach a certain scale within a certain time. When eventually someone comes up with it, then everyone knows who or what On is, so it’s very clear that this is an imitation.” And we’re very lucky that we made it so far and that we’re in a position right now where that feeling and that technology and On’s patented cloud tech is really associated with On and it would be very difficult for someone else, even the big players to accomplish such a thing to the market.

[00:07:04.19] Ben: So, I wanted to talk a little bit about the company’s history. And so, you joined the company in 2013, right?

Marc: Yes.

[Switzerland] is great to scale from because the access to talent is super good and I think Swiss people and Swiss values and the way we’ve been brought up really help in international relations. — Marc MAURER

Ben: I read, I think it was an interview with David — one of the founders — where he said, “2013 was a difficult year for On. We had a bit of a slump in sales. We had a few ‘teething up’ issues scaling the company.” How difficult has it been — or how challenging has it been — for you since you joined, to scale this company to meet the growing international demand for your footwear?

Marc: ‘Difficult’ is probably the wrong word. I think it’s more like, interestingly challenging, and you experience so many different episodes throughout the years. So, in the beginning, when I joined in early 2013, On was 20 people — so it was very small, and our loss was as big as our revenues. So, we were actually fighting for survival, which is a very different mode to what we’re in right now or were in kind of three years later. And then, you start growing and you experience lots of growing pains in production, obviously, in marketing, in scaling up customer service, in finding the right people. But we never experienced it — or I never experienced it — as difficult because it was always associated with positive emotions. We had so much and we still do have so much fun doing it. We’re so fortunate to be able to work with an amazing team, great people. But it’s full of challenges. I’m a person who tends to get bored pretty quickly, and in seven or eight years, I never got bored — not a single day — because the amount of challenges is just so vast, and I think that’s lots of fun.

The problem with Switzerland is it’s a very small home market. So, if you’re the number one player in Switzerland, you’re still subscale from a production perspective. So, that’s why On decided already back in 2012 that we had to go international super quickly and we had to make the US our biggest market as fast as we can. — Marc MAURER

[00:08:47.19] Ben: Is Switzerland a good country from which to scale an international business?

Marc: Yes and no. For us, the advantages clearly outweighed the disadvantages. So, it’s great to scale because the access to talent is super good and I think Swiss people and Swiss values and the way we’ve been brought up really help in international relations. So, Swiss people tend to be quite well-traveled internationally, they’re adapting to different cultures because we essentially have four cultures or three cultures in one country, and three languages/ four languages in one country. So, that has helped. The problem with Switzerland is it’s a very small home market. So, if you’re the number one player in Switzerland, you’re still subscale from a production perspective. So, that’s why On decided already back in 2012 that we had to go international super quickly and we had to make the US our biggest market as fast as we can. And then, Switzerland serving as a basis for international expansion has proven very successful and very helpful.

I think Swissness stands for quality. It stands for design. It stands for innovation. It stands for reliability. And these are values that are very core to On and that we are carrying out. — Marc MAURER

[00:09:58.09] Ben: Yeah, I suppose it’s sort of a double-edged sword, isn’t it? Which is, having a small domestic market means that you need to look outside from the beginning. And so, it’s like, internationalization is higher up the agenda for a Swiss company than compared to a US company, for example?

Marc: Yeah. I mean, in the US, if you’re basically looking at Under Armour, they did $2 billion in revenues before they left the US. It would be completely impossible for us to do that. But, on the other hand, that means that you’re actually building an international company from scratch. So, already now we’re having several offices across the globe, in all regions: On is present in Brazil, in Japan, in the US, and so on. And it’s actually much easier to do that when you’re young versus when you’re already a $2 billion company, and then you’re building your first office abroad. So, I think looking at it from a 20–30-year perspective, hopefully, we’ll look back and say we were very fortunate that we scaled and went international so early on.

[00:10:55.13] Ben: Every single pair has a Swiss flag, right? So it’s almost like Swissness is at the very heart of On.

Marc: Yes. I think Swissness stands for a few things that are absolutely core to On — to On’s products, but also to On’s values and culture. So, it stands for quality, which is super important to us. It also stands for design. It stands for innovation. It stands for reliability. And these are values that are very core to On and that we are carrying out. And all our design work and all our development are happening in Switzerland. So, the product that you see is truly engineered in Switzerland. It’s not manufactured in Switzerland, but it’s engineered here. Swiss designers, lots of developers based in Zurich. So, it’s really at the heart of what we’re doing.

The way we started apparel is because we wanted to have apparel for ourselves. We never did an apparel business plan to eventually go to so many customers; we just said, “We need our own apparel.” — Marc MAURER

[00:11:46.24] Ben: It seems to be that you’re sort of riding a secular trend, which it’s almost like we’ve seen the death of the mass consumer, and we now live in a world where producers can produce things that are much more tailored to our individual needs. At the same time, we’ve become more affluent and we’re demanding better quality stuff; at the same time, we’ve become more conscious about the environmental impact of production. And it seems like you’re riding this big wave towards more locally-produced, more sustainable, better quality products?

Marc: Yes, definitely! I mean, what we see a lot and what is really core to On is authenticity. And that’s very important to today’s consumers. And it’s just come very natural to On because this is how it started. We always say On was started in the Swiss Alps or born in the Swiss Alps. So, we’re all runners, we love to run. The way we started apparel is because we wanted to have apparel for ourselves. We never did an apparel business plan to eventually go to so many customers; we just said, “We need our own apparel.” And we’re very, very fortunate that On has grown to such scale and that so many people are fans of our brand, but it’s all very authentic. Because it was never the goal, there was never a business plan to go where we are today. It basically just happened naturally by doing what we enjoyed doing, and by being true to our values, and true to what we believe in.

we’re holding ourselves accountable to be authentic — Marc MAURER

[00:13:17.16] Ben: How do you keep or stay authentic, the bigger you get? Because if your success so far has been built on this idea of you being really high-quality and a bit niche, what happens when you’re mainstream? I think I read that you already have a 10% market share in Germany. So, how do you keep authentic at scale?

Marc: I think we’re holding ourselves accountable to be authentic. So, On doesn’t have a CEO for example. We’re kind of like the Swiss government, but that means there’s lots of checks and balances and we know each other so well, because we’ve been working together for so many years, we’ve built a team together. So, everyone has an understanding of who we are. So, it’s very important to us that we’re staying true to ourselves. And we believe you can be a mass-market brand that is still authentic by doing the same thing. On hasn’t really changed in the last seven years in the sense of the products that we bring to the market. we’re still doing more or less the same thing and we’re still very price stable, we’re still very premium, we’re still super high-quality, we’re still very innovative. And then, basically, becoming mass market is almost like the consumer appreciating just the work that we’re doing, so why should we change? Because what we’re currently doing right now is appreciated by our customers.

[00:14:37.26] Ben: When I asked that question earlier about big consumer trends, I mean, one is the high-quality products — tick; and then I think the other big one is to more sustainably source products. And I know you guys have done a lot of work here to try to make your footwork greener, but I suppose the uncomfortable or the inconvenient truth is, shoes are largely made of petroleum. So, how do you make a green shoe? How do you make a green trainer?

Marc: Actually, building on what I said before in the last question, if we do it, we want to do it right. So, we see a lot of companies almost using it as a little bit as a marketing play and what we’re working on is kind of truly solving the problem — and you make it greener with the product. So, a lot it’s just what you said — kind of, if you look at CO2 or carbon emissions, or whatever, a lot of it is in the product and the material itself, and part of it is in the production process, but that’s the vast majority. So, what we’re working on is we’re working on materials that are basically, ideally, at least recyclable; even better if we can have a 360-reuse cycle, so to say, so we can reuse the residuals of the product in other products. And there’s lots of research happening in that space. There are solutions out there. What we don’t want to do is we don’t want to compromise on the product. So, basically, the shoe that has no oil component has to feel as good as the shoe that has an oil component. And this is what takes a little bit of time, but this is where a lot of people at On are invested in, and we’re putting a lot of money to come up, eventually, with a circular product, which is the ultimate goal.

[00:16:27.03] Ben: When we talk about authenticity, one of the things I read, when I was researching this podcast, is that you, guys, regularly have meetings out running. Is that true?

Marc: It’s absolutely true! So, for example, Caspar — one of the founders — and I, we do all our meetings biking, not even running. And it’s actually scientifically proven that when you walk or when you move your body, it stimulates your brain. So, you come up with better ideas rather than just sitting in a meeting room. And so, we do a lot of meetings running, biking, walking and just outside.

[00:16:57.25] Ben: Including client meetings, I heard, as well, right?

Marc: Including tons of client meetings. We had a t-shirt saying, “At the beginning, we don’t talk about our shoes.” Basically, what we meant is, “Just try it on, and then you’ll eventually experience it.” And this is how all the meetings started. We said, “We’re not going to talk about it. We’re going to go on a walk together or on a run together.” And that still holds true till today. A lot of our meetings and discussions are happening on the bike or on the run.

[00:17:27.20] Ben: I have six pairs of On shoes. And the reason I got into On is because a friend of mine just raved about them. He said, “You’ve got to try them! They’re amazing!” And since then, obviously, I’ve made many repeat purchases, I bought shoes for my friends and I can really see how this is a business that has grown organically, based on just having a wonderful product. And I think, when I read about your marketing strategy, you use terms like ‘grassroots’, ‘word of mouth’ — and I suppose, the question is, how big can you get on the back of grassroots, on the back of word of mouth? At some point, do you have to use other marketing strategies? Do you have to use above-the-line type advertising to get to a big-enough audience to really gain massive market share? Or, are you comfortable just to grow, I suppose, in a very Swiss manner, right? Which is, you just grow slowly, sustainably.

Marc: So, one of the Swiss values is also something that’s very important to understand: we’re building a sustainable business, in a sense of, obviously, sustainability, but also financial sustainability. So we always want to be able to kind of finance — or On should be able to finance itself — to a large extent. So, we had to come up with ways to make our product known, that doesn’t cost too much. So, that’s also why On it’s built around or on the basis of lots of retailers. So, when you walk into a store, you have your seven running brands and, eventually, the retailer will also pull the On — and once you’re in the On, the chance that you purchase it is pretty high. And then, hopefully, will remain a loyal customer. And we did a lot of grassroots activities and we still do, because this is really who we are. Then, at some point, to kind of take the next jump in brand awareness you need to start doing above the line. And this is what we already do. We do tons of digital. So, most of our advertising spend will go into digital. We are very lucky to have great ambassadors and athletes of the brand, we’re very lucky to have very loyal customers that are actually, as you said, promoting the brand to friends, and I think the more mature you get, eventually, the more you will start investing in above the line, but in a very different way than we would have done it 10 years ago. Today’s advertising environment is completely different. It has to be much faster. All our videos, all our creative is shot in-house, we’re not working with an agency. So, we have to be very fast in what we come up with.

[00:20:12.27] Ben: Yeah. And again, authentic seems to be the word because it doesn’t seem that you pay people to wear On. It seems that you just tell their stories.

Marc: Yes. So, in an ideal case, and in most cases, athletes or ambassadors come to us because they experience the product and they’re asking, “Hey, I wear On because I feel I can run faster, I can run longer runs, I need less time to recover.” So nearly all of our relationships really kind of emerge from, obviously, the product but then also friendship with all the people that are now part of On. I mean, with Roger who has joined a few months ago, it’s the exact same story. It started with the relationship first — the first discussion we had when we first met him was not targeted at whatever outcome. It was just getting to know each other. And we truly believe if interesting people come together, then something amazing might emerge. And this is how it started with Roger, as well.

[00:21:20.02] Ben: We’re going to come back to Roger later. But, how much do you envision doing something like what Nike does, for example, with Nike running and I suppose building the social context around the brand?

Marc: I think this is one of the next steps. I think there’s a very strong On community, and the community basically has a certain stickiness because of the experience this community is sharing. But there’s no orchestrated way from On on how to activate this community and how this community can really come to life. And there’s tons of grassroots activities, again, that we’re doing with that community. So, you might have heard of something called Tug-O-Run, which is like a squad race that we’re doing in different countries where we bring the community together, we’re doing arc runs in many different cities where we’re bringing the community together. But bringing the community together on social and really activating them potentially also with an app is definitely something that is one of the next steps.

[00:22:25.01] Ben: I wanted to ask you a question a little bit about the demographics of your customer base because I imagine you’ve got elite athletes, for sure, and I think they’re in many of the stories that you tell on your social channels. Then, you’ve got a lot of amateur athletes, people like myself who love the feel of the shoes and make repeat purchases. But I also read that the demographic is much, much broader than that. For example, I read that you guys have a really big following amongst nurses. Is that correct?

Marc: Nurses, and amongst chefs as well because basically, for people who are on their feet all day long, our product is really helpful because of the cushioning technology that it uses — so it’s less tiring, often it helps people that also have certain back problems and so on. So, there’s a huge followership amongst doctors, nurses, chefs, and so on. It’s a super broad customer base. It’s over 50% female, tons of elite runners, lots of outdoor athletes, as well. With the big outdoor push we are doing now, we see lots of walkers as well that are in our products. So, it’s a very big customer base. I think what they all share is obviously they’re all active people that love to be outside and they have an appreciation of quality and design.

On and Roger Federer had a dream and a vision on how we could create something that would eventually be there for a very, very long time and would be way longer-lived than Roger’s career. — Marc MAURER

[00:23:40.29] Ben: That brings us out on to the pandemic because you said these are people that love to be outside. How difficult has it been for you to sell footwear during the pandemic? Because I suppose you’ve got multiple challenges. One, I think, most of your sales go through physical retailers. I think you’re now stocked in 6500 stores in 50 countries, I think. So you’ve got the one challenge of, your distribution channels have been disrupted. And then, another one is that people have been asked — I suppose it’s easy now — but for a long period of time people were asked to stay at home and not exercise too much. So, how difficult has the pandemic been for On?

Marc: I think the pandemic actually triggered two big consumer trends. So, one is running or walking despite some people had to stay at home for quite some time. But it’s mutually searched. So, when you look at cycling case and running case or miles and how it has developed, it’s grown like crazy over the last weeks. And so, you have this huge running boom. So that means there’s a need for people to get access to their product. And now, with many stores closed, the second thing that has done, it has basically leapfrogged roughly three to four years in terms of digital adoption. So, what it meant for On is, immediately when the outbreak happened, we shifted a lot to digital because we cut marketing spend on the physical side because we knew stores were eventually going to be closed, we heavily invested in digital channels. And we also allowed retailers to have a digital channel to sell on. So, if you’re a store in the US, let’s say you’re called A Runner’s Mind, then we basically made an URL for you, which is on-running.com/runnersmind that you could share with your customer base and that would allow the customer base of that store to purchase On product and we will do the fulfillment. So, these two elements together have actually allowed us to overachieve our business plan in April and May. And so, we’ve grown stronger than we anticipated, due to the crisis — and that has been a very positive surprise. So, we didn’t think that impact will be so strong.

[00:25:59.28] Ben: What’s the relative split now of online versus physical sales?

Marc: Before the crisis, online being our own channel, we also do work with third-party online, but let’s take our own direct to consumer channel. So, you’re looking at roughly 25% D2C and 75% B2B. And that’s basically switched. So, April — May, is going to be close to 75–25. And so, it’s completely turned around. And, what we see now happening in the countries that have reopened is that actually, the B2B channel comes back to a large extent, so developments in Germany and in Switzerland, the first weeks have been very, very positive. But that e-com channel stays up. So it’s actually almost a market expansion that is happening, which is very positive to see.

[00:26:53.01] Ben: Let’s talk again about Roger Federer. So, I think he joined — if that’s the right term — On, I think it was November last year, was it?

Marc: Yes. Yes, exactly.

Ben: That garnered quite a few headlines, including, I saw there was a piece in The New York Times. And so, I suppose the first thing achieved was elevating the brand, which I guess you’d anticipated. But I think you alluded to this earlier on, it’s like, not just about Roger wearing the shoes. I think he’s actually becoming much more involved in helping design the shoes. So, what is Roger’s role at On and how significant is it beyond just the marketing impact?

growth has never been the ultimate goal. The ultimate goal has always been to give you, as a customer, an amazing experience — Marc MAURER

Marc: Yeah, I mean, it’s very significant. So, both, I think, On and Roger had a dream and a vision on how we could create something that would eventually be there for a very, very long time and would be way longer-lived than Roger’s career. And because the product is at the core of what we’re doing, it had to come through a product. So that’s why, at the beginning, we really started to work on a product, brainstorm on a product, and eventually coming up with ideas and first sketches and a first product. And that’s a big part of Roger’s role: helping us thinking through what that product range could look like going forward, and he’s very actively involved in that. At the same time, obviously, Roger is an extremely authentic person and he shares the exact same Swiss values that we do. And together, that allows us to also reach a broader community, kind of take a step in sports marketing. And it has been a very, very inspiring partnership so far.

[00:28:41.06] Ben: How long before there’s a tennis shoe? And how long after that before there’s a squash shoe?

Marc: Probably there’s never going to be a squash shoe. And I’m not sure if there’s going to be a tennis shoe. But I think everyone who is listening, should look forward to eventually something come out that is very authentic to Roger and to On.

[00:29:04.08] Ben: So, up until now you’ve built a business and you’ve grown market share on the back of product innovation. So you’ve had the Cloudrac, Cloudflyer, Cloudedge. Are you now starting to move beyond just product innovation to product development? So, I think one of the things I read — I don’t have a pair yet I’ll get a pair — is that you’ve now started to move into fashion sneakers or fashion trainers, beyond just performance shoes. So, is that now the shift you’re making? Or is it more just that all these different lines are getting blurred? So, what was a running shoe is now doubling up as a fashion shoe. How much is the category changing versus your strategy’s starting to change?

Marc: It’s more the second one. I mean, the thought behind this is basically, what if I could wear my running shoe every day, everywhere, anytime? In the past, you either had a running shoe, a comfortable, performance shoe, or you had a fashion shoe. But you would never have a comfortable or performant fashion shoe. So what we’re trying to do is we’re trying to take our tech and bring it to the lifestyle industry so you actually can wear a very innovative product that is extremely versatile but that is made for a 24/7 active use, rather than just running. At the same time, the second thing is we’ve moved strongly into outdoor because, again, as I said, we were born in the Swiss Alps and trail running is something that we love doing, hiking is something that we love doing, so we invest a lot in outdoor as well. And outdoor, at the same time, has become a huge fashion trend. So, actually, if you go to the big cities now, if you go to some of the key tastemakers that we see in the retail landscape, then a lot of the silhouettes are now influenced by outdoor. So, we’re, again, taking that, and also bringing that trend to what we call, ‘performance all-day’.

[00:31:06.10] Ben: You’ve been, as you said, a couple of times, you were growing in a very Swiss way, which is very sustainable, very organic. How big do you think On could eventually be? I’m not asking for your projections, but much more your long-term ambition for the company.

Marc: We never dared to dream to be where we are today. We would never have imagined being where we are today. So, I don’t think we could give you a number or whatever. I think, in the end, we’re trying to have a great product, work with great distribution partners, have a great team. And if we do that right, and if we continue to execute on the highest level, eventually, our customers will appreciate that and that will allow On to grow much bigger than it is now. But growth has never been the ultimate goal. The ultimate goal has always been to give you, as a customer, an amazing experience — and the more customers we can target and reach to have that amazing experience, the better it is.


For me, an industrial guy is someone who is basically making a commodity. You can swap around industrial lagers and basically see no difference to them. They spend millions in marketing but it doesn’t necessarily mean a difference. Sometimes they don’t even have their own brewery, they contract brew all over. It’s not about the story. — Arthur VIAUD

[00:32:12.26] Ben: Arthur, before you started La Nebuleuse, you were a private banker. How does one go from private banking to craft beer?

Arthur: Well, I was working on the trading floor at the private bank in Geneva. So, of course, they’re very unrelated topics. I was brewing on the side, as a hobby — something I’ve been doing since I was a student.

Ben: Like in your bathtub?

Arthur: Kind of in my bathtub. Not literally in my bathtub, but in the bathroom, for sure! At some point, I felt like I wanted to find a really meaningful working life, and the entrepreneurial spirit always has been in me and then, I’m not going to say it was a very natural jump, because you need to consider a lot of things before jumping ahead, and of course, you go into a lot of uncertainty. But it was just about taking the jump. The passion was there, the interest was there, and it was about doing something with my brain but with my hands and with passion and moving ahead with a different set of values, etc. The previous professional experience was useful and proved to be useful in a lot of different aspects in the journey, so I never regretted having done what I’ve done, but of course, I would not go back to it now. I’m very, very happy, and proud that I’ve made this move. So I would say it came up naturally and the deep motivation was so early on in my career. I’m young, I don’t have any family to feed, it’s easier to take risks, as well. So, that’s how it came.

