My research into what this “Gig Economy Thing” is all about continues to uncover more and more interesting aspects that I’m not sure are truly being addressed by any one person or organization resulting in a myriad of opinions some of which appear thought out and others not so much. Some of this is due to it not just being relatively new but also as a result of these activities, there appears to be a new employment designation arising as a result of these confusions as this continues to iron itself out which I will explore in a future post. The first question was the most obvious; “What’s the difference between Gigging and Freelancing?” I discovered that although they are frequently used interchangeably, digging deeper demonstrated that is not the case especially due to the persistent growth of the On Demand App aspect which doesn’t necessarily require a specific skill set whereas Freelancing does. You can review that here. The one thing that differentiates a traditional employee from those in the Gig Economy is their tax status of 1099 from which I discovered that this is not a simple tax designation as evidenced by the number of various tax codes. This then brought up the fact that technically those that are considered “entrepreneurs” are also under the 1099 designation so how does that play into the Gig Economy thus explored?
Interestingly and amusing that poor ol’ Freelancing is stuck in the midst of this contrast again, yet when being compared to entrepreneur there appears to be better definitions which at the onset would make one think that it’s better defined but not so much as it appears that many are stuck on the allure of the word “entrepreneur” with some of them either refusing to accept it or at the least not happy about it. The illusion comes from the misconception that anyone who is in business for themselves is an entrepreneur and even further compounded by attempting to understand if one is better than the other or that there’s a wide gap between the two or putting the two together as if they were the same thing but never delineating it. Frustrating when all you want are answers on what they are and how they are different so as to know how it all applies to this Gig Economy.
The dictionary definitions that many articles use further compounds this confusion because although they all have similar initial definitions, it’s when you look at the second definition that it becomes apparent how this definition is being confounded due to “cherry picking” the one you like the best. I’ll use the version from dictionary.com for my example:
- a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.
- an employer of productive labor; contractor.
Its origin comes from the French word entrepredre which means to undertake (1875-80; < French: literally, one who undertakes (some task)). There’s also an indication of its use in connection with theatrical production; 1828, “manager or promoter of a theatrical production,” reborrowing of French entrepreneur “one who undertakes or manages,” agent noun from Old French entreprendre “undertake”. The word first crossed the Channel late 15c. but did not stay. Meaning “business manager” is from 1852”. In contrast to this is the Oxford online dictionary’s definition; “A person who sets up a business or businesses, taking on financial risks in the hope of profit”. This definition only references “business” with no reference to enterprise, both mentions risk, yet the latter “hopes” for profit. Using the French derivative of “one who undertakes or manages” you can understand how some would think that if they are in business for themselves in any capacity they are “undertaking or managing” a business yet its use has continued to expand over time.
That’s enough of these “Blathering Vernaculars of Confusion” as the more you look, the cloudier one’s understanding becomes. A post on Seth Godin’s SAMBA Blog titled “Freelancers vs Entrepreneurs” (author not given) published on October 7, 2010 confirms these confusions perfectly “The term entrepreneur is overused. And in these challenging economic times, more and more people are calling themselves entrepreneurs. Problem is, when a term is overused, it loses meaning and impact. Many self-declared entrepreneurs are actually freelancers. It’s important to make a distinction here because knowing which you actually are will lead to better decisions.” One of the reasons why this SAMBA post is so poignant is because the delineating definition of freelance versus entrepreneur came from Seth a few years earlier and is quoted quite frequently since. His post titled “The Difference Between a Freelancer and an Entrepreneur” published on December 16, 2008 simply says this, “A freelancer is someone who gets paid for her work. She charges by the hour or perhaps by the project. Freelancers write, design, consult, advise, do taxes and hang wallpaper. Freelancing is the single easiest way to start a new business. Entrepreneurs use money (preferably someone else’s money) to build a business bigger than themselves. Entrepreneurs make money when they sleep. Entrepreneurs focus on growth and on scaling the systems that they build. The more, the better.” Another way of putting this in a single sentence referencing the Gig Economy is “Freelancers gig, Entrepreneurs don’t” because the entrepreneur is busy building a “scalable empire” that eventually removes them from their immediate involvement as it scales to higher levels. What I would call a “pure” entrepreneur is knowingly building a scalable business or at least one that can be converted to scalable. They also are known to put in more extreme hours in the early stages but then little by little remove themselves as it continues to scale upwards. Seth goes on to say in this post, “The trap is simple: Sometime freelancers get entrepreneur envy and start hiring other freelancers to work for them. This doesn’t scale. Managing freelancers is different from being a freelancer. Managing freelancers and saving the best projects for yourself gets you into trouble. The cash flow gets you into trouble. Investors don’t want to invest in you because you can’t sell out if you’re a freelancer at heart. If you’re an entrepreneur, it is impossible to succeed by using your own labor to fill the gaps. That’s because your labor is finite. It doesn’t scale. That’s because if it’s a job only you can do, you’re not building a system, you’re just hiring yourself (and probably not paying enough either).”
