This post is inspired by two things. The first is a CNBC report of the 28 year old “Miss Excel” made $100,000 in one day by having a unique way of teaching Microsoft Excel skills in TikTok and Instagram. The second is a bad & old day example of how the system had not only a racial discrimination but “credential discrimination” that hardly anyone has talked about, as shown in a movie made in 2004 based on true life stories.
How the World Is Changed by the Pandemic
This article of Hubspot offers a good summary of the changes we have seen since the pandemic on social media. Unlike some authors making up a few weak points to fill up the page of a report, this article does seem to have substantiated every point it makes. Among the more noticeable are the increase in social media users: 11% more worldwide, from roughly 3.4 billion in 2019 to 3.78 billion in 2021. Also the video content is now a big winner that “media uploads increased by a staggering 80% year-over-year — peaking at 103,603 video uploads on April 22.” Finally, the influencer marketing “went from $1.7 billion in 2016 to $9.7 billion in 2020 — a staggering 470% increase.”
While changes in social media are true and visible, it helps to think of changes in the entire world. I want to use the following metaphor to describe the story: The global train has been moving fast in a foggy dark night but suddenly hit a huge rock sitting on the track. The impact immediately derailed the train and killed some passengers, especially those sitting near the locomotive. Fortunately most passengers survived but also stuck in the middle of nowhere waiting for the rock to be removed and the train back to the track. Being forced to stop gives passengers the rare opportunity to think about things they did not have the chance, time or willingness to think, like what they will do once they reboard the train — or whether they should reboard it at all.
It is this group of passengers who decided to walk, to get a ride on their own, or to look for a different train that I find most interesting. They form the human capital or the supply forces behind the new economic sector.
Name the New Sector
What new sector are we talking about? One seemingly good way to name it is the “Creator economy” as briefly mentioned in the aforementioned article. But no, I choose not to call it by that name. For one thing, “creator economy” implies there is one sector of economy completely driven by creators, while another by non-creators. Economic activities have always been mixed and mingled by creators and producers together. It is better that way since these two groups can complement and inspire each other.
To the extent that we have always had creators, “creator economy” is nothing new, either. Finally, the name is too general and not location specific. I prefer the name “home based” economy, which includes “full time home based” and “part time home based,” like when companies ask employees to work 2 days at home and 3 days in the office (or the other way around). Those 2 days would be counted as a part of home based economy.
While dividing the economy into sectors of creators and producers makes little sense, dividing it into “home based” and “office based” sectors is reasonable as we have been all staying in home since the pandemic. The only difference is that when things are back to normal some will choose to continue their home stay and find business to do from there.
I contrast “home based” with “office based” because most people with the privilege of working from home are white collars normally working in offices.
Home based economy, if we count in the part time at home workers, could have another name of “flexible economy” in which workers have the flexibility to work part time from home.
Why Is It a Big Deal?
Ever since the Industrial Revolution, economic production has always meant to leave home to work, get paid and come home for rest, preparing for another day of the same process. Working from home has been related to housewives or the primary economic activities commonly seen in the third world or less developed countries.
As we know, COVID-19 pandemic changed all that. But is the new sector good for the economy overall? The answer is positive. I am hopeful that this new sector may be the biggest social and economic gains when we walk away from the COVID crisis — if we do things right.
Home based economy has received an encouraging sign from the wave of “great resignation,” which partly reflects the “great rethinking” among some “passengers” from the crashed train. There are three possibilities from the rethinking. many will end up returning or reboarding the old train; some will leave the labor forces for good, and finally some will find new directions or a “new train” to board. It is the last group that is most related to home based economy.
The “TikTok Economy”
My train wreck metaphor is inaccurate in at least one sense: When the crisis hit, life did not just stop. The surviving passengers did not sit there waiting for the rock to be removed. Instead, they have found other things to do while waiting. Top the list of “other things” is the social media, which goes back to the previous article talking about changes in social media.
Among all the social media, I would say TikTok, and Instagram stand out in turning young people into entrepreneurs. The new economy may be called “TikTok economy” in that sense. The point is that a new economic sector does not fall from the sky; it must be cultivated, nurtured and encouraged by seemingly unrelated changes and things.
Speaking of TikTok, let us not forget that Trump almost killed TikTok from operating in this country — in the name of “National Security,” a dangerous attempt that was thankfully halted by a federal judge. In retrospective, I want to say that in many ways Trump acted exactly “like a bull in a china shop” or “an elephant in a porcelain store” as the idioms in a few European countries have it. The US will be definitely better off without Trump in the office again.