[00:34:00.21] Ben: And when you were weighing up that decision, did you literally weigh up the pros and cons? I mean, did you make a list of, a private banking offers me a steady career, it offers me a fixed wage, it offers me a bonus each year. On the negative side, I don’t want to wear a suit anymore, I want to do something I’m passionate about. Like, how did you make that decision?

if you share that passion and that interest and you’re passionate about your product and you want to get the best thing out, then I think that it’s not really volume question. It’s about your interests and how you’re aligned. We take decisions that are sometimes not efficient on an industrial basis, but we won’t compromise on them because we just think it’s the right thing to do. — Arthur VIAUD

Arthur: Well, first, it was not a single decision because I went into the game with two very old childhood friends of mine. So, we all took the decision at the same time and both of them also had corporate jobs. So, it made it both easier and harder. It made it easier because all of a sudden, if you’re three people convinced about something, it’s easier to say, “Okay, well, this must be something right about it.” But it may have been also harder because then you have on your shoulder the potential failure of the business but you also have on your shoulder the potential failure for your other partners who are also taking a lot of risk there. And so, of course, we discussed about it. So, in my head, I mentally went through pros and cons and I think I remember writing down a small list about things that I will lose by doing it, and sometimes writing them makes you realize, “Am I really willing to let go of that?” But it was easier because we were still fairly Junior in the positions. So it’s not like we left a huge paycheck on the table. It’s not like we left massive benefits, big stock option plans, whatever. It was way earlier in the curb. And I thought, “Okay, well, I might not miss much of the curb at this point in time.” So it was also easier to go ahead at this point in time.

[00:35:40.16] Ben: So, on the one hand, you had your personal desire to do something you’re passionate about, but presumably you also saw the gap in the market, the opportunity to launch something which would be successful. So, what is the gap that you saw, and how is La Nebuleuse addressing it?

Arthur: We’ve been following the craft beer markets in other countries just out of interest because we were just homebrewers and it was quite fun to do that. When we realized, “Well, actually, maybe we should do that.” Then I thought, “Okay, I had to go ahead and do a few trips abroad to really check what the scene was like, to see how is this different from the current market?” I just went to the US for about three weeks, in California, and just checked the craft beer scene there, and then I discovered that the level of development of the market there was way, way, way ahead of the Swiss market. And, looking at it, I saw no reason why this would not come here. The power of the population, the level of education, the center of interest, the psych — all the stars were aligned to see a real booming of the industry in Switzerland and it was just not there. There were a few players who were still around brewing but there was nothing spectacular. The connection with the customer was pretty low, to be honest, the quality of the products was not outstanding, we would not find the flavors and the kind of brand that we would look up to abroad. So then, it became apparent that something could be done. And then, I got further confirmation looking at what was happening in Scandinavian markets, in the UK. So, I was like, “Okay, it’s happening also in Europe; it’s not only a US thing. There’s absolutely no reason in the world why this would not happen in Switzerland.” And that’s what really triggered the, “Okay, this was just an idea and now we have to make it a business.”

Craft beer is an affordable luxury. It is a luxury because it comes at a premium and it comes at quite a premium if you look in percentage terms, but if you look in absolute terms, it’s actually quite cheap and affordable for most people. — Arthur VIAUD

[00:37:39.06] Ben: Basic question: what is the difference between an industrial and a craft beer?

Arthur: It’s not volume related. A lot of people think it’s volume related. I think it’s spirits related. For me, an industrial guy is someone who is basically making a commodity. You can swap around industrial lagers and basically see no difference to them. They spend millions in marketing but it doesn’t necessarily mean a difference. Sometimes they don’t even have their own brewery, they contract brew all over. It’s not about the story. It’s not about what you offer behind it. And you have small guys who actually have kind of an industrial mindset — will produce something that’s not so interesting, they don’t put much soul into it, and much interest to it. On the other hand, a craft brewer is someone who focuses first and foremost on the quality of what they deliver — and I value that a lot. It’s a bit like an industry with a heart and a smile, I like to say, so you’ve got to be passionate about what you do. You’ve got to be very interested in the people — it’s a people business, we do something that’s basically as old as the world and has been gathering people around beer forever. And so, if you share that passion and that interest and you’re passionate about your product and you want to get the best thing out, then I think that it’s not really volume question. It’s about your interests and how you’re aligned. We take decisions that are sometimes not efficient on an industrial basis, but we won’t compromise on them because we just think it’s the right thing to do. And a big guy would not do that.

[00:39:11.21] Ben: And the rise in craft, as a general term — which encompasses beer, but also chocolate and all sorts of different items — this is really riding, I guess, two waves, right? One is the growth in disposable income. And the other one is the death of mass marketing. Would you say that’s fair to say? Because it’s harder to get people to buy an undifferentiated product at scale — on the one hand; on the other hand, as people get wealthier, they’re demanding better quality products, and they’re more interested in where these products come from, and how they’re sourced and if they’re sustainable, and so on. Do you think these are the two trends you’re riding with craft beer?

Arthur: Yeah, totally! Over the last maybe 50–60 years, there’s been such a rise in consumer choices, and people got a bit obsessed with choice. And then also the price was a big trigger, because all of a sudden it became accessible to the majority, to have access to a wide range of goods, which if you go back in the early 20th century was not at all like that. And then, at the end of the 20th century it was already a very different game with goods coming from all over the world, and products that were once never available, were available to the masses. I think that’s the first part of the equation. Now, the second part of the equation is that people got used to diversity, they start to also look a bit deeper than just, “Okay, what do I have available?” They start to look for the story behind, they start to associate with the brands, they want to support maybe more values that they like, and I think the rise of the Internet in the way that it increased the speed of information and then people got just much more information about things. So, it’s much harder to fool consumers today than what it was 30 years ago. So, you can’t just go around and say something that’s completely wrong or that’s completely not in line with your values and expect to take people for fools and think they will just take it. So, I think that this is a big change. Of course, there’s wealth involved, but also, it’s just that people are more sensitive to what they consume. They think more. And I think if you’re just doing a good job, and you’re being honest about it, and you show it and you’re caring and professional, then eventually you’ll find a market as well — as long as you do something that’s quality-driven and that you actually mean it, then there’s a market out there for you.

We target people who are conscious about what they want to drink, who like to taste, who like to feel, who like the branding, and who feel like they can have some tie with us one way or another. So, naturally, we tend to go a bit local. But, of course, this can resonate with people abroad, it can resonate in a lot of different places. — Arthur VIAUD

[00:41:30.01] Ben: How big could that market be? Is there a tension between this constant fragmentation, this constant search for better quality? And then, on the other hand, producing a really good product at scale? Because, some of these “craft brewers” like, BrewDog, for example — I mean, these guys have gotten really, really quite big and they’re distributing internationally. So, does it come to a point at which you grow so big that you almost look like a mass-market brand?

Arthur: I think it’s a fair question. It’s the big question of, “Is it better to be a big fish in a small pond or a small fish in a big pond?” And I think BrewDog, for example, has had a very aggressive growth. They’re fueling a lot of that. So, for those who don’t know, they’re a Scottish-based brewery, they brought a lot to the equation in terms of craft beer throughout Europe. They’ve been very disruptive. And they’ve been expanding internationally. This is a bit against the base idea of craft, which has some sort of local grounding to it. So, we’re not talking about historical beers and say you want a special beer from a Belgian Bay and you won’t find it anywhere else in the world, and that’s shipping all over the world. Craft beer is an industrial process and someone in Iceland can do an excellent beer, and someone in Vietnam could do an excellent beer, given that they have access to the raw materials that they of course have to source internationally, but they can produce and brew something really qualitative. So, I would say that the craft beer market tends to be a bit more local than the international beer market. And hence, some guys like BrewDog, have tried to associate a lot with local brewers when they go abroad, not to get too much of this image of an international global brand. Whether this is successful or not, it’s hard for me to say. But what’s for sure is that I think that our market, for example, is still very Swiss at the moment. Could evolve over time. But I think it’s hard to be a really global brand and have a really close relationship with the consumer. Or you can have a close relationship, but in a product that’s physical, I think there’s some limitation to that one way or another.

we go and have drinks in the same places that our consumers go have drinks and we just see people there, we know everyone from bartenders to waiters, to bar owners, restaurant owners, shop owners. And so, there’s a very special relationship — Arthur VIAUD

[00:43:39.18] Ben: But isn’t it about finding the right demographic for La Nebuleuse?

There’s a certain type of drinker and you identify with that drinker and maybe it’s about their lifestyle, maybe it’s about their age, and then you’ll find that same demographic in all the places where you have “hipsters”. So, do you know what I mean? Like, you have an audience in Lausanne, you have an audience in Geneva, you have an audience in Zurich, and then maybe the next natural audience is in Lyon, or it’s in Milan.

Arthur: I mean, it could be, of course. I think beer is an affordable luxury. Craft beer is an affordable luxury. It is a luxury because it comes at a premium and it comes at quite a premium if you look in percentage terms, but if you look in absolute terms, it’s actually quite cheap and affordable for most people. So, we do not see ourselves as a very exclusive good. We just target people who are conscious about what they want to drink, who like the taste, who like to feel, who like the branding, and who feel like they can have some tie with us one way or another. So, naturally, we tend to go a bit local. But, of course, this can resonate with people abroad, it can resonate in a lot of different places. But I think, then, in these places, it will tend to be a smaller size market than in our home market. It doesn’t mean that there’s no market, it just means that it will be a bit more niche. But again, a niche market in Shanghai might be as big as our local market here. But demographics are obviously very important. Because it is such a widespread good, because it is consumed by so many people, in terms of demographics, it might touch a lot of people anyways. But, of course, we have a core range of consumers who are much more likely to take the product than others, that’s for sure.

The only motto that we have, internally, is that we do not produce something that we don’t like ourselves. So, any single product that goes out is something that we would happily consume ourselves. And if not, it’s not making it. — Arthur VIAUD

[00:45:21.04] Ben: That just seems that’s the mistake of mass-market brands, which is, in order to appeal to every single demographic everywhere, they stand for nothing. Whereas I think you authentically stand for something and it would almost be better to target a small demographic across Europe than to try to get too deep in Switzerland.

Arthur: Well, I think that you can’t touch everything and you can’t touch everyone, that’s for sure. I think that we can also stand for something that can be seen as local pride because we think it’s how we want to be perceived, eventually, and it’s what we want to work towards. So we want to do things differently and we want to brew the best beers we can with an independent spirit and all of that. And I think you can reach the point where you’re seeing not just as an outstanding product but also as a symbol that can be seen and put forward. So in Lausanne already, in a lot of places, we’re seen as really THE beer of the place and there’s a sense of pride from people living there, just because they have a cool brand that’s the cool beer that’s being brewed very close by and it’s part of it. And of course, if they can see that brand elsewhere in Europe, they would also advocate it. So, it’s really, I think it’s two things. And at the same time, we also appeal to people who are very in line with the brand. So, as I said, our real core target group of people who will really fit with us, they will also be all over Europe, maybe, and they will associate with our products, our design, our spirit, all of that — and regardless of where they are, they might be a perfect match and if they can have their hands on our product, they will do that.

[00:46:58.13] Ben: Tell us, what’s so special about La Nebuleuse, in your opinion?

Arthur: I think we’ve seen the whole thing as not only brewing the best beer but as being part of something. So, we haven’t followed the typical, “Let’s try to make the best beer.” We talked about how are we going to activate with our customers, do events things like this? How are we going to do the best packaging we can? How can we be very, very active to support the local community? How can we interact with all the industries as well? So, we try to be part of an ecosystem instead of just being a player somewhere. And I think it makes quite a big difference between a lot of the players around. It’s us, the three founders being very, very involved and the team that grew around is very involved, and where it all takes place is Romandy, in general, and I would say mostly focused on Lac Leman in general. And there’s a story behind it and there’s the relationship we’ve got with the people and we go down to meet customers but not on the purpose of meeting customers. It’s just because we go have drinks in the same places that our consumers go have drinks and we just see people there, we know everyone from bartenders to waiters, to bar owners, restaurant owners, shop owners. And so, there’s a very special relationship in that perspective, which is very different from a lot of different brands.

[00:48:20.17] Ben: What is the best-selling beer that you have?

Arthur: Now, there’s a bit of a competition, but we have three brands that are really doing great. And that’s Stirling, Embuscade, and Zepp. Zepp, obviously, is taking a big hit because it’s a beer for bars and restaurants, and over the last two months plus it’s been closed pretty much. So, it took a hit but Stirling is getting stronger as well. Embuscade is still growing. So, I would say these three are really the three brands that are all the way at the top.

[00:48:54.02] Ben: You have an IPA, you have a Pilsner, you have a session IPA. So you have all these different types of beers. And is the idea to appeal to everybody’s different tastes? Or is the idea that you can not just take market share from traditional beers, but you can start to take market share from spirits and wine. What’s the idea behind having such a broad range of beers?

Arthur: Well, first of all, it would be very boring to have only one or two beers and that’s not in the spirit of what we do. I think it’s very hard to have a favorite among your children — you should not — so the thing is it’s part of our culture to have a range and to have diversity. And, of course, we try not to overlap too many styles together. We have a lager that can compete against bigger industrial breweries, but most of the time, it’s still priced at a premium. And so, it’s not necessarily really scavenging on the big guys market. And we’re not necessarily trying to scavenge on craft beer themselves. It’s just that the craft beer segment is growing. So by growing, we have more space for products. We try to have a portfolio of products that’s balanced that we like and we’ve built it with that in mind. Of course, we wanted a Pale Ale, we wanted an IPA, we added a Session because it’s something that was really missing in our range — we wanted something that was highly drinkable with lower alcohol. The only motto that we have, internally, is that we do not produce something that we don’t like ourselves. So, any single product that goes out is something that we would happily consume ourselves. And if not, it’s not making it.

[00:50:34.16] Ben: And I think you have very passionate customers, like me, right? Real brand advocates. What’s the plan to get your passionate customers and use that passion and channel it to make the product better, and I guess, more importantly, use that passion to help you to sell more?

Arthur: I think the best thing is to embark them on the journey one way or another. I think we are a great brewery, we’re going to pull back visits on the schedule, ideally from July going forward. We want to get as many people to come and visit, as possible. And you rarely speak about the beer that you had yesterday except if it was something truly outstanding, but you’re not going to pick up a discussion with that. But you might pick up a discussion on the visit that you’ve done and how great it was and how you discovered this and that about the process and all of this, and then you might get these other people to come and visit. You came, you tasted beer, you liked the place, you liked the atmosphere, you liked all that. The likeliness of you consuming more of that product next time you hit the bar or telling the bar manager, “Hey, why don’t you have this product in stock?” Or picking up that product the next time you go to the supermarket just shoots through the roof once you’ve seen that.

Arthur: And we’ve seen this with some of the bar managers, bartenders — after they came — because our place really sweats of passion. And so, once you really got into this and you saw it, it actually triggers something. You get more interested in the product, about the whole story behind. And it’s much cooler to speak about something that you’ve seen the back scene of it, then to talk about something that you don’t really know about. I think big brands have nothing to say. They have to spend millions to find a storyline that they can share with the consumers. And we have a lot to say. We just need to get the people in to see it. And after, I think, they will do the job themselves and they will advocate for what they like or they didn’t like. And if they don’t like, well, we’re actually small enough so that we take very seriously any comments that we have and we can actually act upon it quite fast or much faster than the big guys. So, that’s also a big differentiating point for us.

[00:52:53.22] Ben: Tell us about C’est ma tournée.

Arthur: Yes, sure. So, you know, of course, there is a multitude of campaigns that were launched by a lot of different actors throughout the pandemic and how to support your consumers, how to support clients, how to support the society as a whole, as well. We thought about a lot of different things. We thought about, of course, it was this huge talk about, should we do some hand disinfectant? But we realized, “Okay, we cannot. We can’t produce pharma-grade disinfectant. It’s not going to work. We’re a brewery, we’re not distilling and we can’t even bottle the product.” So, that was a no-go. But we really wanted to help with something because the whole company is not going to a dead stop. But it was very, very slow because more than 50% of our sales were in bars and restaurants. All of a sudden, you have zero sales with that. And we thought, “Well, we have to help these guys out, as well, because if they go down, we also go down. Oh, it’s terrible. We need to find something to do.”

Arthur: And we didn’t want to do something complicated because we know the guys, and they’re not very big into paperwork. So, we wanted to do something that’s quite easy that requires minimal effort from their side and that can bring what they need most — that is cash — just to survive. And we thought, “Well, we have a bit of a capacity because of course, it’s being unused. And we know how to make great beer because it’s our day-to-day job. And we don’t have a niche shop — because we didn’t then.” So we thought, “Well, what could we do that would be significant?” Well, that would be saying, well, we’re going to deliver ourselves the beers to a limited area — because we can’t deliver throughout Switzerland — and people can buy a pack of 24 and select which bar or restaurant they want to support. And the bar or restaurant needs to be in Lausanne or in Geneva — the two areas that we deliver — and if they don’t want to pick, they just say, “Okay, I split parts” and we give to all the different things. And we decided, “Well, we’ll give half of the sales” because it’s not very profitable, at all, for us, but that’s okay, we get the beer moving. And most importantly, we support bars and restaurants. So, for every franc that we get, we give back 50 cents.

Arthur: So, it’s that simple and people get to select which bar and restaurant they want to support. So, of course, people are stuck at home, they can’t do much so they might as well get a beer in the evening and they might as well help the bar that they used to go to, to have drinks because that bar will be in dire need at this point in time. And “C’est ma tournée” means “it’s my round” and what we thought is that very often when you go to a bar or a restaurant, the bar owner will give you a round at the end of an evening just to thank you for being there. And I thought, “Well, now it’s time for you, the consumer, to give a round to your bar or to your restaurant to help them out.” And you can do that by contributing no more than paying the normal price for your beers and we will go the extra mile and give 50% of that to the bar or restaurant of your choice. So, we made some posters that bars and restaurants could put on their windows and some banners they could put on their social media. So it was a very simple operation, at the end of the day. It was put in May, and it’s been running since then.

[00:56:18.26] Ben: The last question is, will you keep direct distribution to consumers post-pandemic?

Arthur: It was something we didn’t consider before. But we had surprisingly high traction on that — or I don’t know if it’s surprising, actually, but we had excellent traction on that. Now, the website is actually put up, so it is very possible that we keep this as a branch of business for us. Also, because some products that we sell are sometimes a bit more difficult to get out on standard channels because you might have distributors who don’t want to stock up small volumes. If you do some funky beers, then it’s always hard. You can find a lot of people who will be interested. We actually often have consumers who call us up at the brewery and say, “Well, I’ve seen that you’re releasing this beer and I can’t find it anywhere. How do I get it there?” And sometimes there’s only a few places that will actually pick it up, even though there’s demand because they can’t be bothered to buy just a few boxes, they can’t be bothered to change their menu, they can’t be bothered to make some space in the shelves. But still, there’s demand for it. So, I think for that simple reason, as well, it’s a very good channel that we’ve never really used. So, most likely we’ll keep it up and running, yeah.

[00:57:25.19] Ben: And can you ship internationally?

Arthur: It’s complicated today. We ship internationally on occasion for professionals. So, if we have some bars in France or in Belgium, or in Scandinavia, or in England, who want to buy the beer, sometimes some have just contacted the distributors, and it’s going through like that. So, it’s been, I would say, a non-systematic business, but it’s been happening ever since 2015. We’ve been selling beer internationally, but not to private consumers because it’s very difficult and you need to go through a guy, you need to go through a middleman. I don’t see how you’d do it without.

Ben: Perfect! Arthur, thank you so much for coming on the podcast!

Arthur: Thanks, man!

From Scalable Efficiency to Scalable Learning (#22)

From Scalable Efficiency to Scalable Learning,
w/ John HAGEL

We are speaking with John Hagel, who has been working with the most successful companies in Silicon Valley for 40 years (also a startup founder of his own). John is the author of several books — including The Power of Pull he co-chairs Deloitte Center for the Edge, which is a Silicon Valley research center. In this episode, John joins Ben Robinson for a very comprehensive discussion on the zoom in — zoom out approach to strategy; why the advertise-based business model is unsustainable and the alternative; how customers’ reluctance to accept mass-market products will drive the fragmentation of product and service-based businesses; why learning in the form of sharing existing knowledge is not where the greatest value is; why John is optimistic about the gig economy — and more.

Podcast also available on:

Apple PodcastsSpotifyGoogle PodcastsAnchor.fmSoundcloudStitcherPocket CastsTuneInOvercast

Resources:

  1. The Power of Pull — John Hagel, John Seely Brown, Lang Davison
  2. Zoom In / Zoom Out — Deloitte Center for the Edge
  3. Never underestimate the immune system — John Hagel

Full podcast transcript:

 

One of the things I’m intrigued by is the degree to which the big shift is producing a return to the past, and I think one of the interesting trends that I anticipate in the gig economy is moving to what I call ‘the guild economy’. — John Hagel

[00:01:40.27] Ben: So, John, thank you very much for coming on the podcast. I guess most listeners will know who Deloitte are, but probably there are quite a few people that aren’t quite so familiar with the Center for the Edge. So what is the Deloitte Center for the Edge?