Now we’re getting somewhere. The Freelance/Entrepreneur Fog is beginning to clear. As a freelancer you have a ceiling on your income because there are only so many work hours in a day, week, or month which caps your income. Even if you raise your price, it only raises the cap as there will always be a maximum capacity which can’t be scaled beyond that. The question then arises if that is good enough for you. If you’re making a good living meeting all of your needs then all is well yet if the words “unlimited income” are in your vocabulary then new decisions will need to be made once your freelancing endeavors have taken off and begin to move towards that inevitable income cap.
Using the “money while you sleep” reference which can to some degree “build a business bigger than themselves” begs the question of if someone participating in the Gig Economy can “scale” their activities to at least include some aspect of “money while you sleep” and it appears that you can if you modify or augment this definition somewhat.
Two articles I discovered somewhat mirrored the conclusions I have been coming to. They are “When is it time to stop calling yourself a freelancer and become an entrepreneur?” by Amber Leigh Turner published on November 17, 2012 and “Are You a Freelancer or an Entrepreneur?” by Leah Kalamakis no published date given (there is a mention of 2015 in the comments). Although they are coming from two different directions, their conclusions are primarily the same that you can have a combination of the two. One knew that from the start and the other began to figure it out as more varied types of opportunities came her way such as consulting and writing a blog for a website. These sometimes resulted in side projects which little by little began to take on a life of their own. This is similar to the concept I developed for OTJ HelpDesk. Consulting for Metrics and Reporting, freelancing for various types of Excel work, and creating online courses for residual “while you sleep” income. Then as the business develops I intend to expand the concept of OTJ HelpDesk from just being metrics and Excel to bringing in some “friends with mad skills” to expand on the concept of “Quality Services from The Cloud”.
Will that make me an entrepreneur? That depends on one’s definition. Some of the websites referenced and/or quoted for this post would concur while others wouldn’t because it’s all based on individual definitions. For me it’s not about tagging myself as one thing or another. I see it as fulfilling a business need meaning I will be at the minimum an independent businessman whose income generation comes from both freelancing (because I love to do it!) plus residual income from teaching online courses. From there the sky is the limit and the only thing required is an open mind and lots of creativity both of which I have in abundance.
Previously I mentioned modifying or augmenting the definition of entrepreneur in order to accommodate the Gig Economy. I now think it needs to be done with independent 1099 employment in general so here’s my take that incorporates all levels discussed. There are 3 levels of entrepreneur, essentially Low, Mid, and Upper or whatever terminology works best for you. The Low level could be better described as “entrepreneurial” because not all of your income is “while you sleep” but a percentage of the total. A quote from Leah’s blog says it best “this year 40% of my income came from “passive” sources” and that is exactly my plan”. The Mid level plan would be more akin to running a business that gets slightly expanded such as opening a store which leads to several more where the original owner has gotten to the point where he or she can hire staff to run the businesses and just takes a cut of the profit. This would be the lower level of entrepreneur because the businesses will operate even when the owner takes a long Caribbean cruise to the Congo yet due to the current operating plan it’s not scalable beyond a handful of stores unless significant changes are made to open it up to larger levels of scaling. The third is obviously the full blown version that comprises the initial dictionary definition involving long arduous hours building a business model that is scalable to the level of becoming an enterprise. Most any freelancer can acquire the Low level entrepreneurial because there are lots of variation of residual income with affiliate being one of the more popular and a subject I will eventually address because it too has caveats that need to be considered.
The final question may be if a freelancer can become an entrepreneur? Based on what I’ve discovered and outlined above I would say yes but with the caveat that it all depends on the business model and if or at least to what degree “scalable” is kept in mind and deployed keeping Seth Godin’s definitions in mind in order to stay on target. This cannot occur though with those in the On Demand App aka Uber/AirBnB type of businesses because the individual employee does not have the ability to scale it as that was already done by the entrepreneur that started it. The Gig Economy offers a wide variety of possibilities for those who knowingly or unknowingly become involved with the only thing impeding them is their creativity in conjunction with their skills.
Resources quoted and/or referenced:
- The Difference Between a Freelancer and an Entrepreneur
- Entrepreneurialism vs. Freelancing. What’s the Difference?
- Entrepreneurship vs freelancing — which is better?
- Entrepreneur vs Freelancer – Is there a difference?
- How to Make It as a Freelance Entrepreneur
- Entrepreneur or Freelancer – What’s the Difference?
- When is it time to stop calling yourself a freelancer and become an entrepreneur?
- Are You a Freelancer or an Entrepreneur?
- The Wide Chasm Of Difference Between Freelancer And Entrepreneur
- Freelancers vs Entrepreneurs
- Seth Godin On The Difference Between A Freelancer & Entrepreneur (video)
- Freelance or Entrepreneur | Seth Godin (video)