A Model of “Heart + Money”
Much of the home-based economy starts from personal side hustles that turn into major money making business or professions. This begs the question of whether it represents the future of work, at least a part of that future. My hope is that the future economy will be more individualized, more flattened and most of all, more personally engaging than it is now, when most people are taking it for granted that they will seek to gain employment by a firm, preferably a famous one, even at the cost of hiding or compromising their true identity, true preferences, and true personality.
When the majority of people hold an “employment-seeking” mindset, it is the firms, especially the more established and more privileged ones already dominating the job market, that gain more power. But in the spirit of encouraging home based economy, we should ask ourselves this question, “Do I want my life to be totally defined by a firm that I work for, or do I define it my own way?” Post-pandemic is the right or the best time to ponder.
This does not mean to ignore the office based economy and go all the way straight to home based. I have no problem nor doubt with office based economy continuing to dominate — as long as we create space for home based sector to grow. The two sectors should have peace in co-existing and complementing each other. There are also people finding office based economy fitting perfectly with personal goals, which is nothing less than a blessing. Finally, a home based economy does not mean it will stay in home forever. To win economy of scale it will have to grow into office based unless the goal is just to gain $1 million for retirement. Ideally, the market will have a high efficiency when individual home based business tests the market with new side hustles and the successful ones with proven market needs will grow into larger, office based economy.
Speaking of personal goals, home based economies allow workers to follow their hearts in career life. To be sure, some workers work on the sideline purely out of financial pressure, but at least for some home based workers, side hustles are the things they really enjoy doing, perhaps more than their main job duties. The latter is what they do to make a living, while the former is to keep hearts warm and dreams alive.
As many entrepreneurial stories tell, following one’s heart can and do allow one to get the money. Of course, the media love to report stories of those making six figures of income by doing just side hustles or passive income. One must keep a sober mind and do not get expectations out of a reasonable range. Other than that, I do believe it is possible to monetize your passion in a model of “Heart + Money”.
Advantages of Following the Heart to Make Money
The nice thing about the “Heart + Money” model is that money here has a new function that did not exist before: It tests the “goodness of fit,” to use a statistical term, of your passion to what market wants. The market will reward you, sometimes handsomely, if your side hustle offers something new and exciting. No traditional marketing is required. For Miss Excel, all she did was to keep posting her video on TikTok once a day and she “didn’t tell a soul other than my mother and my boyfriend.”
Any successful side hustles that grow into a profession must have done two things right: Their side hustles have a big enough market to provide a major and stable income; and they must be good at what they do to win market competition.
In the “Heart + Money” model the money is also more rewarding per dollar paid. Other things equal, workers do not feel too much pressure from working on their “heart projects,” because they love doing those things. This reduces the cost of “sweat equity” and thus the cost of innovations, changes and risk-taking. Think of two workers, one gets paid only through his full time job, while another also from a side hustle she loves. Now let’s say they both are paid $100 a week from the same main job, but she has an extra $50 a week from the side hustle. That $50 would mean more than the $100 to her, perhaps a lot more.
The “Gatekeeper” Economy
Office based economy has contributed a great deal to the overall welfare of citizens of this great country. It is not exaggerating to say that without firms like Fortune 500 or S&P 500, the US will not be the way it is now.
That said, office-based economy has two trade-mark features. It is a “Gatekeeper economy” and there is typically, although not always, an “Imperfect match” between entity goals and personal goals. They are not necessarily weaknesses, just something with a part being liability and a part being asset, “Asslial” to use a made-up word. But these two features, especially the first one, is how home based economy makes a difference.
The defining feature in a gatekeeper economy is that there is no direct interaction between workers and market. Workers must first be hired by a firm or an entity by going through a gatekeeper of qualifications. Without being qualified for a firm, the market does not even know the existence of those workers. The home based economy on the other hand allows a worker to directly enter the market on his or her own to test ideas, products, services that are either non-existed or existed but can be improved.
Learning from the Vivien Thomas Case
To illustrate the difference, it is best to discuss the movie “Something the Lord Made” in 2004, which is based on true stories. I cannot stop thinking after watching it for the first time last week (officially last year by calendar). Read this introduction of Wikipedia if you have no access to the movie but of course, no words can replace the movie itself.
The Wikipedia article told me something I did not know, like the movie “was nominated for nine Emmy Awards (including acting nominations for both principals) and won three.” But it also omitted things that are very important to me: Vivian Thomas, the black cardiac pioneer, contributed so much to the modern heart surgery and yet was not allowed to conduct a single human surgery even after proving himself to be a superior surgeon than his white partner Alfred Blalock — all because he did not have a college degree.