John: Broadly, it’s a research center that’s chartered with identifying emerging business opportunities that should be on the CEOs’ agenda, but are not, and do the research to persuade them to put it on the agenda. So, we try to stay a step ahead of everybody else.

[00:02:14.11] Ben: Your work is guided, I think, in large part, through this idea of the big shift. How do you define that big shift?

John: We don’t have a single definition. We just view it as the way in which the global economy is transforming as a result of long-term trends that have been playing out for actually several decades.

[00:02:37.15] Ben: So, you mean technological trends like Cloud, mobile — those kinds of things?

John: Certainly digital technology is a key driver of the changes. I’d say the whole movement towards the freer movement of people and goods and information across boundaries on a global scale is another factor; the increasing power of customers is another factor. So, there are many forces that are coming together to shape the big shift.

[00:03:09.13] Ben: And this big shift, you would argue this is as big a shift as the move from an agrarian to an industrial economy? It’s that kind of magnitude of shift?

John: It is. I mean, I think that often we hear the phrase or some framing of, “We’re in industry 4.0”

Ben: Yes. It’s the World Economics Terminology, I think.

There are two very different time horizons: 10 to 20 years, and 6 to 12 months. When you think about the way most companies talk about strategy, it’s the five-year plan, right? It’s year one, year two, year three, year four, year five — that’s their strategy. [While Big Shift] companies spend almost no time on one to five years. It’s all about 10 to 20 years or six to 12 months. And their belief is that if they get those right, everything else will take care of itself. — John Hagel

John: Yeah. And our perspective is, no, we’re beyond the industrial era. And the way we frame it is around this notion of a contextual era where it’s all about context — reading context, responding to context quickly and effectively — and that’s a very different way of organizing and acting on business issues.

[00:03:55.08] Ben: That’s good! I think we should now start to delve into what that really means — the big shift in the contextual era. So, maybe let’s start by talking about the role of strategy within an organization. Because, I guess, in response to faster change, a company needs to introduce more agile decision-making and you’ve written a lot about this. So, I was wondering if we could maybe start with your concept of zooming in and zooming out and how that helps to frame strategic planning horizons.

One of our concerns is everybody today talks about agility and flexibility. And certainly, that’s valuable in some contexts. But if all you’re doing is sensing and responding to whatever is happening at the moment, being flexible and agile, you’re going to spread yourself way too thin across way too many things, because there’s so much going on. If you’re just responding and reacting to anything and everything, good luck! Zoom out — zoom in helps you to focus to get a sense of what really matters. — John Hagel

John: Yes. It’s a very different approach to strategy — zoom out, zoom in. I’ve been in Silicon Valley now for 40 years, and I’ve had the opportunity to work with some of the most successful tech companies in the Valley and they have a very different approach to strategy and it inspired the zoom out — zoom in. They don’t use that term, but it’s one that I’ve used to basically describe a very different approach to strategy, which focuses on two time horizons in parallel. On one time horizon, it’s 10 to 20 years — and that’s the zoom-out horizon. And on that horizon, the questions are, “What will our relevant market or industry look like 10 to 20 years from now?” And then, “What are the implications for the kind of company or business we need to be, to be successful in that market or industry 10 to 20 years from now?” So, that’s zoom out.

John: Zoom in is a very different time horizon. It’s six to 12 months. And on that horizon, the questions are, “What are the two or three initiatives — no more; two or three — that we could pursue in the next six to 12 months, that would have the greatest impact in accelerating our movement towards that longer-term opportunity we’ve identified? And do we have a critical mass of resource against those two or three initiatives in the next six to 12 months? And how would we measure success? What are the metrics we would use to assess our progress towards that longer-term destination?” So, there are two very different time horizons: 10 to 20 years, six to 12 months. When you think about the way most companies talk about strategy, it’s the five-year plan, right? It’s year one, year two, year three, year four, year five — that’s our strategy. These companies spend almost no time on one to five years. It’s all about 10 to 20 years or six to 12 months. And their belief is that if they get those right, everything else will take care of itself.

John: And so, it’s a very different way of thinking about strategy and we believe in rapidly-changing times it’s necessary, essentially, as challenging as it is, to look ahead. You need to do that. One of our concerns is everybody today talks about agility and flexibility. And certainly, that’s valuable in some contexts. But if all you’re doing is sensing and responding to whatever is happening at the moment, being flexible and agile, you’re going to spread yourself way too thin across way too many things, because there’s so much going on. If you’re just responding and reacting to anything and everything, good luck! Zoom out — zoom in helps you to focus to get a sense of what really matters. Where are we headed? What’s the destination that we’re trying to achieve? Then, how can we accelerate our movement there? It’s a very powerful way to focus effort rather than just respond to whatever is happening at the moment.

One of the zoom-in initiatives — six to 12-month initiatives — should be focused on what we call ‘scaling the edge’. It’s finding an edge to the existing business that has the potential to scale to the point where it will become that business that we anticipate 10 to 20 years from now. — John Hagel

[00:07:30.28] Ben: And presumably, when you’re working on these different time horizons, you’re using different strategic tools to try to figure out what the world looks like in 20 years; and also, I guess, separate tools to optimize what you do in the next six to 12 months. Is it fair to say that when you’re looking 10 or 20 years out, you’re using scenario planning, kind of pulling yourself out of your comfort zone, and trying to think without constraints about what the future might be?

John: Absolutely! Scenario planning is a critical tool and very useful in terms of looking ahead and imagining all the possibilities, alternative futures. I think that the difference here is that in most scenario-planning efforts, you imagine very different futures, you may ultimately just agree on which future has the greatest probability, and then you leave; the meeting is over. In this approach, the meeting is not over until we have committed to the future that we believe is most likely — and committed to short-term initiatives based on that future. So, where this has implications for us — and it very much changes the whole discussion because a lot of scenario-planning efforts are viewed as theoretical, conceptual exercises, but they don’t really make a difference to the business today. Zoom out — zoom in has a profound difference in what you do in the short term.

[00:08:57.02] Ben: How concrete an idea or a future do you have to come up with? Because one of the things you talk about a lot in your writing is this idea of narratives versus stories. And I think the difference you draw is that a narrative is open-ended. So, can a future state be a little bit nebulous and just kind of help frame where you’re headed, kind of like the Northstar, without having to be too concrete?

John: Yeah, it’s a balancing act, ultimately. It has to be sufficiently tangible that it can help you make choices in the short term, but broad enough so that there’s room to explore and discover as you go. One example I use, most of the companies that pursue this approach don’t talk about it publicly: there was one company where it’s been written about, so I can share, and it was actually Microsoft in the early days when it was just a startup, back in the 1970s. Bill Gates pursued a zoom out — zoom in approach and the zoom out he had for his company could be summarized in two sentences: one is, “Computing is moving from centralized mainframes to the desktop”; the second, “If you want to be a leader in the computer industry, you need to be a leader on the desktop.” So it wasn’t a detailed blueprint of what the computer industry would look like 10 to 20 years from now, but it was enough specificity so that you could make really hard choices in the short-term and accelerate your movement towards the desktop.

I think the immune system, the people in the immune system are very well-intentioned people. They’re not evil, by any means; they’re wanting what’s best for the company. Their view is what’s best is to continue doing what we’ve always done. So, this notion of scaling the edge is a way to not draw out the immune system. — John Hagel

[00:10:29.13] Ben: You just said something that I want to touch on, which is, you said, you’ve got to be able to make hard choices in the short term. In this kind of strategy work that I’ve done, I think that’s one of the hardest things to get people to do, right? So let’s assume that you can galvanize an organization around the long-term vision, then getting them to make difficult choices to actually divest of some activities is super difficult. What’s the right way to approach making those short-term choices?

John: It helps if it’s short-term and it’s not massive resource requirement. So, a lot of the resistance is, if you’re talking about five-year programs and billions of dollars, that’s going to encounter a lot of resistance. We have kind of a filter that we use on the zoom inside, which is that one of the zoom-in initiatives — six to 12-month initiatives — should be focused on what we call ‘scaling the edge’. It’s finding an edge to the existing business that has the potential to scale to the point where it will become that business that we anticipate 10 to 20 years from now. So, it’s finding an edge and starting to scale the edge in the next six to 12 months.

John: The second zoom-in initiative is, “What’s the one thing we could do that would have the greatest impact in strengthening the performance of the existing core of our business? Because ultimately, that’s where the money is today and we want to prolong it as much as possible.” And then, the third one, which is the most challenging in my experience, the third zoom-in initiative is, what one major set of activities could we shut down in the next six to 12 months so that we can free up resources for scaling the edge and for strengthening the core? And that’s looking for something that is marginally profitable, has no real potential for growth. Why are we doing this? Let’s shut it down, so that we can, in fact, devote more attention and resource to the things that matter.

[00:12:41.10] Ben: And how successful are you at getting companies to do that third aspect?

John: As I said, it is certainly challenging. I think that, in my experience, having a sense of what’s that edge that we could scale and the really big opportunity we could be moving towards, and then also that there’s an imperative to strengthen the core — we can’t just continue on as we are — I think that helps to build a sense of need for shutting down. I mean, if you just say, “Let’s shut down things that aren’t very good or very profitable”, that’s going to encounter a lot of resistance. But it’s the notion that there’s actually something much bigger and better that needs and deserves the resources that we’re currently devoting to something that’s not producing great results.

[00:13:30.24] Ben: One of the articles that you wrote that we have cited the most — in fact, I’m pleased we don’t have to pay royalties to you because we’ve cited it so many times — is the one around the immune system. I think you consistently say, “Never ever underestimate the immune system!” How does one scale the edge under the radar of the immune system?

in most of my career, I’ve been a business strategist — it’s been all about strategy: that’s what’s going to win, and if you get the right strategy, everything else will solve itself. Increasingly, I’ve come to believe that it’s much more about psychology than strategy. We need to understand the emotions that are shaping and driving our actions. — John Hagel

John: It’s a great question and certainly a major focus of our work is the notion of how do you avoid mobilizing, exciting the immune system. And a general counsel to companies around the drive to change, first of all, it’s scaling the edge versus trying to transform the core because even if you see the need to do everything fundamentally differently, if you go in from the top-down into the core, and define this massive change program that’s going to take many years and a lot of money, that guarantees that the immune system is going to come out full force against you. They want to hold on to what they have, they don’t want to take risks. And by the way, I think the immune system, the people in the immune system are very well-intentioned people. They’re not evil, by any means; they’re wanting what’s best for the company. Their view is what’s best is to continue doing what we’ve always done. So, this notion of scaling the edge is a way to not draw out the immune system. If you start with a small part of the business that today is relatively modest, doesn’t get a lot of attention and you focus on short-term action and impact, that helps to build more credibility for what you’re trying to achieve and over time, in our experience, it undermines the immune system because the immune system, a lot of it is about being risk-averse. But if you can show real impact in a short period of time, it starts to overcome that risk averseness and people start to ask, “Well, wow! That’s interesting! How can I be part of that?” So it’s a way to avoid direct confrontation with the immune system.

[00:15:41.16] Ben: You have an expression — in fact, it’s the subtitle of your book, The Power of the Pull — where you say, ‘it’s all about small moves smartly made’. I suppose that begs the question, if you’re making small moves, are we not in danger of incrementalizing ourselves to death, if we’re not careful?

John: That’s one of the biggest risks these days. The focus is on the term ‘smartly made’. I mean, yes, it is small moves, but it’s with a clear sense of direction and focus on what really matters, and being very aggressive in those small moves. It’s how quickly and how much can we achieve in a short period of time? The emphasis is on ‘smartly made’ and the way to avoid incrementalism, again, is to have a very clear sense of what’s the destination, and how would we measure our progress towards that destination? What are the metrics so we’re very clear what really matters here, and then focus on how quickly are we actually making progress on those metrics?

I think the fear is definitely dominating, in my view, the reaction to the pandemic versus viewing this as a catalyst for change — John Hagel

[00:16:50.03] Ben: And I suppose those small moves might actually be quite large moves but they’re small in the sense that they involve a limited number of people so they don’t consume too many resources or invoke the immune system, the antibodies of the immune system.

John: Yeah, it’s all relative, obviously. If you’re a large company, a small move can still be a fairly large initiative, but it’s lost in the rounding for the overall company because it’s not that big and doesn’t draw that much attention. So, I think that’s the focus is really not trying to excite that immune system.

[00:17:31.02] Ben: And it seems like, listening to you, there are two parts to not exciting the immune system. One part is doing something which is relatively small so it doesn’t consume too many resources or bump into too many people or too many budgets. But the other part is around fear, right? Because, as you said, it’s perfectly rational — at least it’s rational in the context of what we’ve been taught in the business school, etc. — to not cannibalize revenue streams, and to pursue things that can double-down on things that work. So, I suppose, is countering fear also done through narratives?

John: First of all, I think your point about fear is absolutely spot on. I say now that in most of my career, I’ve been a business strategist — it’s been all about strategy: that’s what’s going to win, and if you get the right strategy, everything else will solve itself. Increasingly, I’ve come to believe that it’s much more about psychology than strategy. We need to understand the emotions that are shaping and driving our actions. And in the business world, again, the culture we have today is emotions are a distraction; focus on the numbers and do the analysis and everything else will solve itself. But I think in that context, this notion of narrative has become a key piece to our approach, which is… And again, I’m sorry if I go on a bit, but I make a big distinction between stories and narratives. Most people use the terms to mean the same thing. For me, a story is self-contained: it has a beginning, a middle and an end to it. It’s over the end. And the story is about me, the storyteller, or it’s about some other people. It’s not about you in the audience. You can use your imagination, figure out what you would have done, but it’s not about you. In contrast, for me, a narrative is open-ended — there is no resolution yet; there’s some kind of big threat or opportunity out in the future, not clear whether it’s going to be achieved or not, to be resolved, and the resolution hinges on you. It’s a call to action to the people who are hearing the narrative to say, “Your choices, your actions are going to help resolve this narrative. What’s it going to be?” And I think, in that context, if I focus on opportunity-based narratives, that helps to inspire people and excite them, and helps them to overcome their fear and act in spite of their fear.

John: One of the reasons we’re such strong proponents of the zoom out — zoom in approach is because if you think about it, at one level, it’s not framed this way in the strategy domain but you can think about the zoom out as framing that opportunity out in the future. What’s that really big opportunity that we could focus on and become over time? And then, it focuses people on short-term action and impact, which helps to inspire people — there’s a really big opportunity out there — but also overcome the skepticism that many are going to have who are afraid to say, “Well, wait a minute! That’s just fantasy. That’s never going to happen.” “No, we’re actually having an impact today, we’re making progress towards that opportunity. Come join us.” So I think it can be a powerful way to address and overcome the fear.

[00:21:11.24] Ben: The companies you’re working with at the moment, how good a job are they doing? Or how tough is it to translate this pandemic, into an opportunity and not into something to be fearful of?

It’s early days, still, but my counsel to companies is, find alternative approaches to advertising-based business models, if you really want to build trust and deeper relationships with your customers. — John Hagel

John: It’s hard to generalize, but, at least, in my experience with the companies that I’m dealing with, it’s still very much driven by fear and short-term focus, understandable at one level — I mean, many companies are struggling to make payroll for the month and continue to exist. And so, that definitely holds people back to a very short-term time horizon and just focusing on survival versus how can we learn from this? What are the things we could change that would help us to become even more effective and successful in the future?” So, I think the fear is definitely dominating, in my experience, the reaction to the pandemic versus viewing this as a catalyst for change.

[00:22:15.17] Ben: I want to slightly shift gears if that’s okay. So far we’ve talked about evolving strategy in response to the big shift. Now, let’s just focus a bit on how business models need to change in response to the big shift. I think you’ve written a lot, and I think you’re one of the earliest people to flag this, which is, in a lot of the platform business models we see today there’s this kind of inherent conflict between the consumer and the producer because in the middle you’ve inserted an advertisement, right? So, I think you’re one of the first people that I can quote, who was starting to question the sustainability of these “free models” that depend on that advertising revenue because they introduce that conflict of interest. But, I suppose, we haven’t yet seen. I mean, I think for a long time we’ve anticipated that maybe Facebook was about to move into negative network effects, but it hasn’t really happened. Do you still subscribe to the view that these advertising-based business models are inherently unsustainable? And when do you think we, as consumers, wake up to this? And when do you think these business models start to perform worse or not as well as they have done?

John: Yeah, there are a lot of challenges with the advertising-based business models. I think, certainly, one of them — and it was the whole focus of the book ‘The Power of Pole’ — was advertising intrinsically is a push-based model. It’s all about how to intercept people, get your message, push your message to them, push to get attention. Our belief is that model is increasingly challenged. The number of options that are trying to push to get our attention is significantly increasing and we, as customers, are becoming overwhelmed with all the attempts to reach us. So, I think that’s one piece to the puzzle. The other piece is that it goes to the notion of trust and perception of what interests are you serving when I interact with you? Is it my interest? Or is it somebody else’s? And, intrinsically, in an advertising-based business model it’s the advertiser paying the bill so the attention and focus are going to be on their needs and what do you need to serve them? It’s an interesting question.

John: I do see early signals. Again, I don’t think it’s a massive movement, yet. But, if you look at, for example, the adoption of advertising blocking software on the Internet, it’s skyrocketing. It’s significantly expanding. More and more people are using that to block the ads that are coming in. I think there’s also, again, early signals, but a lot of people who are active users of some of the social media platforms are pulling back and now saying, “Wait a minute! Do I really want to share this? Can I trust that it’s going to be used for my benefit versus somebody else’s?” And then, the other thing is the growing call — and again, I think it’s early days, but it’s enough evidence out there — that the mobilization of people for the regulation of online businesses and around data capture and around advertising and all the rest suggests that people are less and less open to having that model and having their data being used for that purpose. It’s early days, still, but my counsel to companies is, find alternative approaches to advertising-based business models, if you really want to build trust and deeper relationships with your customers.

[00:26:15.14] Ben: What you paint is this alternative or a better model is a model where you have alignment, right? So, I’m helping you to make better decisions to find products or services that are better suited to your needs. And so, it’s a model where I very clearly give you the consent to use my data in exchange for you doing something that will benefit me. So there’s total alignment, there’s trust, and also, an expression that you use, “In our attention-stuffed age, it’s about helping us to get a higher return on the attention that we afford to your platform.” So I can definitely see how that’s the next model to triumph. And I listened to everything you say about regulation and people turning on ad blockers, but we haven’t yet seen, as far as I’m aware, anybody who’s really profiting from this new idea of a trusted advisor or an intermediary. Have you seen examples in the marketplace that are really starting to work?

John: Not in any massive way. I mean, I think there are, again, early signals. I’m frankly, frustrated. I’ve been talking about these opportunities for quite a while. The challenge is it requires a massive cultural shift for a company to really address this opportunity. And the focus is, again, much more on the scalable efficiency and just doing things faster and cheaper and more incrementally. So, I think some of the early indicators — again, not perfect — there are companies in Asia that are being much more effective at mobilizing large networks of third parties to provide value to their customers, positioning themselves essentially as a trusted advisor. It’s more in the business to business space in those situations — things like the motorcycle industry, the clothing industry. So, there are some examples at that level.

the evidence is that customers are becoming more and more demanding and less and less willing to accept something that’s standardized, mass-market product or a bundle of things, some of which are good and others that are not that good. We want the best in whatever product or service category we have a need for and we want something that’s the best in the sense of addressing our individual needs, not just the mass market or even a large segment, but our specific needs — what would be the best product or service? In that context, we believe that that is a force that’s going to drive fragmentation of product and service businesses. — John Hagel

John: I think, one that’s intriguing to me, although, again, relatively early stage — not in terms of time, but in terms of real development — is what Johnson & Johnson has done with Baby Center website: they invite parents with small children, babies who are experiencing a very challenging life event and offering them a space to connect with each other and get help from each other, learn from each other about how to be more effective as a parent with small children. And so, I think it’s this notion of, again, being proactive in connecting the customers with people who can help them. And, at least in the US, that’s become a go-to place for millions of people. Parents with small babies are going there because the word is spread. And it’s the power of pull in that case because they’re not doing advertising for this website. The word is spreading — a parent with a baby has a friend who just had a baby and says, “You need to go to this website. It’s really helpful.” And so, it’s word of mouth and this draw because it’s so helpful to the person.

[00:29:43.27] Ben: Yeah, with that Johnson & Johnson example, I think you’ve more or less answered the question I was going to ask you, which is a kind of a paradox — and I know you like paradoxes — this idea that you could imagine I have your trust and in exchange for you sharing your data, I’m giving you useful information back. But without engagement, people won’t return enough to the site and won’t show enough data to make that site truly useful. But I think you’ve kind of answered it, which is, it has to be both, right? You have to achieve trust and engagement at the same time, otherwise, you won’t have a big-enough factor, and enough data to be able to be really useful to people’s lives. And I guess also, the social aspect helps with what you term as ‘scalable learning’ — which is, it’s only through many-to-many interactions that you can learn fast enough to really materially improve the learning curve, materially move up the learning curve.

