Entrepreneurship is the future of work. It is a future where everyone inside or outside of their employer has access to tools and technology to create new products and services and can do so easily and at scale. Entrepreneurship (or intrapreneurship) is a necessity for workers because we’re living in an era where many employers have less loyalty to their employees. There is also a widening skills gap as the workplace of the future becomes more reliant on technology. In many cases, companies are using technology to replace employees, which is helpful for increasing productivity, but poses a threat to workers in vulnerable roles. Because of these and other factors, we believe the next generation of professionals will be forced to design their lives differently such that entrepreneurship is no longer a buzzword, but a necessary and integral part of their professional journey. In the following sections we’ve listed our reasons for why we believe we’re moving toward this new paradigm.
Over the last 50 years, employers have taken on less accountability for ensuring employees are taken care of in retirement. In 1975, there was a significant change in the way employees earned retirement benefits. During this time in corporate America, most major organizations had a pension plan that provided employees with a percentage of their salary (usually between 65 and 85%) after a defined period of employment. Pension plans are great because they provide guaranteed income for retirees. But they are expensive for public corporations who are on the hook for funding them regardless of how the pension plan investments are performing. If there are more people retiring than there are assets available to fund their pension plan payments, a funding gap is created called an unfunded liability. An unfunded liability of zero percent or lower is desired, but for many public pension plans this is not the case.
In the early 80s, the employee-directed 401k plan was introduced and today pension plans are rare at private corporations. As of September 30, 2022, 401K plans hold ~$6.3 trillion in assets in more than 625,000 plans for 60 million people. Pension plans, unlike 401k plans, are professionally managed and regularly funded. The underlying portfolio construction of an individual 401k plan is selected by the 401k participant. The participant also decides the amount she wants to invest. As such, each 401k participant’s investment performance will vary, thereby creating uncertainty in knowing how much that person will have when they retire. As such, individuals relying solely on 401k assets for income in retirement may benefit from additional income streams.
Our society continues to shift from industrial to technological. In 1965, the number of manufacturing jobs in America remained at or above 16 million workers, peaking at 19.5 million workers in 1979. Since 1979, the number of manufacturing jobs has fallen 35% to 12.9 million workers as of December 2023. A few of the drivers behind this change include outsourcing, automation, and a shift toward a more service-oriented, consultative society.
On the other hand, the number of core IT positions is expected to increase in the U.S. from 5.78 million people to 6.7 million by 2033. “Information technology stocks currently represent the largest sector of the benchmark S&P 500 Index, comprising just under 29% of the index’s value. When you add in communications services stocks, many of which connect with the technology arena, the group represents more than 37% of the S&P 500.” Technology companies will take further dominance in modern societies and workers unable to adapt may be left behind.
Throughout history innovations in technology have made us more productive. Industrial automation has reduced the need for manual labor, and technological innovations (especially generative AI) threaten to reduce personnel needs for service-oriented labor.
According to McKinsey’s 2023, Gen AI and the Future of Work report, Gen AI can be “used to write code, design products, create marketing content and strategies, streamline operations, analyze legal documents, provide customer service via chatbots, and even accelerate scientific discovery.” By 2030, analysts at McKinsey anticipate 12 million occupational shifts (i.e., job losses, transitions, or eliminations). Of the 12 million - 1 million workers in healthcare, STEM roles, business, and legal will transition to another occupation; 1 million workers will be reskilled and positioned for lifelong learning to continue in roles such as construction, property maintenance, education and workforce training, agriculture, and creative arts; and 10 million workers in production work, food services, customer services and sales, and office support could face declining occupational relevance. Workers affected in this new occupational paradigm will need to find other means to survive.
According to Careerbuilder.com, there are approximately 72 million millennials in the U.S. workforce, which represents a large part of the working population. Millennials have a high propensity to frequently change employers, doing so on average every 2.75 years. They have no problem leaving an employer for a better opportunity. In comparison, Baby Boomers stay with their employers on average for 8.25 years but often face age discrimination despite their ready skill set. For employers, finding and retaining talent is an ongoing challenge especially at a time when the majority of the available workforce is comprised of individuals who are unlikely to stay and grow with the organization.
The ongoing spate of tech company layoffs does not inspire confidence to prospective and current employees either. In 2023, 1,188 tech companies laid off 262,595 employees. Meta led all tech companies with 10,000 layoffs in 2023, and Amazon was close behind with 9,000 layoffs. Laying off employees is not unique to the tech sector. However, given the high societal and financial impact these companies have, the ripple effects of these layoffs stretch far and wide.
We’re bullish that the next generation of global companies will be those creating technologies that provide individuals and businesses with easier access to capital (loans, lending, payments, transfers, etc.), services (legal, health, accounting, banking, etc.), and products (tech stack, tools, SaaS, platform, ops, etc.) that help them be more productive and increase their value. To succeed in today’s decentralized and hyper-competitive society, it will require a mindset of entrepreneurial independence. In the future we envision, everyone will think of themselves as entrepreneurs as a means to thrive. Hence, entrepreneurship will be the future of work.
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