A Waste of Talent That Hurts Consumers
In the movie Thomas ended up selling medicines to doctors’ offices after failing to find any accelerated bachelor’s program, and also after finding that his white partner Blalock did not even mention his name once in his speech accepting the award and recognition under the limelight. Meanwhile, parents lined up from all over the country, sometimes driving thousands of miles away, just waiting for the only qualified surgeon, Blalock, to save their babies.
That was a tragic waste of talent in a gatekeeper economy, with consumers (the parents of the “blue babies”) suffering the most. It did not have to be this way, as the hospital could have conducted timely surgeries using its existing and ready resource: Someone with the right skills was right there!
Unfortunately the movie focused only on racial injustice, which definitely deserves the attention, but so does the “credential injustice” that I have seen nobody raising hands for. Somehow everyone believes surgeries should be done by certified medical doctors and nobody else — even those with proven skills and top of the line capabilities. There is a clear discrimination against practical skills and in favor of the theoretical knowledge written in books.
Things have not changed much from the days the movie was depicting and reflecting. Yes, black people gained more civil rights than before, and yes, Thomas received his long deserved honorary doctor’s degree for a happy ending (more on this later), but no, not when patients needed him the most, and not when the market could have achieved a higher efficiency and it did, as this article told us:
“Thomas had investigated the possibility of enrolling in college and pursuing his dream of becoming a doctor but had been deterred by the inflexibility of Morgan State University, which refused to grant him credit for life experience and insisted that he fulfill the standard freshman requirements. Realizing that he would be 50 years old by the time he completed college and medical school, Thomas decided to give up the idea of further education.”
This upsets me, and I ask myself what the right way should be for doing things differently. My own answer is that the system should be made more flexible such that when (1) someone (e.g., Thomas) has a proven talent or a gifted skill that is (2) badly needed by the market and (3) with patients full consents, guys like Thomas should be allowed to do the surgery — with or without a medical degree.
The general idea is to let the market decide, and do not let ex-ante rules get in the way, to preclude viable choices based on presumption.
The Myth of Ex-Ante Rules
Unfortunately many ex ante rules have been regarded as necessary for protecting public interests. “You can’t let people choose their surgeons,” some would argue, “crooks will dress up as experts and patients will die!”
But that is simply a myth. To go from “letting people choose surgeons” to “crooks killing patients” requires a giant leap of faith. It is like saying “letting people learn to swim” is equivalent to “sharks killing the swimmers!” The two events are not logically isolated but there is no definite or sure link in between them, either. Just because there are sharks out there does not mean we should give up on learning swimming. By the same token, just because there are crooks out there does not mean we should not permit patients to choose doctors — as long as we provide them with fair and truthful facts. Of course some preemptive rules need to be installed to prevent perceivable danger and damage from occurring. Yet in the Thomas case I can’t think of any perceived danger involved to allow someone without a medical degree — but with proven and directly relevant talent — to perform the life-saving procedure he himself co-created.
Consumers have been preemptively deprived of the right to choose because the arbitrary rule has turned blind eyes to facts and put presumption ahead of evidence. But that is not by accident but design, as the value of all ex ante rules is, by definition, not evidence backed, only presumed.
Protecting Consumers, Even When They Do Not Exercise Their Rights
Rules like this only make some interest group happy and promote prejudice and bias. Of course, the right of people who received formal medical training is not to be ignored, just not at the cost of consumers’ right to choices. The tricky part is that most consumers do not think of protecting their right of choices until the moment comes when that choice makes a difference between life and death. Therefore, thoughtful regulators should keep consumers’ right in mind — even when they are only silent stakeholders in the game.
Otherwise if rules were only catering to those who make the biggest noises, they cannot bring justice. It helps to be reminded that there is nothing sacred about formal medical training, as many as 225,000 people die each year from medical malpractice according to an article from the Journal of the American Medical Association. The same report also tells us that
“The average annual number of suits filed each year is about 85,000, with the actual number of medical injuries estimated to be about one million per year. This means that there are eight times more injured people who never file claims compared to those who do, and only about half end up receiving any type of compensation.”
In the Thomas case, a thoughtful regulator would ask a simple question of who is more capable of conducting a successful surgery to save the blue baby’s life, guys like Thomas or someone with a MD but never did the surgery before?
An end note: According to this report, “because of certain restrictions” even the ending of the Thomas story was not completely happy, as Johns Hopkins granted Thomas not a honorary MD but a honorary of law LL.D., as if Thomas’s work had anything to do with law, and as if there were a hierarchy of honorary degrees that put a MD at the very top, above LL.D.