John: It’s definitely complicated. I don’t suggest this is easy, at all, but another example that I use — and again, this is from quite a while ago, in the mid to late 1990s — a company here in Silicon Valley, Cisco, making networking equipment, created an online website called ‘Cisco Connection Online’. And what they were doing was they were inviting prospects — people who were interested in their equipment — to go to this website. And what they would do on the website is they would start by asking two or three questions — just “Tell me something about yourself.” And then, based on those questions, they would immediately provide tangible advice and value back to that prospect, to say, “Okay, based on that, here are the kinds of things you should be thinking about and why those could be valuable to you.” But then, they would ask another set of questions. And it was this notion of rapid staging to build trust, that you’re not presenting them with a five-page questionnaire or survey. It’s two or three questions; they’re providing real tangible value back to them, and then, based on that, asking for more information. And the experience was customers were more and more willing to share more detailed information about themselves because they were getting real value back in return.

John: And another piece to the Cisco platform, which was, I think, an important part is, based on the answers to the questions, Cisco would start to connect you with experts based on your needs. So, they might come back and say, “Well, based on your answers, you haven’t really clearly defined your need yet. You could benefit from having a consultant work with you to really frame the needs that you have. Here’s a consultant that you might consider.” And they make an introduction and connect the customer with a third party. Cisco had 40,000 specialists or experts within their network that they could connect customers with. So again, word spread among people who were interested in networking equipment that if you go to that Cisco site, it’s really helpful. It can help you figure out what you really need. And then, once you figure out what you need, another key piece to this platform was, once you bought the networking equipment you had needs like staging the site, the location for the networking equipment. So, Cisco would connect you with a specialist who could prepare the facility for the equipment, training people — people who could come in and help train your employees to get more value. So after the purchase, it was continuing that focus on how to help the customer get more and more value from the products that they had purchased.

while we see fragmentation in the product and service businesses, we also see concentration in a set of other businesses, starting with things like running data center operations, logistics — businesses where there are significant economies of scale, and network effects that can really drive scale over time. And, in fact, part of the reason we see fragmentation in the product businesses is because you have those concentrated resources you can tap into. — John Hagel

[00:33:40.01] Ben: I wanted to ask you about the fragmentation that is bundling. You envision a future state where we see massive fragmentation because if we move to a state where platforms are really connecting us with the optimal service of each individual, then we have much more self-heterogeneous suppliers. We actually move to a longtail-type concept where you could optimize just for a very small demographic of people in each case. Do you really think that that is going to be the end state? Or do you think you’ll always be able to bundle an inferior product with a great product, if you can bundle the pricing?

John: Yeah, again, this goes back to our view of the big shift, and the evidence is that customers are becoming more and more demanding and less and less willing to accept something that’s standardized, mass-market product or a bundle of things, some of which are good and others that are not that good. We want the best in whatever product or service category we have a need for and we want something that’s the best in the sense of addressing our individual needs, not just the mass market or even a large segment, but our specific needs — what would be the best product or service? In that context, we believe that that is a force that’s going to drive fragmentation of product and service businesses.

John: We’re starting to see it. I mean, the early-stage trend for this was actually in the digital space, where things like music, videos, software have seen exploding fragmentation, more and more options that are available for very specific customer interests or needs. And it’s starting to spread into the physical product space. My favorite example because I’m a chocoholic, is craft chocolate. Ten years ago, 20 years ago, there were three or four global brands of chocolate; that was what you had, and that’s all you could get. Increasingly, we’re saying, “No, that’s not enough. We want chocolate that’s tailored to our very specific tastes and interests”, and there are more and more craft companies — small, profitable companies. I mean, again, part of our view around fragmentation is, while these companies will be small, they will be quite profitable. It’s just that they’re not going to grow into massive, multinational companies in the way that the traditional mass-market companies did.

John: But also, I will say, too, that while we see fragmentation in the product and service businesses, we also see concentration in a set of other businesses, starting with things like running data center operations, logistics — businesses where there are significant economies of scale, and network effects that can really drive scale over time. And, in fact, part of the reason we see fragmentation in the product businesses is because you have those concentrated resources you can tap into. I don’t need a data center if I’m a small product company — I can just rent space in the data center. I don’t need to have my own trucking and logistics operations — I can contract that out. So, I can access the scale assets and resources that I need for my business without doing it myself. That allows me to stay small and profitable.

John: And then, on the other side, I think the big opportunity — which we briefly touched on, but I think is more speculative, but ultimately more interesting — is this notion of a trusted advisor. As you’re confronted with more and more choices as a customer, as you see the fragmentation of products and services and the rapid evolution of products and services, having somebody you trust, who can really help you connect to the products and services that are most relevant to you, is going to really be hugely valuable. And our view is, the trusted advisor has what we call economies of scope, in that the more I know about you as a customer, the more helpful I can be to you as a trusted advisor, versus if I just see a small slice of who you are. And the more other customers I am serving, the more helpful I can be to each individual customer because now I can say, “Well, customers like you have gotten huge value from this product or service you’ve never even asked for it.” By the way, a key role for the trusted advisor, in our view, is not just waiting for a customer to ask for something — it’s being actively challenging to the customer to say, “No, you asked for this. You really should be looking for this and here’s why.” Or “You haven’t asked for anything but here’s something that could be really valuable.” So, it’s challenging to get more value for the customer.

One of the key challenges in our view is most institutions today are run by a scalable efficiency model, versus a scalable learning model. In the scalable efficiency model, the one message that every employee hears is ‘failure is not an option’. You will deliver as predicted, as expected, reliably, and efficiently. But what’s required for learning, especially learning in the form of creating new knowledge? Failure! If you’re not failing, you’re not learning fast enough. — John Hagel

[00:38:51.12] Ben: I 100% agree with that. The way you depicted the future economic state where you have a small number of players that have a very large supply side economies of scale, and you have a few number of players who have a very large demand side economies of scale. And in the middle, you have this proliferation of producers, right? So, you can borrow the scale from those people that have supply side economies of scale so that you can produce at much lower unit costs and then you distribute through those people who command attention. I think I would totally agree with that end state. I think what we haven’t seen yet is a shift in who aggregates demand. Because I think what we’re seeing is — and I totally agree with you — it just hasn’t happened yet — which is the precondition, ‘to aggregate my demand is you have to have my trust.’ And I think at the moment, the precondition is ‘you’ve got to have engagement and then we’ll pay you 40% of our revenues so we can get access to your customer’. I think that’s the bit that will change, but just I’m not sure how quickly.

John: Yeah, it’s early stage. But again, if you look at the fundamental forces reshaping the economy, our view is that that’s going to unfold over time because there’s a growing unmet need for that kind of service. We’ll see how it plays out.

[00:40:06.14] Ben: I want to talk to you next about lifetime learning. So, clearly in the big shift — which is in many ways an acceleration of economic activity and an acceleration of change — the knowledge that we accumulate will depreciate faster, necessarily. And I think, as you said, it’s sort of almost Canute-like to just try to read more books and go to more courses. And so, what you’re saying is we have to put in place something that will achieve scalable learning. How do we do that?

John: I think most people, when they hear ‘learning’, especially executives, will say, “Well, yeah, we have training programs, we do learning.” Actually, in a world that’s rapidly changing, learning in the form of sharing existing knowledge, while it’s still helpful, is not where the greatest value is. It’s learning in the form of creating new knowledge and doing that through action in the workplace as you’re confronting new situations that have never been confronted before, and connecting with others so that you can learn faster — when you confront those situations, who can I connect with that is going to help me figure this out and come up with an approach that really would create value in this context? It’s got huge implications for how we do business. I mean, one of the key challenges in our view is most institutions today are run by a scalable efficiency model, versus a scalable learning model. In the scalable efficiency model, the one message that every employee hears — if not daily, it’s certainly very frequently — is ‘failure is not an option’. You will deliver as predicted, as expected, reliably, and efficiently. Well, okay, I got that message. What’s required for learning, especially learning in the form of creating new knowledge? Failure! If you’re not failing, you’re not learning fast enough. You’ve got to learn from the failures and figure out what the right approaches are. But again, there is that fundamental conflict between those two messages. And that’s why many companies try to just isolate the learning and innovation labs or incubation centers somewhere off on the side and focus everybody else just on staying true to the manual. So, I think that it is a massive cultural shift.

the people who are just doing work because they want to get a secure income or paycheck are the ones who are going to struggle with lifelong learning. — John Hagel

[00:42:34.01] Ben: John, what about as an individual? Because I suppose we have knowledge stocks that are also depreciating very fast. How do we learn faster?

John: I think it’s an interesting question! We increasingly are hearing in the world the need for lifelong learning because the world is changing so much, but nobody talks about why. What’s the motivation? I mean, why would somebody engage in this? It requires a huge amount of effort, it takes you out of your comfort zone. The unstated assumption, I think, is that most people do it out of fear. If you don’t pursue lifelong learning, you’re going to lose your job, you’re going to be out of work. And so, get to it. My belief is while fear can be a motivator to learn at some level, it’s not a very powerful motivator. The most powerful motivator is passion. And we have a very specific form of passion that we focused on in our research. We call it ‘the passion of the explorer’. Our belief is that people who cultivate this passion find out what they’re really passionate about and then find a way to pursue it as a profession, as a way to make a living. Those are the people who are going to learn the fastest because they’re excited by, driven by the need and opportunity to learn. They’re not doing it out of fear — they’re doing it because they’re excited about it and they’re constantly seeking it. So, our sense is that the people who are just doing work because they want to get a secure income or paycheck are the ones who are going to struggle with lifelong learning. The ones that are going to be most successful are those who are working out of passion.

[00:44:16.14] Ben: So early on, we talked about the whole move to craft, right? And you talked about chocolate and if you’d asked me to give an example, I would have talked about craft beer. But I suppose in a way, that’s a manifestation of people actually moving to do things that they’re passionate about. There’s this whole return to craft and therefore, becoming artisans and doing something they’re passionate about allows them to create this motivation for them to continue to learn.

John: Absolutely! I think a key driver of fragmentation in the economy overall is this quest for passion and many people are passionate about very creative kinds of activities and developing products that are tailored to very specific needs. But I think you can be passionate about virtually any activity. It just depends on looking inside, what really excites you, and then continuing to search for that, until you find it — and then finding a way to make a living from it. You’ll be quite successful in a world that requires lifelong learning.

Our view is that, as we move to the scalable learning model, there’s still value in connecting with people outside the organization but it’s with the objective of learning together so that we can actually rapidly improve our performance in whatever the work area is. And in that context, the notion is that the independent contractors are increasingly going to want to connect with each other because they’ll learn faster as a small group — John Hagel

[00:45:22.24] Ben: How does scaling the edge tally with, or how is it compatible with the organization, at large, learning faster? Because it’s almost something that you said earlier on, implied that you think some of these things like innovation centers and so on are a bit of a sideshow. They’re never going to achieve the large scale, systematic changes that are necessary for an organization to really learn at a much greater scale.

John: Again, it’s a challenge. I sense it’s unlikely that you’re going to get the entire core of your business to fully embrace all aspects of scalable learning because that does require massive transformation. On the other side, again, I go back to this notion of strengthening the core. We have a framework that we call ‘metrics that matter’ that can help you target elements in the core where you could start to drive some of these scalable learning principles and approaches. And the example I give for metrics that matter, is, start with the financial metrics of the company as a whole. And just as an example, revenue growth is a big challenge. Okay, let’s drill down one more level to operating metrics. What’s holding us back from revenue growth? And in this illustration, it could be, “Well, we’ve got a high rate of customer churn — customers are leaving at a rapid rate so we can’t grow revenue.” Okay. Drill down one more level to say, where in the front line is there a metric that could really make a difference in customer churn?” And in this illustration, again, it could be Call Center Operations, it could be, “Well, customers are calling us and they’re getting frustrated they’re not getting answers to their question.” Okay, now we have a very specific part of the company in the core, where there’s a big need, and it could influence the performance of the whole company. Let’s focus, again, with small moves targeted to this particular area, and say, “How could we help the customer call center operators learn at a more rapid rate in terms of addressing unmet customer needs?” The intent is to show real impact quickly and to build more credibility and support for doing this in other parts of the organization versus just customer call centers.

In a network, if you design the network and the relationships in the network so it’s not just transactions — buy low, sell high — but we’re all committed to learning faster and accelerating our performance improvement, that’s powerful as a motivation to participate in the supply network — John Hagel

[00:47:48.04] Ben: On the gig economy, again, you’re starting to craft a different narrative from the one we tend to read about every day, which is, most of the stuff you read about the gig economy is, it’s a race to the bottom, right? By not allowing people to act collectively and by putting them on different types of contracts, we just get people to work harder for less money. That’s one narrative. And I think you’re starting to reframe the narrative by saying, “That might be true today, but we’re going to see a different type of gig economy job, in time.” And then, the second thing is, we’ll start to see gig economy workers form collectives, right? Not collectives in the sense of trade unions or anything, but they’ll start to form groups where they can collaborate together in order to learn faster and achieve better quality at scale. And so, can we break that down? Can we start with why you think the gig economy will move upstream in terms of requiring different types of skills and, I suppose, creating jobs that are better paid?

John: Yeah, I think, again, it has to do with this broader focus on the big shift. In the scalable efficiency world — which is the world we’re largely in still today — the gig economy emerged largely as a result of a drive towards more efficiency: if we can take fixed labor cost and transform it into a variable labor cost, and potentially access the labor in lower-wage regions or countries, we’ll become more efficient. And that’s the gig economy. Our view is that, as we move to the scalable learning model, there’s still value in connecting with people outside the organization but it’s with the objective of learning together so that we can actually rapidly improve our performance in whatever the work area is. And in that context, the notion is that the independent contractors are increasingly going to want to connect with each other because they’ll learn faster as a small group than they will, just sitting in the isolation of their home or wherever they are. But connecting and now offering their services as a small group — five people maybe — they will learn faster, they’ll help their customers to learn faster in terms of whatever their needs are. And one of the things I’m intrigued by is the degree to which the big shift is producing a return to the past and I think one of the interesting trends that I anticipate in the gig economy is moving to what I call the guild economy, where, as you said, people with similar areas of interests are going to come together in guilds. And again, it’s not with the desire to just hold on to what they have, it’s to connect so that they can learn faster together and help each other learn faster. And that’s a very different kind of mindset or model.

In the big shift world, the winners are going to be those who learn faster. The ones who are going to learn faster are those who are more networked and connected with a broader range of more diverse expertise and resources. And so, if you’re just narrowing your connections, we believe you’re going to be increasingly disadvantaged relative to those who continue to expand their connections and harness the power of networking on a global scale. — John Hagel

[00:50:53.26] Ben: I think you’re right, and I think another reason why that might happen is because, at the moment, a lot of this gig economy is mediated based on ratings, right? So I won’t take an Uber driver, theoretically, if they’ve got a 4.2 rating versus a 4.8 rating, or whatever, or I won’t use a tradesperson if they’ve got a low rating. But if we think the gig economy is going to step up and do more and more complex work, then it’s going to be harder and harder to mediate that work just based on ratings because there’ll be much more complex deliverables, which will consist of many people contributing to that deliverable. And, at that point, I think is when it makes sense to create guilds or some sort of collective bodies because simply having a four-star rating is not going to be enough if I want you to build my home and plummet — whatever the example might be. I just think the deliverables become more complex, so it lends itself to some sort of intermediation. What do you think will happen to globalization in light of this pandemic? Because, I think one of the things that we realized was that our supply chains were much more fragile than we thought. So, do you think that will, to some extent, put the brakes on physical trade? Do you think we’ll end up reshoring a lot of manufacturing?

John: Clearly, at one level, there’s this desire to have things closer to me so that I can rely on them more. But, on another level, if you’re just taking the supply-chain mentality, and again, it’s a longer conversation, but broadly, the scalable efficiency model says, “You want a supply chain with as few participants as possible and tightly integrate and tightly specify every activity that’s done in that supply chain.” That makes for a very brittle and fragile supply chain in times of extreme events like the pandemic. And just bringing all those activities onshore, closer to where you are, is not going to solve the problem; it’s still going to be very brittle and fragile. Our belief is the real need is to expand our horizons from supply chains to what we call supply networks where you are working to orchestrate a very large number of participants and pulling them in, as needed — as specific situations arise — versus “No, I’ve just got this one supplier who depends on this other supplier that depends on that supplier.” No, it’s increasing the range of participants so you have more flexibility. And by the way, so that you can learn faster. In a network, if you design the network and the relationships in the network so it’s not just transactions — buy low, sell high — but we’re all committed to learning faster and accelerating our performance improvement, that’s powerful as a motivation to participate in the supply network.

[00:53:57.20] Ben: It’s almost self-evident, but just, as more and more activities move online, they become intrinsically more networked. And so, would you argue that what we’ve been seeing over the last few decades is supply is becoming more networked and therefore, what we might be seeing now is an immediate reaction where we’re trying to, again, put up barriers, but effectively, the secular trend towards more networks and more ecosystems will trump the immediate backlash to erect borders and become more nationalistic?

John: In the big shift world, the winners are going to be those who learn faster. The ones who are going to learn faster are those who are more networked and connected with a broader range of more diverse expertise and resources. And so, if you’re just narrowing your connections, we believe you’re going to be increasingly disadvantaged relative to those who continue to expand their connections and harness the power of networking on a global scale. So, in the short term, yes, because of fear, we may see borders come up and barriers to movement come up. But over time, our view is the countries and the areas that maintain openness and connection are going to be the ones that thrive. And over time, those who are putting up these barriers are going to realize that they’re being disadvantaged and start to reconnect again.

[00:55:30.08] Ben: I know that every one of your blogs finishes with ‘the bottom line’. So I wonder if I could end this podcast with the bottom line, which is a summary of what the big shift means — if we can summarize it. And then, the last thing is, reasons to be optimistic about how we overcome the fear and inject the optimism to make it happen.

John: Well, I’ll end with a paradox — it’s what I call ‘the paradox of the big shift.’ If you think about the big shift, at one level, it is creating exponentially expanding opportunity. We can produce much more value with far less resource, far more quickly than would have been imaginable a couple of decades ago. Huge opportunity! At the same time, the paradox is the big shift is also creating mounting performance pressure on all of us. As individuals and as institutions, we’re experiencing more and more pressure. It takes many forms: intensifying competition, accelerating pace of change, extreme events that come in out of nowhere and disrupt our best-laid plans — witness the pandemic. So, you’ve got the interesting thing that the big shift is, at one level, creating exponentially expanding opportunity; on the other side, mounting performance pressure. And the challenge and imperative, I believe, is how do we move from that mounting performance pressure to exponentially expanding opportunity?

John: And the overlay here is that mounting performance pressure induces fear, it creates an emotion of fear. I think it’s notable around the world the extent to which fear is becoming the dominant emotion. But, in that context, I think the way to move forward and move from that pressure to opportunity is around framing what I was describing as opportunity-based narratives that can really focus people and inspire people on the really big opportunity and help people to come together. I think, again, one of the key roles of narratives, the way I define them, is to bring people together saying we all need to address this opportunity. You can’t just do this individually. And that’s, to me, what gives me the optimism, is that framing that kind of opportunity-based narrative can help overcome the fear and help mobilize us to address that exponential opportunity. But it requires articulating that opportunity-based narrative.

Ben: John, thank you so much for coming on the podcast!

John: I appreciate the opportunity. Thank you! We’ve covered a lot of ground!

Future of Work: From GRAFT to CRAFT (#11)

From Graft to Craft with Laetitia Vitaud

Future of Work: From GRAFT to CRAFT,
w/ Laetitia VITAUD

This podcast is part of our Future of Work series, brought to you in collaboration with TrezeoBen Robinson is joined into the conversation by Laetitia Vitaud — renowned author and researcher on the topic — and we explore the role of platforms, individuals, policymakers and startups in enabling a future of work that works for everyone. We also discuss the changing nature of the firm in a world where inside/outside boundaries get blurred by the rise of freelancing and self-employment.

  1. Du Labeur à l’Ouvrage, by Laetitia Vitaud
  2. The 100-Year Life, by Lynda Gratton
  3. Reinventing Organizations, by Frederic Laloux

Full podcast transcript:

 

Ben Robinson (BR): Welcome to the Aperture Podcast. This episode is part of our series on the Future of Work, which is brought to you in collaboration with Trezeo, a financial services platform for self-employed workers. And for this episode we are with Laetitia Vitaud, who is a renowned speaker and writer on the Future of Work. She’s also Editor in Chief of Welcome to the Jungle, which is a platform for recruiters. Laetitia is here in Geneva… she’s in town because she’s promoting her new book, which is called Du Labeur à l’ouvrage. And it deals with the shift in employment from paid full time work to a world which is made up much more of craftsmanship and freelancing.

I think the place to start with this book, Laetitia is very much the product of your own personal journey. So could you maybe just tell us how you arrived at this point and what motivated you to write this book?

Laetitia Vitaud (LV): Thank you for inviting me first. Yes I started writing about work because I was unhappy at work. The reason why I picked this subject was that I realized that it was a large enough subject for me to be able to write about history, sociology, economics, psychology and all the other subjects that I’m interested in because it deals with all these things. So intellectually speaking, it’s just the perfect subject. And the second reason was that, on a personal level, I hadn’t solved the question of how can you be happy at work? How can you find a place that fits, that makes sense to you and possibly others too? So how do you find meaning and revenues at the same time?

I used to work for a company, a computer services company, and I was extremely miserable and it was really not only labour, but complete alienation. And I changed jobs the first time and became a teacher and I was a teacher for eight years and… liked my job but then found another form of alienation, which was its repetitiveness and dealing with the idea of doing the same thing over and over and over again with all those yearly rituals, beginning of the school year, end of the school year, the exams, and these very repetitive rituals have this paradoxical effect of giving you the impression that time flies. It’s paradoxical because you think that something repetitive will make time last longer, feel longer. It’s the opposite. So eight years happened extremely fast. I had my two kids and all of that and then had this kind of panic.

Literally I had panic attacks at the idea of being in the same place, doing the same thing 20 years from now with the world moving at a fast paced and me being in the same place, doing the same thing in the same way that the previous generations did. That led me to the realization that I have to find a way to do something else. And that was a literary a quest that took a couple of years. It led me to leave my country, France, leave my position as a civil servant in the French éducation nationale as a teacher. I joined an American tech company based in London and did recruiting for that company for a couple of months. Didn’t like it either. Still not found the thing… and then left the company and started my own.

Laetitia Vitaud; Photo on 35mm film captured by Dan Colceriu

I probably needed that transition of being employed by another company before I could start my own. I wasn’t ready yet. I needed all these steps before I could create my own company. And that was now a bit more than four years ago. And I would say that I’m pretty certain that in four years I will still have this company and be self-employed. I’m not a hundred percent sure, but I think that’s it because it’s a flexible enough vehicle for me to do different things and transition from one job to another, from one subject to another with more autonomy and I do find that a lot of pleasure at work and I like what I’m doing now.

BR: So your own experience is one where up until now every job had trade-offs. So the teaching job had flexibility, but it was monotonous. The job working for the American tech company, I presume was quite well paid, but it had alienation and other shortcomings.

LV: Actually the teaching job was not that monotonous. It was quite exciting because I had a lot of autonomy and I could teach my students lots of things about American politics and history. It was very interesting. The problem is it was extremely badly paid. I mean, very badly paid. And because it was so badly paid, it signals to the rest of society, namely the French society, that you’re not worth much. And probably there’s a part of me that’s ambitious and that suffered from the way other people were looking at me, someone with no value and I know there’s this confusion between price and value and I definitely felt it. And had I been a professor with tenure at an American university, probably doing a bit of the same thing I may not have left.

BR: …and the bit about the book that’s most optimistic is this idea that, so we’ve gone through several cycles, right? So we used to have boring jobs, that came with a bundle of benefits and that bundle of benefits got unbundled and jobs got unbundled… but when you look forward, do you see the possibility for people to do meaningful work again on their terms? So can you just maybe talk us through exactly that sequence and why you’re so optimistic?

LV: So what I call the contrat de labeur… it’s this idea that in the Fordist Age, as in the work on Ford’s assembly lines, you had a very repetitive job most of the time. You had division of labor and subordination but in exchange for that type of alienating work, you had a bundle of benefits, not only stability, but also a good wage that you knew would get better and better because you had powerful unions fighting for you. And a good share of the pie, basically. You had social protection and health insurance, retirement, future revenues, paid holidays, political identity, etc. etc. And the promise of upwards mobility for your children. And all of this made the relative alienation somewhat acceptable. And when we say today that a lot of people… I often hear the new generation doesn’t want boredom anymore, as if the old generation like doing repetitive jobs and boring things.

Of course not. It’s just that yes, the bundle, the tradeoff that came with this alienation is dwindling away. And now obviously the new generation is questioning the alienation that used to come with the tradeoff. So I don’t think it has anything to do with one generation being fundamentally different from another, but rather it’s systemically one type of contract, of deal that is not what it used to be. So the deal is today that you still have alienation. You still have division of labor and subordination in most jobs in organizations, but you have a lot fewer of the benefits that used to be the tradeoff.

Wages are stagnating or declining. Job security, forget it. Social protection, not quite what it used to be. Pensions, we know they’re not going to be the same. Access to housing used to be a part of the bundle (I forgot that when I made the list). Access to housing is more and more of a problem. Access to credit… and access to housing because you can borrow money, but it’s just not enough to buy an apartment. I mean, if you have a secure enough job, you have access to credit. But even with that credit, you can only have a 10 square meter flat for that money because the real estate prices in the urban centers where most of the jobs are, have gone up tremendously.

BR: So you’ve talked about how the bundle is being unbundled and you said that younger generations don’t want boredom anymore. But what it seems to me you’re saying is they’re getting boredom without the bundle, right? So the worst of the worst.

LV: Yes!

BR: But your book is essentially a very optimistic view of the future. So why are you so confident that things will be better from here on?

BR: There are a few reasons that lead me to be somewhat optimistic because there’s also a part of me that’s pessimistic about the present and I’m not naïve and I know that right now things are not looking good, but there are a few… I call them the pioneers of the future of work that are showing the way and that are changing aspirations, culture and probably organizations to some extent. Those pioneers are the freelancers and makers and IT developers who only want to be self-employed in autonomous and who created the open source ecosystem and who change the culture of the work place and work spaces and collaborative tools and collective intelligence and et cetera, et cetera. All these things really started with this IT crowd at the beginning of the internet; by the way the first co-working space was created a bit more than 20 years ago.

That’s just a good example. And today co-working is this huge business and it’s a huge industry because all the other corporations are turning to co-working as a way of being more modern and more appealing to the younger generations. So if you take the IT developers who are self-employed, some of them managed to work remotely because they just don’t want nine to five constraints. And increasingly salaried workers in these organizations have obtained some extra flexibility that they didn’t have at work. And that’s changing management because once middle managers who are very reluctant to accept it, find out that everything is still fine, that everything is still working, then they accept that flexibility as a default can be possible. And that’s changing life, changing also the way you can balance work and life. It’s changing the way, presenteeism was controlled very strictly. It’s changing things to, to my mind quite profoundly.

BR: So the same factors that caused work to become unbundled… so if we say improvements in telecommunications that allowed work to be globalised, for example, and the same factors that have led to some degree to feelings of loneliness and isolation. You’re saying those same factors can actually provide agency to people to get a better bargain?

LV: Yes.

BR: Because it’s been unbundled, they can demonstrate their own individual worth more easily and therefore achieve higher pay and better conditions.

LV: Some of them can. And especially those with the skills that are in high demand on the market. Now the question obviously is what about those with skills that are not in high demand?… And yes, of course things are much more difficult for them. They have the precariousness without any of the freedom.

Although sometimes with the same level of precariousness and low pay, some of them prefer the flexibility of platform work because they can choose their shifts, because they can choose exactly how many hours they work. And it’s easier to juggle the constraints of having a family for example, and looking after your children, whereas if you work for a less flexible company on a zero hour contract, sometimes. On top of that you have the cost of transportation and strange hours of the day or you have the cost of finding a way to have to find someone to look after your children. And so with the same level of pay, sometimes a bit flexibility on the side of the worker is indeed a little bit of a gain. Now for most, that’s not enough obviously. But that’s more a question for public policy than it is a question for individuals because there is only so much you can do when nothing’s regulated and when you have no safety net and when you have no training institutions to help you transition to a different career. There’s only so much you can do on your own when you’re not well connected.

BR: So if we accept that some people prefer the autonomy and it comes from an increasingly sort of unbundled workforce or remote workforce or however you want to describe it. And if we assume that some people have the skill sets to be able to bid up their own paying conditions. So there are two groups in the workforce who are everything else being happier than they would have been before. What about everybody else, because how do we get better conditions for all of those people, essentially preferred the old paradigm of boring job but a good bundle of benefits versus boring job and very few benefits? And it could even be worse, boring job, few benefits and very precarious hours, zero hour contracts…

LV: Absolutely! You can have division of labor, subordination and precariousness and low pay. You can have all of the bad things, but what is it that makes all of this type of deal possible? It’s a society where you can prey upon the weak. It’s a society where there is no protection whatsoever. No redistribution of wealth. It all boils down to what kind of society do you want? You want something that looks more like the Danish model or do you want something that looks more like the UK model? And that’s fundamentally a political question.

BR: Okay. So how does the government… is it through raising the minimum wage? It seems to be in the new model that an awful lot of responsibility gets transferred from employers and from the state to the individual. So should the state be picking up some of the responsibilities that got transferred from corporations for example? I mean, so in the U S, the government tried to intervene into providing or at least underpinning the healthcare provision, right? Is that where the government should move into?

LV: The trap or the thing that you shouldn’t do is do like what the government did with Walmart in the U S, it’s called The Walmart Effect. That you have jobs that are so poorly paid that most people are on Medicaid. They have, you know, health insurance provided for by the state. And sometimes they even need food stamps… they basically depend on government programs because they’re too poor to have a decent life. So in a way, that’s like having the government subsidize a company like Walmart so that they can pay a price that’s too low. That doesn’t reflect the real cost of labor. So it basically pays for, if you distinguish between production and the reproduction of the workforce, it doesn’t include the reproduction of the workforce, obviously, it doesn’t include healthcare or retirement or any of that.

So how can that be possible? And in that case, I believe that in the case of Walmart, that minimum wage is definitely a solution. Now your question is probably that with self-employed people, there is no minimum wage because they charge their companies, they charge something. It’s a price. It’s supply and demand. And the things that were implemented for salaried workers do not protect the self-employed. There’s no minimum wage.

Now… that’s not entirely true, because the city of Seattle managed to make the concept of minimum wage apply to the self-employed drivers of Uber and other platforms there in the city of Seattle. So there are ways of doing it, so long as you recognize that freelancers are not exactly like any other corporation and that you can in fact transfer some of the legal apparatus, some of the legal framework that was designed for salaried workers. You can transfer some of it and adapt it to the world of freelancers to create new protections. So you can keep the flexibility to make the business model of companies somewhat viable. But some things that they do shouldn’t be possible because it doesn’t include the negative externalities that they create. And that’s just economic nonsense…

BR: And if we think about those new forms of organization, so you’ve mentioned one, which are platform companies. So platform companies increasingly coming to intermediate between consumers and freelancers. What are the responsibilities ,do you think, of those platforms? And then what are the responsibilities that they’re currently not assuming? And is that where the government needs to step into to regulate, to make sure that they do internalize those externalities?

LV: Yes, but it’s a complex question because in some cases, those platforms behave in every way like an employer. And then it’s a form of salaried work that maybe shouldn’t be possible. I say maybe because it really depends on the platforms and the work conditions. And if that’s the case, then it’s simple enough, I guess there are laws that are out there enough to just basically say that model is not possible. But in other cases, the platform is truly just an intermediary. And then if you give those platforms responsibilities towards the workers, then you presume that the platform is an employer. And if you do that, you create a form of subordination. You can make the platform give more benefits to the worker but that means that the worker will become dependent on the platform for those benefits.

But if they really want to be independent, they will want to have a business outside of the platform. Think of all the Uber drivers who want to have a business outside of the platform. They give you their business cards and they say, we can bypass the platform and I can make a great personalized service for you and take you to the airport and show you the sites and all of that. But if there are benefits attached to working via the platform, then there is no incentive for the worker to be truly independent and develop their business outside. So it would make more sense to create protections that can benefit all self-employed workers, s it’s not to create an incentive for them to work via platforms. Platforms can help them access a customer base they wouldn’t otherwise have. But the danger for them is to become too dependent on the platform to find those customers and to get benefits on top of it.

BR: So there’s a lot to unpack there. One question would be, whether you could have those platforms provide benefits in aggregate? i.e. You could have kind of benefits pot if you like, that sits outside of the platforms, but to which anybody who work, through any platform you work through contributes. That could be one answer. Or do you think that’s looking at it the wrong way round and it should be, the benefits should be provided by the state for example. And then they sit completely outside of the platform world. How do you see that?

LV: The incentive should be for the worker to charge enough so that the price includes those benefits… Ultimately the customer is the one responsible, but you’re right, the platforms do take, what is it, 25 or 30% of that price. So obviously there could be a way to make them contribute. It’s a large enough margin for them to pay for something. And if it’s an aggregate, then at least there is no incentive to work with one specific platform rather than the other, in which case you would emphasize the winner-take-all effect, by creating incentives for workers to work with the bigger platform, the biggest platform.

Ben Robinson; Photo on 35mm film captured by Dan Colceriu

BR: You’ve written a lot about this idea of internalizing versus externalizing network effects, right? So not all platforms are created equal and some platforms are very good at helping to elevate this individuality of the freelancers that work through them versus the ones that commoditize the individuals who work for them, like Uber does, right? Because they call up a driver and the only thing that changes is the car, the rating, but you get no choices as the end consumer versus others where you know exactly who you’re contracting and they can charge a different price because they’ve got a different rating and so on. So is there some way for the government to enforce that, enforce or oblige platforms to share those things?

LV: Are you referring to the difference between aggregator and platforms?

BR: Yes. So the Bill Gates definition of a platform is an entity that creates more value than it takes. How do you get aggregators to become platforms and can the government do that through forcing to share data and ratings’ portabilities and things like that?

LV: Was it Ben Thompson who wrote this amazing piece about the difference between aggregators and platforms?

BR: It was, yeah.

LV: My piece was about platforms to empower individuals to basically show who they are and find customers to want them for who they are versus platforms who commoditize people where the customers basically buy your service rather than choose a person. And a good comparison would be to compare Deliveroo with Task Rabbit, two platforms that I sometimes use in London. So with the Deliveroo you purchase a meal and it gets delivered, you can add a tip because you know there is a human involved somewhere, but you don’t know who that is and you just add a tip because you are a decent person. And that’s the right thing to do. But basically you will barely even see the person. If it’s raining outside they will be wearing a helmet and you won’t even see who they are… versus Task Rabbit where yo do choose a category, let’s say you need people to do some housework and to repair furniture or to do some plumbing work or electricity work. You will choose someone with expertise. And in fact, you might even trust a profile, a person who charges a lot more than a person who doesn’t charge a lot. And there are huge differences in terms of how much they charge and for sure you choose a person rather than just a service. And then you might even get new ideas of things that they could do in your home if you need help. So that’s a huge difference.

BR: If the answer is turning aggregators into platforms and forcing them to share the network effects that they’re currently internalizing, can the government do that? Would it be enough to oblige them to share data, to force them to allow for rating sharing, could the government enforce that kind of change between aggregator and platform?

LV: When it comes to individuals… I’m not entirely sure how being forced to share ratings will have such a big impact and make it possible to turn aggregators into platforms. I don’t see it because when you look at Uber drivers or Deliveroo riders (by the way Deliveroo riders don’t even have ratings, do they?). This mark that you have that’s 4.7, 4.8, what kind of value does it have if you want to start another career somewhere else? Not that much. Unless it’s 4.999 or something, which case you just take a picture of it and that’s the data.

BR: But you can imagine the situation. So I take a point, which is all it does really is it helps you to get rides quicker on Lyft for example. Right? Which you’re right, there’s no panacea, but if they promoted the individual more, that you might have favorite drivers for example. So rather than just calling for a driver, you could offer a specific driver who’s got a really nice car. I mean in this city, it’s the ones that have the Teslas that you’d like to be able to call, right? Or really charismatic, like chatting to them or whatever. But none of those things are possible. So can the government from endogenously kind of enforce these changes on platforms?

LV: Forcing them to share data is always a good idea. But there are lots of types of data that can be useful for a number of reasons. Be it collecting information about the workers, knowing who they are, how they drive, why they do what they do, how many cars are out there, information data to help with public transportation services, to help with urban planning, etcetera. So there are many reasons to collect data better.

LV: I think you’re absolutely right on this. Data sharing would be a great thing. Allowing people to put their ratings would be a good thing but marginal…

LV: It wouldn’t be marginal in the case of Task Rabbit or LinkedIn or etcetera, but then there are already a few protections in place with the GDPR.

BR: It seems to me that if you really want platforms to operate in a different way, the economics have to be different. Right? And I suppose what you really need, if you take more macro views, you really need the consumers; I think you even said this, right? You need the consumer to bear the full cost of the services they buy. Because what we’ve really seen so far with everything you’ve talked about the unbundling and so on and the platformification of work and is a massive transfer of wealth from workers to consumers. There’s a brilliant report on Uber for example, it shows the massive amount of consumer surplus they’ve created. So the cost of the labour has gone down and therefore a massive surplus has been created other side, the consumer surplus, but then Uber has captured a small part, but not very much. Most of the benefit, the vice majority benefits the consumer. So what you really need is somehow for the consumer to pay more. And in a way the consumer by not paying full cost of services is hurting themselves because they’re also workers. So how do you do that and is that where the government can make more of an impact by trying to create some sort of pact between consumers or workers?

LV: Well, sometimes even of price control. I’m not sure I’m 100% in favour of the idea, I was being a bit provocative on purpose, but it’s a question that I never see out there in the open. And it’s not such a stupid question, in fact…

BR: Well in a way this move to craft goods and artisanal goods is that in a way, right? Because it’s almost like the consumer is prepared to pay much more than the marginal cost and is prepared therefore to subsidize people who want to pursue their passions. So how did The Craft Movement come about and how could it be extended to other things? Or does it just come back to the same point, which is… some people have skills where they’re in a better position to get fair value for those skills versus most people who are in danger of being commoditized?

LV: I don’t think that… or rather the idea of the vision that there are only the elite few who are creative and smart and basically you have the geniuses on one hand and all the other stupid people on the other hand. I think in fact, most people have some kind of unique, maybe skills is not the right word, but unique things that they can contribute, that they can give. Unique personality, unique network of individuals that they are surrounded by and it all boils down to the definition that you want to give of craftsmanship. If craftsmanship is making something beautiful with your own hands, then obviously some people would be better at it than others. But if craftsmanship is doing something in a unique way with autonomy, responsibility and some creativity making it yours, then there are lots of things that can be done… artisan-ly.

BR: There’s one last thing I’d like to get you on, when we talk about platforms, which is, have you ever read that… it was a brilliant article. I think it was in The New York Times and it was called The Spy Who Fired Me. So I found it through Tim O’Reilly’s book. I just think we should say one thing about platforms, which is they tend to quite often get a bad name for exploiting workers and so on. But his argument is that workers practices got a lot worse before platforms came along. And so The Spy Who Fired Me was all about the software that was introduced long before platforms came along, that recorded people’s hours and stop them ever crossing the threshold where they might have to pay them full social security and full benefits. So I just think it might be worth maybe just debunking some of the views around, because it’s not as black and white as all platforms are bad…

LV: Yes. The same is true about Amazon warehouses. I’m not saying it’s fun to work in an Amazon warehouse, but it’s exactly the same to work at the La Redoute warehouse. There was a case in France where a guy was fired for eating a tangerine at work. There were lots of headlines about La Redoute a few days ago in France and some people were surprised. They were like; oh I thought it was just Amazon, right? Or I thought it was just Deliveroo riders.

In fact, the truth is that a lot of workers, the hundreds of thousands of cleaning women working for service companies who work super early in the morning, super late in the evening with nothing in between. So it’s officially a part time job that they’re too exhausted to do anything else. Plus there’s no one to employ them in the middle of the day. And they have no social protection and are fully precarious… and they’re salaried workers and those are traditional companies that are in no way digitally enhanced. And likewise the new working class-the new urban working class-is full of people who don’t work for platforms and many of them are very precarious. And the working poor, the vast majority of the working poor in the US don’t work for platforms.

BR: Yeah. And in fact, there’ve been many studies that show in aggregate the platforms have created more employment than they’ve, quote and quote destroyed. And also that in aggregate they pay more than the jobs that they’ve displaced.

LV: What it reflect is that the balance of power between workers and employers has changed since the 1960s or seventies. And that’s the case everywhere. And except for a small niche of workers on specific skills like, computer developers and marketing specialists, the rest of the workers are not in the same situation anymore as their parents.

BR: Because of globalisation?

LV: Because of globalisation, de-industrialisation, the decline of labour unions, culture of individualism that weakened collective bargaining, because of lots of reasons, demographic reasons and immigration and…

BR: And if we assume that those trends that you talked about aren’t going to go into reverse, most of them aren’t going to go into reverse. What are the new sort of policy measures that need to come together or what are the actions that individuals need to take in terms of reskilling or whatever to try to improve pay and reduce precariousness? And do you think you will see return of collective bargaining, for example, is that going to come back or do you think we just have to equip ourselves as individuals with better skills and take more responsibility for our own retirement and healthcare costs and so on? So how do you see that playing out?

LV: I think training and re-skilling and all these things will be more and more an individual thing. But when it comes to healthcare for example, that’s not possible. When you look at the American model, you see that’s just not possible. You have individuals who will die at a young age because they simply cannot afford a $100,000 operation. It’s just a treatment that’s too expensive.

So some things cannot be completely dependent on individuals and we need some kind of institutions for that safety net. So how far should the safety net be? That’s a question that can be discussed. But I believe healthcare is not something that should be up for discussion because it just doesn’t work. It’s just a system where you have a lower life expectancy for the many and a higher life expectancy for the few and that’s not the society that I would want to live in. But for re-skilling and all of that, that’s a good question. We had a discussion before the podcast about the age of transitions and what it takes for individuals to be prepared for that age of transitions. And I mentioned to you the book of Lynda Gratton, The 100 Year Life, in which she speaks of a concept that I really liked, the transformational assets.

The transformational assets are a series of assets that we have that makes it possible for us to be ready for future transitions and to transform, take new turns, change careers, do new things. And what she says is that we’ve gone from the three stage model, life model where you had 1/ training first and then 2/ work for about 30 years and then 3/ retirement, to a multistage life with multiple different phases where you’re stretching that career the same way to 45, 50 years is just not viable because we wouldn’t be able to sustain it physically, mentally, emotionally, et cetera.

And so she says, we’ll go to a life of many transitions and probably have not only multiple jobs, but also multiple different careers, which will involve developing different skills, but also developing, building different networks and saving up enough money to prepare for these transitions. So there are also in these transformational assets, financial assets, that are physical assets, how resilient and strong you are. There are mental assets, how well can you learn new things and there are social assets, how strong are you and diverse of the networks that you have and how will they help you transition from one phase to another or from one job to another.

BR: But these transformational assets that you talk about, I mean this makes a lot of sense to me. You know, what are they? And these aren’t things that we’re currently taught or encouraged to develop at the moment, right? I mean encouraged to develop… so these are not things that we’re taught in school, right? These are not things that our parents are particulary atuned to…

LV: Well, when you look at parents today, they’re all obsessed with it. They don’t call them transformational assets. But why is the Montessori system so popular today? Why are all parents obsessed with that question? What kind of school do I need from my kids? They all know that that’s exactly what they need, even if they don’t use that concept. And the Finnish school system that recently did away with the subjects, with the school subjects like mathematics, history, et cetera, et cetera, they merged everything. And they did away with the whole concept of having different school subjects to focus precisely on different priorities. Like how resilient and empathetic and how strong will the kids be to create new and build new networks and how is their emotional intelligence and how can they learn to work together? How can they learn to learn new things all the time? So I think a lot of people and institutions are asking those questions, but they’re usually asking the questions for children, not for grownups!

BR: And outside of Finland. It doesn’t seem that schooling is changing very fast.

LV: It isn’t. And there’s still this obsession with the skills gap, the idea that there are needs on the market that are not satisfied because the school system doesn’t teach them enough. And there is this idea that there’s always a race you need to adjust the school system and create this one more class where they learn a computer language that will be useful in the market. And it never works because there is always a delay of two to three, to more years before the child or teenager is actually on the market. And it’s such a narrow view of matching….

BR: Is it a bit like the debunked industrial policy of the past, where governments would try to pick winners and by the time they’d identified what those winners could be, then the market had already moved on. Right? So it’s much better therefore to take this Finnish model of teaching, equipping people with the cognitive skills or whatever. Right? So they can adapt rather than trying to teach them specific skills for a specific purpose.

LV: Yeah. I’m a strong believer in developing cognitive abilities in general. And that can be by focusing on poetry or music. So if you can pick anything your child seems to be interested in and let them spend the time they want on that… and it can be music, it can be joying or poetry. I think these things will be in the direction of more creativity and also discipline that the mental discipline… Yesterday we talked about the 10,000 hours that you need to master a subject or a trade. If you want to be able to play the violin, you need to invest 10,000 hours but the problem is before you invest these 10,000 hours, you need to want to have the kind of discipline where you will actually practice again and again and again. How do you get a child or teenager or an adult to have that kind of discipline, that kind of focus to be able to do the deep work or deep learning that will make it possible for you to learn that craft?

BR: So just to revisit that idea of the multistage life, because implicit in that idea is that people will be switching jobs much more often, but are we sure they’ll actually be lots and lots of jobs in the future? So, in other words, much more simplistic question, are we confident that we won’t just automate away all jobs? Which is, a dystopian view of the future which you don’t subscribe to in your book…

LV: I definitely don’t subscribe to it because I write a lot about these proximity services that include cleaning services, nursing jobs, and the like. People will help the elderly remain at home. People will cut hair. Of course you can have a robot to cut your hair, but that’s not the reason why people go to have their hair cut. They go to have their hair cut, not because they want the haircut, but because they want a massage and they want a conversation with the hairdresser. Basically all of these things are not something that can be automated because… you don’t need these services, the services themselves… but for all of what they entail. And that’s basically companionship. Being with someone and having someone to help you and so all these things. There are many reasons to believe that there will be a strong multiplication of those jobs.

First the population is ageing and we know there will be more people who will be dependent at some point, more people who will have handicaps. We know that we will consume more and more services. When you look at the way the rich consume today, they like to spend their money on experiences; they like to spend their money on yoga lessons. If you look at the job market and you know that lifelong training for all the reasons that we mentioned will become more of a thing then that means there will be more and more services associated to lifelong training… and training in general. So all in all there is a lot of certainty that there will be a lot of needs in that area. And a lot of these things, even the most simple things like cleaning and helping an old person at home.

We’re so far from being able to automate it. So I generally get this idea of making tea. Making tea is super tough because no kitchen looks alike, you can have a super small kitchen and then you have to find something that looks like a teapot. And that we know from the technology point of view, that’s actually super hard, right? Because something that looks like a teapot can be something that’s not a teapot, if you don’t have a teapot. You have to find a tea. You have to ask the person what tea they want. I mean so many different little things that right now we don’t have a robot that can do that. And I’m pretty sure that 10 years from now we won’t either. I don’t know about 50 years from now, but for the foreseeable future, that’s not something that’s automatable. And then again, that leaves out the idea that in any case, what we need is companionship and not the service itself. We need both together. So I’m quite certain that there is a vast number of jobs that will be created in proximity services. The problems are many. Well, the difficulties are many.

BR: So maybe take them in turn. So I think one of the challenges is the way that those jobs are perceived, right? So often they are perceived as either service that should be given for free, right?

LV: Yeah

BR: In a lot of cases. And then where that’s not the case, they’re quite often perceived as jobs that are done by females, for example and also they tend to be very poorly paid jobs, right? So how do you address those things? How do you get that kind of proximity work to be well-paid or paid at all if it’s unpaid. How do you get men and women doing those types of jobs?

LV: The reason why they’re so poorly paid is that to this day the confusion remains between unpaid labour and paid labour when it comes to proximity services. Because probably more than half of the work is today still performed for free. So if you iron your own shirt, it will not be a part of the GDP. Whereas if you have your cleaning woman do it, or if you bring it to someone who will do it for you, it will have a price and it will be part of the GDP. So obviously it’s very artificial because in terms of the product or the service being done, in both cases you have an iron shirt, but in one case it has economic value and in the other it doesn’t. And this confusion is so strong in every little activity that used to be performed exclusively at home, that it affects a lot of the jobs that are still on that line, on that blurred line.

So throughout the 20th century, a lot of these activities were externalised outside of home or you had someone external doing it at home. But anyway, a lot of it entered the GDP, but it entered the GDP on the basis that it was something that had to compete with the price of zero. So that makes it a little bit hard to price it higher but there is such a high demand for these services today that the prices are bound to go up and there are already going up for a lot of these services. Again, in the U.S., it’s very hard to hire cleaning women, especially because Trump closed the borders and there are fewer Latinos coming over from Mexico and it’s super hard to hire new people. So the prices are high. Same is true in Paris. If you hire someone individually, it will be priced high and the prices will go… or sometimes maintain low because workers doing them are not a workforce who communicate with one another and can negotiate collectively. So they have no history of building unions and negotiating collectively. So they’re in a position of weakness with employers, companies or individuals who are in a position of power.

And that’s changing too because obviously with digital, all of a sudden there are ways of talking with your fellow workers that didn’t exist before. And so the new unions that are being invented today are being invented in domestic services. And one of the fastest growing union in the U.S. is the the American Domestic Workers Union that has the support of the Hollywood actresses like Meryl Streep… that walk on red carpets and are on TV all the time. So I think that prices will go up.

BR: But prices are going up because demand is going up and supply is not going up. But supply would go up if you could get men to do these types of jobs. So how do you change the perception that these are jobs that are done by women and do you agree that if that were to happen then you might see more pressure on pricing?

LV: But if that were to happen, you mean if men were to join so-called female jobs in force, then prices will not go down. Prices will go up. Look at what happened to IT people, when women were computer scientists in the 1950s, it wasn’t a job that was valued much. And when women were pushed out of these jobs, suddenly the jobs were paid much, much more. And it’s happened with a few professions and you can be sure that if the profession becomes more male, then there will be stronger unions and somehow it will be valued more because it will also change the perception of value. And that’s the challenge; it’s a chicken and egg problem. It’s seen as having no value. And that’s why men don’t go. If men were to go, value would be perceived as higher.

BR: So I’m happy that you challenged the premise of that question, but also in a way you kind of answered it right? Which is you think that if the work becomes better and better paid, that will attract men into the work.

LV: That’s the idea that at some point this identity issue of male factory workers saying, I can’t be a nurse cause that’s a female job. At some point this identity issue will be overcome by the attractiveness of the new job if it comes with better benefits and better pay.

BR: What about geographical mobility? So, if you assume that we’re going to see a big boom in proximity jobs and those proximity jobs will eventually appeal to male workers as well as female workers, then you should see a big shift in the population, right? From areas that have been de-industrialised for example or for whatever reason have suffered economically towards the booming urban centers, where people want those proximity services. But you, yourself, earlier in this podcast said that the urban centers have been priced out of the reach of most people. So how do we overcome that? How do we make it possible and feasible for people to move to cities to do these proximity jobs?

LV: A number of things, not one solution only. There’s definitely, again, government stepping in or city stepping in with more social housing in areas where there’s lots of social housing, there are more mixed groups and it helps everyone. So that’s one thing. Then you have obviously companies. Employers, in some cases employers can offer housing too if they want to attract the people they need.

BR: That takes us back to industrial times doesn’t it?

LV: Exactly! It was a thing of the past but it’s also the thing of the future because look at San Francisco schools today, some of them cannot attract teachers because it’s not paid enough for them to afford a one bedroom apartment in San Francisco. And basically they have to put housing in the package if they want to recruit people. Again it forces to put more value and increase the price of labour directly or indirectly. Directly it’s pretty obvious that if you’re paid more than you can afford to live there. And that’s what you see in cities like Copenhagen. A cleaning woman earns enough to live in Copenhagen… and Copenhagen is expensive. Very, very expensive.

BR: So same thing ultimately, which is supply and demand will bid up the wages of people so that they can live in the city center, aligned with the fact that corporations and governments… we’ll have to also take steps to make it easier…

LV: And also, but there are more things, also obviously public transportation cause now there’s no, you could live a little bit further if it’s easier and convenient to come. If the commute is not hell then why not? And that’s definitely something that more cities needs need to consider. And last but not least, the organisation of work itself. If you allow for more flexibility, then you can have people who work 20 hours in two days, sleep one night on a couch and go back home the rest of the week and do something else with their lives. And that is going away from the nine to five jobs and from this organisation if you’re working from Monday through to Friday. I have another thing to add, is the idea of making the job more valuable through craftsmanship by adding more tasks that bring more value. If again you take this example of the cleaning woman, if she doesn’t only clean but also manages the household and become a sort of governess and does more and more and why not also accounting for the household. Then you have a job that’s much more quantified. Yes. But they would be paid much more.

BR: I am so pleased that you brought up the topic of the organisation of work because that’s a beautiful segue to what we want to cover next, which is how corporates adapt. So how do corporations adapt to this new world where they’re going to be working a lot more with remote workers, freelancers? Maybe putting it a different way. The sort of old world of command and control I guess is not possible. And then we moved to a world of sort of pay setting based on KPIs. What comes next? How do we manage people? How do we judge their success in a corporate setting? What does the corporation of the future look like?

LV: The future of the corporation is already there and a lot of companies have workforces that are composed only partly of an internal workforce that is composed of salaried workers. And the rest are consultants or interim workers and freelancers and people who work for service companies providing cleaning services, providing accounting services, providing… you name it, lots of services that are performed within the company, but these workers do not have the same employers as their colleagues.

BR: Do you have statistics on that? Because, while I can think of examples, it doesn’t feel like it’s as pervasive as your suggesting.

LV: Precisely, we do not have reliable statistics because the statistics on workers focus on the traditional relationship between an employer and a worker. And the rest is basically suppliers, the world of suppliers. And among the things that you purchase as a company, there are services, there is software that has embedded work in it, but it’s software, right? And you have sheets of paper that you use for your printing machines and you have furniture and whatever and all these things are things that you purchase. So in terms of accounting, it’s not the same thing but the reality behind the things that you purchase is that some of those services are actually performed in the company and in place of a salaried worker who could do it for their employer directly, and you have sometimes side by side different workers doing more or less the same job, but they don’t have the same employers. They don’t have the same benefits; they don’t have the same working conditions.

BR: And what does good look like in this new world? Because who does this well? Cause it a little bit of what you’re describing there is just, the model of sort of outsourcing, right? So that corporations have a blend of their own stuff plus externals. But to some extent they’ve done that for a long time to save costs. And it seems to me there’s a way to really capitalize on this shift to get access to the best workers and to manage them differently. So what does the corporation of the future look like from a structural point of view? And how do they manage remote workers?

LV: It’s a company that doesn’t have silos that don’t communicate with each other. One that’s in charge of purchasing, the other that’s in charge of HR. Basically Human Resources is something that’s much larger than the current definition of Human Resources. And if you don’t have a strategic vision of, you know, talent management and recruitment that includes hiring freelancers for short time or long term missions, then you don’t have a good view of HR.

So some companies, small companies started to do it well, because they have, they work regularly with freelancers who they know are very valuable and they don’t find it taboo to speak of onboarding a freelancer. And sometimes they’re even treated like a team member. And the only reason why they’re a freelancer is because they don’t want another type of contract and because want to maximize their gains or keep their freedom or whatever. And so some companies in a very rational and realistic way have a good view of that but usually there are smaller companies or younger companies and the very large organizations still have silos and they still have these metrics, these accounting metrics that separate things. And for them it’s taboo to say you need to consider how to onboard a freelancer, even though you actually have to.

BR: A lot of people are fascinated by Haier, a Chinese manufacturing company, they’ve organised work in a very unique way. I don’t know if it’s holacracy, but it’s this idea that they’ve devolved a massive autonomy to every individual in the organisation. So everybody has skin in the game. Is that the kind of model you’ll see in the future where the corporate itself is really only sort of a facilitating body rather than actually setting very concrete tasks and….

LV: A sort of hub or platform where employer branding and consumer branding is the same thing and where all of the lines are open. Well that’s the idea. And many companies pretend that they’re in that vision of things. And the whole phrase is, I think it was Google — Act Like An Owner — with this idea that workers should have equity because otherwise we’ll never act like owners and the owners that they should be and for them to be innovative and entrepreneurial enough for the company to move ahead. You need them to have a stake in the company. Of course, the reality is that Google became a huge corporation where people do not really act like owners and where there is division of labour and subordination, but that’s another matter. At some point when you grow and grow, can you really, really remain agile?

BR: And if holacracy is even the right model, how do you get something like that to scale? Haier is fascinating but I think the reason everybody talks about Haieris because it’s pretty unique right now. I mean there aren’t, I don’t think we can think of hundreds of examples of companies that are doing this on that scale.

LV: I have the same problem with liberated companies and Teal Companies, which is the concept used by Frederic Laloux whose book I love very much.

BR: What’s it called?

LV: Reinventing Organizations.

BR: Is it available in English?

LV: Yes. It was written first in English and then translated into French. So Teal organizations, liberated companies and holacracies and all these things about new governance and having workers who act like owners, the same thing bothers me that bothers you. It’s always the same examples that are given, always the same company. So holacracy, there’s always an article about how it felt, how Zappos, the company’s Zappos that was purchased by Amazon made it famous. And by the way, Zappos is no longer holacracy, sadly. So there are very, very few examples out there and even fewer of companies that are large and that can provide a model for other companies and let alone super large corporations who need to transition from one model to another. So the best examples are usually medium sized companies, that had a governance model from the start where people were more autonomous and this model has been proved effective in many different places, in many different sectors. And there are more such companies than we know of because we only know of the companies that were in those books that we mentioned.

BR: But I think the thing that’s probably repeatable about Haier is that it sort of decomposed itself into small units.

LV: They are more organic, like cells and organisms.

BR: Exactly, a bit like a federated governmental structure. This same idea, which is the head office department, is super small and it’s just facilitating the activities of a very large number of small cells.

LV: Exactly, that’s the model of Frederic Laloux’s Teal organization where the metaphor is of a living organism. And when you have different cells, they have the flexibility to grow organically and evolve like DNA in a way that’s much more adaptive, than the machine of the large corporation of the Fordist age and the metaphor for the large corporation of the Fordist Age in the Laloux’s is that of a machine. You have cogs in well-oiled machinery and not cells in a living organism and in a living organism each individual in that cell mirrors microscopically the cell itself. So it’s also a living organism that exists in its entirety and not just a cog with one thing. So it’s just a beautiful metaphor that probably speaks a lot to people who want to think about organizations and, and philosophize about it.

BR: Yeah but again, difficult to codify…

LV: Difficult to codify but the examples that are given by Laloux and there’s this famous Dutch company called Buurtzog, which provides a nursing services, nurses who provide services at home and who unlike in other companies are fully autonomous and can develop that very special, unique relationship with their patients. And they see those patients again and again. And it’s part of the treatment that they have this level of attention and care that someone just given a shot once in a while will not be able to develop. So it’s a very successful company that’s launched in several European countries.

BR: What happens to the corporations that are still run like machines? Will they become obsolete and be replaced by companies that are much more flexible and adaptive and how quickly will that happen because change happens normally slower than people expect?

LV: Well the problem is that there is no free market. If there was a free market, they would at some point be replaced. But there is no free market. And most sectors, these large corporations are rent seekers that build very high barriers to entry or even barriers to exit to keep their customers. I’m referring to banks obviously for example, but in lots of sectors you have barriers to entry, you have strong lobbying, you have situations of a rent. And so even though they’re not agile, even though the design is bad and there are better places out there doing it better, it will take a long time for these large corporations to be fully replaced by smaller, more agile ones.

BR: We’ve been talking about the different stakeholder groups that are affected by all the changes in the future work. So we’ve talked about platforms, we’ve talked about individuals, we’ve talked about corporations, we’ve talked about the state. What about startups? What role does startups have in reinventing the Future of Work, either directly by introducing new employment practices and the kinds of things we talked about or indirectly through innovating new structures and new institutions, helping people to rebundle the bundle if they’re in financial services, for example, what role do startups have?

LV: There are a number of startups out there who developed services for the new type of workers who fall through the gaps of the current safety net. Who have no access to housing for example or no access to training because they don’t fit in the right boxes. So there are many companies doing it and, and together they, they provide some form of a bundle. In some cases there is only so much they can do because again, health care and housing, etcetera, it’s not something that can be done by a startup alone. But I’m very optimistic that some great services would make it easier for at least some of the most well off freelancers to have access to all of the bundle. You know, at least some of the most obvious things that can be done, are done and will be done thanks to innovative startups that provide new services.

BR: I think the reason to be optimistic is that the situation is so acute for so many people right now that we’re building services for really quite dire situations. So that if we can solve the bigger problem of actually raising these individuals income and we’ve built the whole set of new services for them, then things could get much better quite quickly.

LV: Absolutely!

BR: It seems like no conversation on the Future of Work could ever be complete without talking about Universal Basic Income. So just for completeness, I feel we need to cover it up. Where do you stand on Universal Basic Income because a lot of people put it forward as exactly the right solution, to go back to, to revisit this idea of the multistage life. So between those stages of life, you will have periods of no income because you’re changing jobs, you’re re-skilling, you’re moving. So if you set it against that multistage life, it’s at least intuitively a very appealing idea. Right? Or it seems like an elegant solution but the counter argument is that it’s just… it’s a way too simplistic solution to what’s a very complicated problem of low income and unbundling of benefits. And so where do you stand on Universal Basic Income?

LV: When I left the American Tech Company that I worked for, I negotiated two months of salary and that was it. And it was so stressful because I had to create a business and make it viable in about three months. That’s the time that I had. And I was very, very jealous of my French friends who have these unemployment benefits that when they leave their companies, even willingly, they get 18 months of revenues, good revenues. And they have the luxury of training for a new job, starting a business, taking their time, learning new things and even traveling a little bit before. And I was very envious of them. So the unemployment insurance system in France is a system that’s made it possible for so many people to transition from one job to the next and it’s amazing. And yet it doesn’t really solve many of the problems that we have. Cause the people who transition well because they have these revenues, they know what they want to do, they have the right connections, they get the training, they have housing, they have all these things. And for many people the problem is not just the revenues to survive but the connections to reinvent themselves and do something new. The training, the housing to be with the job is, the healthcare insurance if they have diabetes or are likely to get cancer in five years, the school system for their children, if they have to move with their children and the list goes on. And basically money is just for food when you have all the rest, right. So it’s not enough and it’s just survival. So I’m very much in favor of if this income when it’s combined with the other things that make it easier for people to transition from one thing to the next and find meaning in that professional lives.

BR: Do you think it risks being a distraction? If we boil it down to something that is too simplistic, then we fail to have developed the imagination to solve all the other problems. Do you think it risks?

LV: That’s exactly how it’s sold by libertarians. It’s like, it’s so much easier, let’s not bother with the rest of the social protection institutions that we’ve inherited from the past. Let’s give everyone a sum of money and then we can have basically no government services anymore. And of course it just doesn’t work.

BR: We’re almost out of time. So this is my last question. So I would very much encourage everybody to read the book. It’s a brilliant account of how work has changed and will change in the future. And as we said before one of the best things about it is it’s pretty optimistic about the future. But having said that, we’ve discussed all of the sort of changes that need to happen to the institutions, or the incumbent institutions, whether it’s the state, existing corporations, individuals about how they need to adapt to this new world. So there will be necessarily a period of transition. And so my question to you is that even if we’re optimistic about the future, which I think we both are, can we get through this transition period without civil unrest?

LV: We’re seeing civil unrest out there so I’m afraid if we just look out the window, I have to say we are going through a period of rise of populism and unrest and so I think the transformation will happen with a strong crisis that has many dimensions. Sorry, that’s not an optimistic answer, but there will be a lot of pain.

BR: And how quickly can we manage the transition, do you think?

LV: Hopefully the more pain, the quicker.

BR: Laetitia, thank you so much for coming on the show. We’re going to tweet a link to the book and we hope as many people as possible will buy it and read it. So thank you very much for coming to Switzerland. And, and sharing your vision about the Future of Work.

LV: Thank you, Ben and Dan for this warm welcome.

On our way to Lausanne, after recording the podcast; Photo on 35mm film captured by Dan Colceriu

Future of Work: Building a safety net for the self-employed (#10)

Building a Safety Net for the Self-employed, with Garrett CASSIDY, Jonathan KEY, Gareth MCNAB

Future of Work: Building a Safety Net for the Self-employed,
w/ Jonathan KEY, Garrett CASSIDY, Gareth McNAB

This podcast was recorded in London and is part of our Future of Work series, brought to you in collaboration with TrezeoBen Robinson is joined into the conversation by: Garrett CASSIDY (Co-founder and CEO of Trezeo — the financial safety net for the self-employed); Jonathan KEY (Co-founder and CEO of Labour Xchange) and Gareth McNAB (Co-lead of OB4G — Open Banking for Good and Money Advice Liaison Manager at Nationwide Building Society).

Full podcast transcript:

 

Ben Robinson (BR): This podcast is part of our series on the Future of Work, sponsored by Trezeo. So I’m here with Garrett Cassidy who is CEO of Trezeo, who are building a financial safety net for the self-employed. We’re also here with Jonathan Key who is co-founder of Labour Xchange, a platform to help underemployed people earn more. And lastly, we’re here with Gareth McNab, who is co-leader of Open Banking for Good at Nationwide, which is not just UK’s largest Building Society, but that’s actually also the world’s largest Building Society. Gareth, talk to me about the life, the day to day life of a co-leader of Open Banking for Good.

Gareth McNab (GM): Sure. So my role within Open Banking for Good is many and varied. I am first port of call for the 5 different FinTechs who are part of the program for anything they need out of Nationwide. I am responsible for finding colleagues within Nationwide who can provide support to the FinTechs as they grow and scale their products, services and solutions. I’m also responsible for our relationships with the advice sector and charities who provided us with really, really valuable input from even before Open Banking for Good publicly launched and coordinating the series of workshops that we’ve been putting on for the successful FinTechs who are part of our incubator.

BR: And the five FinTechs, who are they?

GM: Trezeo is one, yup. There are four others who are OpenWrksTullyDucit.ai and Toucan.

BR: And how much of your time is spent on the FinTech program?

GM: So about a third of my week is involved in activities that are directly supporting the FinTechs. About a third of my week is involved in scaling and supporting through Nationwide, and a third of my week is picking up the tasks that fall out of those two, so it’s a full-time responsibility.

BR: Cool. So you have one of the coolest and probably biggest impact jobs at Nationwide, wouldn’t you say?

GM: It’s definitely one of the coolest since I joined Nationwide nearly 5 years ago. I’ve been telling everybody including my Chief Executive I have the best job in the business and he didn’t disagree with me.

BR: Is that a strategy to get better paid or is that…?

GM: Well, my work-life balance is through the roof and job satisfaction is through the roof because I’m on a mission to help improve the lives of people who are financially squeezed, doing what I can to have a meaningful difference to people who live lives impacted by poverty and problem debt, and the fact that I can earn a living to do so and particularly in this innovative way, leveraging the best of FinTech, charity world, and large financial services to help make a meaningful difference to 12.9 million people who are financially squeezed. I’m the happiest man in Nationwide, I think.

BR: So Jonathan, what you’re trying to do at Labour Xchange is the same as Gareth trying to do through his job, which is help those who are financially squeezed, right?

Jonathan Key (JK): Yeah. Completely. We have a self-designed poster. And it says something really simple. It says, are you in a corner? Do you need more money? Take out a payday loan, big red cross. Sell your staff, big red cross. Work a bit more when it’s convenient to you, a big tick. So we share the same mission at Labour Xchange. The only different angle we take is instead of cutting down your costs or claiming more benefits, you can actually have a better standard of life by getting that little bit of extra work that fits around your life. That’s our entire mission.

BR: And just tell us how you started this, the Eureka moment you had when you realized that this was a gap and you could help bring labour that’s under-utilized into the marketplace.

JK: It was when I sat down and I had a grown man in tears in front of me saying he can’t afford to buy his daughter a pair of school shoes or he’s not going to eat that week. And that was off the back of someone who was on 15 hour week contract at the supermarket, who needed more hours to work, but they can’t get the work because their rota changed every Sunday. So he was caught, in a job. So he was a statistic that actually he’s employed. He should be fine, but he’s not. He’s earning far, far too little money and he can’t do anything to top it up. And having previously run a catering company, I know there’s lots of companies out there who needed him for certain hours.

So it wasn’t so much a Eureka moment as a cliff edge moment I jumped off, and I realized actually for a lot of people there is a very dark chasm and they’re trapped in it. So what Labour Xchange does, it’s basically a ladder out where a person can, on an hour by hour basis, say when they’re free and then business is tap into their time. So you create that win/win. They get the work, the business gets the extra staff and we work on the basis that no one is lazy. Very few people in this country are lazy. They just haven’t got the chance. But businesses aren’t evil as well. Give a business a chance to do the right thing that doesn’t screw over business and they will, and that’s what Labour Xchange does.

Just because you’re self-employed doesn’t mean that you’re a second class citizen. You should have the same benefits and packages that an employee gets and that’s where Trezeo comes in. — JK

BR: And so for somebody like that gentleman you were re talking about whose rota changes every Sunday… when that person knows their rota, then they list the free hours that they have…

JK: And that’s all they do. One of the things where we have on our platform is very little written English because we’ve realized that is a massive barrier for people. So he lists when he’s free next week and it could be one hour. Now previously a recruiter won’t touch him and most work platforms won’t because you can’t make money from that one hour but because we’ve automated everything, we can. So he lists it for one hour or two hours or five hours when he’s free, and then when a business has a demand, they search for the hours they need. The people come up and they click ‘book’, and it’s that simple. There’s lots of people want the work and there’s lots of businesses who need the staff. Why aren’t they connecting? And that’s what we do. We help that connection.

BR: Perfect. Gareth, so the connection with Trezeo is because Trezeo works on the Nationwide incubation program. And for you Jonathan, the connection with Trezeo is you’re now looking to adopt the Trezeo service for the users on Labour Xchange?

JK: More like we are adopting it.

BR: You are adopting, okay.

we can effectively get to a point where people don’t have to trade their kind of flexibility for financial security. — GC

JK: Because there is a substantial need for people to be supported. Just because you’re self-employed doesn’t mean that you’re a second class citizen. You should have the same benefits and packages that an employee gets and that’s where Trezeo comes in.

BR: Garrett, if you wouldn’t mind just elaborating on what Jonathan is saying there.

Garrett Cassidy (GC): So the real key piece here is as people shift from traditional employment or mixture of employment and self-employment, they’re leaving behind what a lot of employers would have provided in terms of your holiday and sick pay and then also workplace insurance and pensions and all of that kind of thing. And also the fact that they then, in that model, they fit into what the system expects, whether it be banks, building societies. They fit the traditional model of what a worker is and therefore can access products. By stepping into self-employment, they step off that. They effectively step off a cliff and lose those protections and lose the fact they no longer look like a customer that banks can service. So what we’re really trying to do is rebuild that almost from the ground up, starting with helping them manage their cash flow through variable income, but also importantly then starting to add the protections like personal accident insurance, income protection type disability insurance, so that if they do have an accident that causes them to be out of work for long term, they’re protected, and building that towards longer term savings and pensions and things like that in the future. So that we can effectively get to a point where people don’t have to trade their kind of flexibility for financial security.

There’s a positive thing around the generation that’s entered the workforce in the last 5 to 10 years through platform work and so on and self-employment can really, really suit, but I think it’s also a fallout from some social policy changes at government level in terms of benefits and employment rights. And I think one of those is a very, very good thing, and the other one is one to watch very carefully. -GM

BR: So I just want to take a slight step backwards. So the thing that unites you and is that you are focused on the world of self-employment, and would you agree that there’s a structural trend towards greater self-employment and what is it that’s causing that shift? So maybe Gareth, you could start us off.

GM: So I think I would agree that there’s a structural thing there. I think that it’s a good thing and not so good things driving that. I think the good thing would be to tap into the trendy millennials and generation Y, Z or whatever we’re up to is like that, and there’s a generation that’s recently entered the workforce who wants to believe in a cause, change the world, make a living, provide for a family and realize that their grandparents used to be able to do all of that from a job for life for the local authority, retiring at 55 and getting a pension, but actually over two, three generations, that’s totally decayed and they’re probably not going to be able to find a job that aligns living for a purpose, changing the world and paying my bills and providing for my family.

And they’ve got to want to/need to balance all of those four very important drivers, probably by either dipping in and out of various types of work and deployment of their time in a week, or they might give two years to this and two years to that and two years to that, so they’re not going to have the kind of career arc that maybe the four of us have had before we started FinTechs and staff, maybe the career arc I’ve had, and many of them would say that’s a good thing.

It means that they can divide their time across their interests and still earn a living. They don’t all need to be lonely artisans up in a garrage somewhere on working on their art. Actually they can meaningfully pay their way through life and make a real difference. Alongside that though, there is the driver of larger and larger and larger employers not necessarily advancing the same rights for their workforce and seeing opportunities where the benefits system 15 years ago had that cliff edge on 15 hours. So actually we can offer lots and lots of 15 hour contracts and people will flock in for those and they won’t want the 16th hour. We can look like we’re making a dent on employment numbers, but actually it just suits us as a massive corporate to have a low cost base on our workforce. So I see — this isn’t Nationwide analysis. This is me — I see there’s a positive thing around the generation that’s entered the workforce in the last 5 to 10 years that platform work and so on can really, really suit and self-employment can really, really suit, but I think it’s also a fallout from some social policy changes at government level in terms of benefits and employment rights. And I think one of those is a very, very good thing, and the other one is one to watch very carefully.

I’m quite passionate about is the modern argument that the world of work is changing more than it ever has. I actually think it is a fantasy and I think the world of work has been changing dramatically for the past 30 years and we blame technology that it has exasperated it, but it has not. — JK

BR: And Jonathan, going to you, what do you think is the relative balance between the — it’s crude to say — the good form of self-employment and the bad form of self-employment, but you know, picking up the idea that there’s a positive and negative. And I think you might argue there are demographic aspects too, right? So depending on regions of the country, maybe gender. So what’s your view on the relative balance of good and bad self-employment?

JK: Before I answer, I just want to go back slightly. Because one of the things I’m quite passionate about is the modern argument that the world of work is changing more than it ever has. I actually think it is a fantasy and I think the world of work has been changing dramatically for the past 30 years and we blame technology that it has exasperated it, but it has not. So I started this business off the back of someone on a fixed hour, 15 hour contract so there’s always been this supply and demand kind of thing, and actually I think people were more exploited on zero hour contracts and 15 hour things because it was very fixed. The business got everything they want. So I think we’re actually in a period where we have an opportunity to make things better than what they were. I actually think the flexibility can be there.

So the demographic on our platform, 30% of people are over the age of 55 so it’s not just the young people, and we focus purely on blue collar workers because generally they are people who get forgotten about because you can’t make a lot of money from them. So they’re not people who want to — let’s say changing the world isn’t on their agenda. It’s actually having a balanced good life where they can bring up their kids and they can do that kind of stuff. Now there is an opportunity there for those people. There’s an opportunity there for businesses to use those peoples’ time, and there’s an opportunity for those people to use their time in a way that they want. Now for first time I actually think in 50 years, we’re having an honest conversation and we can make it work for everyone.

I think with the technology we’ve got now, we can shape the world of work where it does work for everyone — JK

Where it hasn’t been, I think this is a complete fantasy. There’s been a lot of people in part time work who wanted full time. There’s been people in this kind of contract where actually, I think with the technology we’ve got now, we can shape the world of work where it does work for everyone, but self-employment can be used as a way to cut costs because you don’t pay an employee’s National Insurance contribution. You don’t pay this or it can be a way of giving that flexibility and through companies like Trezeo, you can have that support package as well. If you look at self-employment as a way of cutting costs, for want of a better word, the country’s up Poop Creek without a paddle. If you look at self-employment as a way of actually getting the workforce to where it needs to be in a way that helps industry but also helps the individual, then I think it is sunny uplands for everyone, but we’d have to take that bold approach.

BR: This idea of … because I 100% agree with what you said, which is I think if we were to portion of a percentage of blame for this situation at the moment, I think technology only accounts for a small part, would you agree, but if we can use technology to change this situation from being zero sum to positive sum where, self-employment is empowering. Self-employment brings autonomy and flexibility, but it doesn’t mean sacrificing that bundle of traditional benefits. Then it’s very much a positive sum game and that’s… so Garrett, I just want to hear your… I think is was is driving your mission.

More and more platforms and companies who engage self-employed workers are seeing that actually if they’re going to have these workers in the future, they are actually going to have to move up and actually provide access to the supports necessary. — GC

GC: I mean this is what’s driving the mission is the piece around effectively putting self-employed in control of that and more importantly giving them the tools so they can be in control, because without the tools, they spend most of their time just trying to manage their money week to week, trying to understand where it’s coming, where it is, and really struggling so first of all, give them the tools so they can manage better and then give them the access to other products. And what we’re seeing very clearly is people need workers. That’s driving companies to do things like Labour Xchange in terms of taking a very enlightened view and saying these are protections that workers on platforms should have. More and more platforms and companies who engage self-employed are seeing that and seeing that actually if they’re going to have these workers in the future, they are actually going to have to move up and actually provide your access to the supports necessary.

But it’s in a different way because these people work for multiple different places in multiple different ways, you can’t just attach it to the company who are providing the work. It’s really difficult for them to provide those services because you end up then with horrible fragmentation. So it needs a world where those kind of services actually live with the worker themselves so they can pick what’s right for them, and over time we will, and we’re already starting to see it. We’ll see companies starting to contribute to them, like traditional employers would have, but giving the worker the control to pick what’s actually important for them and be able to aggregate and top off as necessary.

BR: So the idea of giving the worker more control, more tools, this will sound sort of very admirable and it feels like we’re moving in the right direction by doing that, but at the same time, I don’t think we want to devolve all responsibility to the individual because this has to be a collective effort to rebuild the safety net. So I guess starting with you, Jonathan, what’s the role of platforms in this? What do platforms need to do to empower individuals to be able to better provide for retirement and rainy days and accidents and all the other things that they would’ve got as part of an employment contract?

All these platforms, they’re going to get into a situation where they’re gonna run dry of working people unless they up their game. So they’ve got to take a lead in saying, yes, you’re self-employed. But we have got to provide a base around that self-employment where you are supported — JK

JK: Weird connection, but there is a point to this, honestly. During the financial downturn, there was substantial less redundancies than what everyone thought, and the reason is companies realized that actually good staff are hard to come by. They prefer to take a financial hit and keep the good staff. Now all the platforms, they’re going to get into a situation where they’re gonna run dry of people unless they up their game. So they’ve got to take a lead in going, yes, you’re self-employed. But we have got to provide a base around that self-employment where you are supported, and that’s exactly what our mission is that yes, you top up your income but actually you’re not left by yourself, because I always gone about bandwidth. When you’ve done 45 hours a week, your bandwidth is limited. You’re not going to wander off and find this is poor package. We have to be honest and we have to say you have a responsibility and even if they’re not your employee, you have a responsibility to that person because they are using your service and you’ve got to support that. And the platforms who don’t do that, it’s going to be like a desert wasteland for workers going on there and they will fail.

BR: So implicit in your answers is the idea that effectively platforms will have to self-police because otherwise there’ll be sanctioned by the market. But when I look at your platform, I think it’s got some really interesting and really positive characteristics. For example, you’ve got an element of data portability, right? You’ve got the ability within the platform for people to build their own profiles and therefore to bid up their own hourly rate, and I suppose you’ve done that anticipation of the fact that it’s going to become harder and harder every time to attract the best workers. So you wouldn’t advocate therefore that those kinds of platform elements to be standardized and made sort of obligatory if you like, across platforms?

JK: I think if you did that it’s like bludgeoning something to death. You do legislation and… let’s be really frank and honest, the people who start tech companies are some of the smartest people I know, and they will always be five steps ahead of people doing legislation and I think we need to be honest about that. So what we need is a collective thing where as a society, everyone comes to them and actually there is a push on standards because that’s what we want to do, not because we’ve made a law, because there will always be a loophole around that law — always — and someone will always find that loophole. So if we push in that direction, then these people are gonna have no choice. Everything will get better and I really do see that. We always talk about race to the bottom. I think it’s going to be a race to the top. So our on-boarding costs for individuals are pennies. So we have that as a market advantage over any other platform and that’s cause people get treated better, and the more we do things like support them, the more they get stuff like that, the lower our on-boarding costs are gonna be and the more of a market advantage we’ll have.

BR: Gareth, what’s the role of financial services providers like Nationwide in this new world of self-employed? Are you merely providing a sort of intermediary, aggregated service to link people to products like Trezeo, or is it a financial literacy type relationship with those customers? What is the role of Nationwide in helping these new self-employed people navigate this new world of work?

we don’t really know how to describe these self-employed people who aren’t quite self-employed, are they gig or are they platform, are they topping up? What are they doing? Well, they’re kind of in the middle of being personal customers and business customers, and rather than trying to force them into the categories we have currently of financial services, there’s an opportunity to work out what we do in the middle while the regulator also pays attention to underserved segments of the market. -GM

GM: I think the role of financial services in the main is to see this balance between opportunity and responsibility, which I’m hearing a little bit in what you’re saying Jonathan, and in your pushback that it’s not that there’s a responsibility on platforms, there’s an opportunity that is they take it now, they can actually shape what this regulated framework would look and feel like. And then if consumers and workers need the protection of that being formalized, well here’s the thing that’s working for the top three platforms, codify that then everybody gets good standards. And I think similar within financial services, there’s a balance between responsibilities on us. When you see segments of a market not being able to access and navigate that market effectively, like the self-employed — there’s a number up in our office, something along the lines of 6% of the self-employed access the insurance market compared to high 50%, 60% of full time employed of any type of insurance.

Now when it comes to keeping a car on a road, there’s a legal requirement. When it comes to keeping your contents insured against theft or fire or whatever, many people see that contents insurance is an optional extra that I can’t afford or I can’t be properly risk priced for that or that I don’t need to have, but that shouldn’t be a choice you feel forced into because the market can’t price you properly. That should be an active choice you made knowing all the factors and the financial services firms you went looking at, knowing all the factors about you too. That should be a choice. You’re not compelled to opt out of mainstream insurance market.

So there’s a responsibility to make sure no single segment of the economy goes under-served or without access to the financial services products we all need to survive and thrive. Sounds like I’m quoting a song, doesn’t it? But then there’s an opportunity I think to work out what that actually looks like. We have a very active regulator in financial services who doesn’t mind being relatively interventionist when it suits them and that’s a good thing for consumers, and I think a good thing for financial services and it gives those forward thinking financial services firms the opportunity to, as I’ve suggested, platforms might want to… to pre-empt that regulating push, spot this gap that’s kind of in the middle of is it personal current account banking with a couple of added services? Is it business banking light? What is it?

Well, we kind of don’t know because we don’t really know how to describe these self-employed people who aren’t quite self-employed, are they gig or are they platform, are they topping up? What are they doing? Well, they’re kind of in the middle of being personal customers and business customers, and rather than trying to force them into the categories we have currently of financial services, there’s an opportunity to work out what we do in the middle while the regulator also pays attention to underserved segments of the market. So, I think what we’ve done with Open Banking for Good, taking a new technology, inviting new FinTechs and offering some support to help them develop the services and products that they are. It’s a really good example of how you stimulate interest in innovation in that middle space. It gives a really interesting challenge to us Nationwide as sponsors of the program, but also to wider financial services to say, hey, there are products growing here, services growing here, there’s a need here. Now whether an untapped need is a market draw to you, or the potential regulatory pressure in the future is a draw to you, whichever floats your boat, mate, come on in and let’s work on building something that works for this middle group of people.

BR: And what is your role there? So is it about helping customers to discover these new types of services?

GM: Good question. You did ask about financial institutions… I have a personal bias against any suggestion that information remedy is a good idea — giving consumers more information they will make better choices. Well, that puts all the blame for their choices on the individual consumer. And Jonathan, you already mentioned bandwidth, the financially squeezed have the same problem, whether they work 45 hours or not. If they’re taking any serious time each week to balance their weekly income against their monthly outgoings and make that fit… that’s not something I’ve got to do. I get paid monthly, my bills get paid monthly, everything works fine for me. So, I’ve got space to day-dream about paying for my kids to Uni, where am I going to go on holiday next year, my AVCs or my pension. That same bandwidth that I have available for my long term financial planning, the self-employed or the gig-worker doesn’t have available to them, even though they may have the money, the financial literacy or the wits about them to do so… they’ve exhausted that bandwidth on making the day-to-day and week-to-week work. So there might be a connecting role to play…

BR: Yes, and you’re providing that bandwidth by recommending the right products and services…

GM: Yes, so when tech can lift some of that joining the dots between my weekly earnings and my monthly outgoings then it releases the rest of the bandwidth for humans to flourish and do what they’re great at, which is making human connections, and dreaming about the future and chaging the world. Or at least their bit of the world. I think there is a bit in terms of working to design products that work, there is a little bit about making sure our members as Nationwide and financial services industry as a whole is aware of the products and services that work.

I think there is a lot of work to do before that in terms of surfacing the need. Doing things like Trezeo-Labour Xchange engagement, doing things like Open Banking for Good, doing things like your podcast to help raise awareness of: “look, these aren’t the zero-hour zombies of the early Cameron years”, these aren’t the Conservative party statistics on how they managed to persuade everybody that we’re nearly at full employment. These zero-hour isn’t a bad thing, that the Labour party might people feel like actually there’s some people feel full-forced into this and there’s many people who have made an active choice, we can’t not make this work for humans, so let’s make this work instead of going back to the 60s.

So, I think there’s some stuff there, I’m resisting to the idea of just flagging Hey, have your heard of Trezeo, have you heard of this, have you heard of that?

I think there’s definitely a role… does banking move into being a platform? There’s some arguments that say it should go that way. Banking is either going to need to go to towards being a platform that other services sit on, or it’s going to create its own services that sit on other banks’ platforms… and in the world of Open Banking, that very much is the future ecosystem. One of the reasons why we initiated the OB4G program in the first place, our Chief Exec described Open Banking as the Uber moment for financial services, from this point forward, financial services look totally different forever. And we want to make sure that we’re don’t have these new products and services done to us, we want to be participating in the creation and fostering of those services and products.

I think it’s important that banks and institutions like Nationwide are open to the fact that things have changed. Workers don’t fit into the boxes that they traditionally fitted in. And either it’s opening up to that and recognising that it’s a very different proposition, or it’s the platform approach of bringing third parties in who can do it. -GC

BR: What do you think, Garrett, be the role of institutions such as Nationwide in helping self-employed people to navigate better their financial management?

GC: I mean the key piece here is, certainly in the UK and most developed markets, these people are banked, so they have bank accounts, but they’re underserved beyond that because they don’t fit in the matrix. I think it’s important that banks and institutions like Nationwide are open to the fact that things have changed. Workers don’t fit into the boxes that they traditionally fitted in. And either it’s opening up to that and recognising that it’s a very different proposition, or it’s the platform approach of bringing third parties in who can do it. So banks, insurers etc. would’ve traditionally dealt with a large employer to help them, particularly on the insurance side, some of those products we’re sold through the employer, that’s how they would get to people. That traditional employer isn’t there anymore, and even the platform cannot play that role now, because we’re no longer in this singular I work for somebody for life, I have one job. One approach is get everyone of the new platforms to do the same as employers do, but that doesn’t work because you end up with massive fragmentation and you end up with all sorts of unexpected gaps.

So I think the first bit is to recognize, that the world is changing. And I agree with Jonathan, it’s not this year or last year, it’s been changing for a long time, it just has accelerated. And also, the whole platform discussion on the bad side has probably brought it to the surface, which isn’t necessarily a bad thing, it was brought to the surface to actually be addressed. Something that in reality was slightly below the surface for a long time, self-employment has been around for a long time, some of the shark practices have been around for a long time, there’s now some very large things that people can focus on and think how can we fix this? I don’t think there’s one simple answer, though.

BR: The reason I ask is because I think it’s a two way street, with a financial services company like Nationwide, because you want a route to market through those guys, because they’ve got millions of customers, but in the same time is not just that you might want as Nationwide to offer the Trezeo service, it’s also that if you’re going to be able to sell some traditional financial services, you almost need a platform like Trezeo to get those self-employed people in a shape where they become bankable for some of your products, right?

GM: It’s been one of the ideas behind Open Banking from the beginning. As a lender, does having access to someone’s full suite of current accounts help you assess them for lending, does it help you lend to more people, more quickly, does that help you give quicker declines if something is not there? And that’s probably right for some parts of the market, but again, that’s going to help people with money and choice, where more money accrue more choices more quickly. I think it will help some people who are on the margins of affordability, checks aren’t lending but, just the sight of all the current accounts won’t necessarily help mainstream lenders who have set risk scorecards and matrices make sense of gig-workers’ fluctuating hours and work on different platforms and mechanisms of payments. So I think, there is room for lenders to loosen up and get to grips with how do you risk-assess these new types of people, and at the same time as we’re learning those lessons, partly through Open Banking technology, there’s got to be room for income smoothing.

Everybody deserves to be able to think and to plan for their future — if they choose not to, it’s a choice — but they deserve the right to do so. But until you’ve got your income smoothed and some kind disposable income identified and the market has created products for you, it’s not really a choice, is it? The self-employed goes without a pension, the self-employed goes without some of the insurances and the important personal and family protections that the rest of us have. That’s an awful lot of families that are going to be going without something that 20 years ago most of us would’ve got. That’s not quite right. — GM

BR: So we interviewed some of the Trezeo users today, and a common theme was that Trezeo is helping them to build a credit score, because it’s providing credit, and it does so without doing maybe some of the ex-ante checks that atraditional lender would do… so that’s what I meant by, once they have that credit score through Trezeo, they then become eligible for the kinds of let’s call them higher value products that Nationwide could offer them. So it’s almost like Trezeo isn’t just seeking a route to market through Nationwide and providing a service that might be useful for income smoothing, it’s also getting those individuals into a… creating the sort of necessary underpinnings for them to be able to access a broader range of financial services.

GM: Yes, the sooner it looks to us as a lender like you have a steady disposable income and the sooner you have the realisation of that as a consumer, or potential borrower or potential insurance purchaser… the sooner we both have that awareness of your budget that you have, an amount of affordability and you have a need that you need to meet… we can more quickly build products and services that would meet those needs, because we could see what’s affordable to be able to pay, and that comes with the greater visibility that Open Banking provides, but also comes with the greater awareness that Trezeo gives to you as a consumer: I do now normally earn this much, I do now normally this much spare most weeks, when I don’t, it’s smoothed out to me through a savings buffer or credit or whatever, and now that the bandwidth problem is probably also sorted, I can day-dream about beginning to save towards a deposit. Now pension might may seem full-time, traditional employment have, I always thought I couldn’t have because I’m self-employed. No, no, no — you can have, you’ve got some bandwidth and you can go and search the market. And by the main banking providers being involved in that we can help get to more people, more quickly to help them engage in those kinds of products. Because everybody deserves to be able to think about their future and choose to plan for their future — if they choose not to, it’s a choice —but they deserve the right to choose about planning for their future. But until you’ve got your income smoothed and some kind disposable income identified and the market has created products for you, it’s not really a choice, is it? The self-employed goes without a pension, the self-employed goes without some of the insurances and the important personal and family protections. People in full-time employment are worth a lot of money, 5x-6x their salary, plus death and service benefits and things like that, and that’s without parting with any buy to purchase any other kinds of protections.

That’s an awful lot of families that are going to be going without something that 20 years ago most of us would’ve got. That’s not quite right.

So I think it’s not just on us to be able to have a greater visibility on your finances, it is on new products and services like Trezeo to smooth some of your finances, to make it a bit easier for the incumbents in particular to be able to score you for mainstream products.

It’s the case that the benefits and the services follow the user, instead of the user trying to access them. That’s massive. So if you looked at income flattening before, if your wages dropped, you’d have to apply for a loan, it’s a very binary process: this has happened. Where now, what you’re saying is that the benefits follow the user, so wherever they go, that benefit is with them. And that’s only because the technology is here. -JK

JK: Can I jump on this… I see this as one of the beautiful things that’s happening with tech. And you touched on this. It’s the case that the benefits and the services follow the user, instead of the user trying to access them. That’s massive. So if you looked at income flattening before, if your wages dropped, you’d have to apply for a loan, it’s a very binary process: this has happened. Where now, what you’re saying is that the benefits follow the user, so wherever they go, that benefit is with them. And that’s only because the technology is here. Because those insurance packages, you’re right Garrett, they’d sell it to the company, and the company gives it, but because it’s paper based it’s expensive, where with technology, and stuff like Trezeo is doing, it follows the user. So suddenly there’s a whole raft of services and stuff that people could access, seamlessly throughout their life. And it’s an ideological point of view, so is it a case that the user comes to us — a binary decision process — so is it a case that this is there for them and it follows them around?

BR: So I see how this relationship works — I’m point to Garrett and Gareth — so I see a mutual benefit for you guys to work together. But how does an individual through a platform like Labour Xchange get access to something like Trezeo? Is it an opt-in service, is it a way for employers to make themselves more appealing? Is it white-labelled, is it branded? How practically does something like Trezeo gets accessed by users?

JK: So the first thing we’re doing with Trezeo is for the Care sector. And we’re approaching it as a This comes with our platform, so you get access to this. And that’s built into our cost model with our local authority partners. And there’s a reason for that, one is that Care has got a really bad reputation, there’s not enough people, so anything you can do to make it better. But if you look at the nature of domiciliary care, it’s actually a very self-employed industry. So you go to someone’s house there, and you go to another person’s house there. So actually who’s the employer? This is my personal opinion, so apologies if it offends anyone, but you have an agency sitting in the middle, who make a lot of money from what is technically a self-employed relationship, by making them an employee, they take a lot of that pie. So if you can accept that it’s a self-employed relationship, but put those benefit packages in, so they get everything that an employed person would be, it’s a win-win, because the money is there to do it.

And for the rest of our user base, it’s opt-in. But at the moment we want to start on that: It is there for you. And if that works, then I think that would be the future.

BR: I think, in the way I’ve already addressed this question, but I still think it’s worth revisiting… it seems that we’re generally in favour of market-based solutions to these problems. But if we think about things like pensions, can these really be completely self-services through platforms like Trezeo, or does the government need to change legislation, nudge people… I suppose the question is: is the government doing enough to create the framework for individuals to access, find and use the services that they need to provide for unemployment, holidays, savings and retirement?

GC: There’s probably two things that are going on there. One is, here in the UK, after auto-enrollment which has had some success in the journey of getting employees engaged with pensions, one of the big focuses is the fact that the self-employed are not engaged with pensions and pension coverage is falling as self-employment grows, traditionally a lot of self-employed used property as their nest egg… that’s obviously becomes more and more difficult for newer generations. Certainly the government here, when it comes to pensions, have been doing a lot of work on this over the last few years in terms of not just solving… obviously, the simple answer should be well, all platforms, everybody that pays these people should also give them some money for pensions, but actually you got to make the products work first.

So what they’ve been much more focused on, and also in this environment, who is the enroller as it would be in the employment space, and how do you avoid the issue that these people work for different sources of income, they might not hit the threshold on any of those and just be left with nothing. So what they’ve more focused on initially, is doing testing in the market on first of all attitudes to pensions within self-employed. On the back of that, most people do recognize they do need a pensions and don’t have one, but also what is it that would help people get into them?

And one of the big reasons is variable income, if you’re trying to do a private pension, it would traditionally be a fixed monthly contribution. At any income, with variable income, that causes a reaction Actually I’ll do it once per year, but then of course they don’t do it. The other one is the whole concept, because they don’t have the other safety nets of locking the money away forever. So finding semi-liquid solutions that actually people can access money. But also another reason is, actually if a self-employed person wants to go and get a pension, they’ve actually gotta go and find a financial advisor, even online, and go through quite a complex process that takes a lot of brain space. If you’re an employee, even pre auto-enrollment, you’ve had a fairly straightforward method, to just go and say Actually I want to contribute, payroll please contribute for me. So, when we think about pensions, we think about all of those, why should somebody have to make a fixed monthly contribution to a pension, and why can’t self-employed have access to a simple occupational type pension like employees? And yes, then when they have the headspace to think, they can engage with the pension and actually start thinking about what do they want, do they want to think about different investment strategies and things like that? But actually, a lot of self-employed people, are mid to low earnings, actually just getting some savings going on is important. And also working out what are the things you could do by combining whether it’d be savings products with pensions, or whether it’d be even just not thinking about pensions but using things like, in the UK, something like lifetime ISAs which might be more suitable for people, and just try to think differently about it, and then test with customers.

I think one thing that is emerging, there’s nothing today in regulations that’s stopping us from doing that… so it’s just a matter of trying to find way that works, seeing it work, and then see well actually with other things that government and policymakers can change, because there’s no point in going to them with an idea. If we get something working and prove that it’s working, it gives them a template to actually take that forward.

BR: Your description of government activity sounds like they’re becoming a platform as well, right? In a way… because they’re adopting platform type approaches to innovation, small experiments, testing…

GC: Yes, so they’re engaging with the industry, but not just traditional large financial services firms, they’re engaging with Fintechs as well around how to find a different way, they’re engaging with representing bodies, associations on the pensions side, to try and work out what are the different initiatives that might crack this. Because self-employment is a fairly broad sector, we’ve got the platforms, all the way up to higher earners and professionals, and different solutions will be required for different sectors.

BR: Gareth, What about the regulators. The regulators have been quite progressive / aggressive in forcing the industry to open up. You would argue that regulators move fairly quickly, right?

GM: I’m pretty supportive too on the FCA and their to approach to sandboxing and so on… they absolutely understand that the regulations that have been built up over 15–20 years probably themselves aren’t quite enough to help you as a financial services company or you as a fintech build products that definitely work, in a very regulated environment. So why not come into the sandbox, build it right in front of the regulator who will work with you to construct the advice and they’ll give it to you as you go so they can build the regulations of the future based on the innovations of today.

BR: And do you think the UK regulator is particularly progressive?

GM: It’s the only regulator I know anything about. [Laughter] That approach, when you compare FCA with regulators of other essential services and industries in the UK, I think they are clearly the most focused on vulnerable customers which many people in this gap would fall into. Certainly their income is volatile enough that at any one point might be in trouble eventually. I think they’re the most forward thinking in helping the industry that they regulate to innovate. I think in other industries some first would find themselves in fear of their regulator rather than finding them a co-collaborator in building future products and services to help the customer base. I think the FCA are a good example of a regulator here.

GC: If we’re taking an example of something they’re working on at the moment. Almost going beyond their core regulatory piece, they’re doing a big piece of work on inter generational finance, what does it mean?, how does the financial industry need to evolve as the generations shift, as self-employment and gig work becomes more prevalent, as more and more are in that space without the protection etc. So they’ve been doing a big discovery piece with industry, both financial and non-financial industry, what does that mean for the future, so that they can start thinking about their regulations and if there is change required to help that as it evolves over the next 5–10 years, they’ve started to look further out.

JK: Sorry, if I can just try to read the analogy. My parents’ generation were told, and they really did believe that through their National Insurance there was an individual pot of money for them, for their pension and sick pay that followed them around, which is a gigantic lie — it’s just a tax—but actually for the first time ever there is an opportunity for that to be what it is. Everyone has this benefit that follows them around. So we’ve had a lie for the past 100 years that this what the situation has been, and it hasn’t, but we have an opportunity to make that reality.

BR: Penultimate question, Jonathan… so you strike me as not just an optimist, but someone who is actually working day to day to fix some of these problems. All of us have talked about how these problems have been gradually evolving over time, and all of us have said that they have now come to a head and we’ve starting to deal with it. So, how did it come to a head and do you think we’re dealing with it urgently enough?

JK: How did it come to a head? Basically because enough people are in pain. Actually, the people we’re talking about and I’m passionate about, let’s be honest, are ignored virtually by everyone. The chances are they’re not likely to vote because their time is taking up. They haven’t got a huge amount of money to spend, so you can’t sell them loads of stuff. They’re struggling day to day, they’ve been ignored for a very, very long time. And what we’re seeing is a world falling apart at the moment, because there is a lot of ignored people who are struggling. So I think that is what helped bring it to head. Brexit, Trump… they are people crying for help, the life I expected isn’t here, please help me!

So I think it’s quite good that suddenly we’re waking up that well, these people exist! People who’ve got mould on their room, all over their place, and the landlords aren’t fixing but they can’t afford to move out. No one has voiced these people! And we have to think is this the society we all want? Because it’s falling apart in a lot of ways.

And on a positive point of view, we are having this conversation, and we can shape the future, where we can go it can be inclusive, it doesn’t have to be like now. The way I equate this, McDonald’s have banned plastic straws because people went: this is not good, ban plastic straws. Collectively we can achieve a world where work should be decent, fair and people should be supported. And we can do that. I haven’t met a business owner who is a bad person. Who wakes up in the morning and goes how can I exploit staff today? And I haven’t met people who are lazy going I’m not going to show up to work. So if you work on the basis that you’ve got employers who want to do the right thing and you’ve got people who want to work hard, the rest is actually quite easy. We just need to make it happen.

BR: Ok. This is the final question, the same to each of you. One of the themes we like to pick upon in this podcast is one where we think, a bit like you said earlier on, we think the whole notion of tech backlash, tech pessimism should be debunked because there’s no reason why should necessarily follow that tech should lead to worse outcomes. Because I agree with you, tech is in the hands of people, people are generally good, right? So from each one of your perspectives, tell us why you’re optimistic about the future. Starting with you Garrett…

GC: I think one of the key things tech does is, used right, it enables solutions to be provided to these people at a granularity that actually wasn’t possible in the past, and it’s one of the reasons they were ignored because they were never a profitable customer base, because they were too different and too dispersed. But technology allows you to shift the costs of servicing them so dramatically that you could do things differently. And that is using technology and data correctly and ethically, for the customer’s benefit.

GM: I think as a risk of technology being the main way that these benefits are deployed is that people who aren’t as connected with technology or digitally-savvy are going to be left behind. I think the reason I’m optimistic about the future is that technology isn’t the thing that everybody is being a big nay-sayer about anymore, they kind of accepted that it’s here to stay and it’s coming even more, how can we make sure everybody’s included so at least they’re asking that question. And you’ve got people’s organisations committed to keeping the local branch networks open, because local communities need physical presence in the high-street. You have organisations thinking about how can we make sure that if not everybody has broadband connectivity in their home, at least have access through the high-street and things like that. I’m optimistic because consumer groups are no longer saying boo-technology, no, is bad, but are now saying yay-technology, how can we make sure all of our client base are included, so they are engaging with it differently. And I think they as consumer groups and the consumers they represent have some of the answers within them: business, society, civil society can work together to make sure nobody gets left behind if technology does help bring the future in.

JK: Hmm… I’d probably say Cadbury’s.

BR: Go on…

JK: The industrial revolution brought massive change. You’ve had some bad factories, you had some good factories. And you’ve got people like Cadbury’s. They were very forward-thinking. And they built towns and villages for their people and looked after them, and actually they’ve thrived because of that. So yes, the industrial revolution shook everything up, but by people doing and leading the right way they had profitable businesses and drove society in the right direction and I think we’re in that point again.

BR: Great! So to summarize, it’s obvious that we’re going through a massive structural shift, but there are plenty of reasons to be optimistic that at the end-state of this structural shift things would be better for everybody, but particularly those people that have been overlooked and ignored for a very long time. Gentlemen, thank you very much for your time, that was a great discussion.

All: Thank you.