Introducing the 1099 Nation

The onset of the recent COVID pandemic and the related economic spiral is making one thing perfectly clear ... the W-2 corporate employment-based economy of the past is gone. Further, it's not looking like these traditional jobs will come back when the economy shifts into recovery mode.

There are many reasons for this phenomenon ... the primary reason is that there has been a prolific rise in corporate debt acquired for the principal purpose of share buybacks. When interest rates ultimately normalize, it will increase the debt burden on existing corproate entities, inhibiting their cash flow and reducing their ability to invest in growth.

In addition to this, carrying W-2 (permanent) employees has become increasingly expensive over time. As this happens, it increases the reduction in cost that can be achieved via layoffs. (Having come from the Finance discipline, I can attest that this is typically 'option #1' in the corporate cost reduction playbook)

What's the deal with a 1099?

The IRS Form 1099 is where earnings are reported for independent contractors vs. the Form W-2 for permanent employees.

What this means for the '1099 Nation' is that an increasing number of people will need to shift from seeking permanent employment to making their own livelihood.

To be successful in this new reality, there are some key changes in perspective are needed:

1) You get paid for results, not for being busy

Nobody likes to admit this, but much of corporate life is consumed by appearing busy. If you are an individual contributor, this will manifest itself in lots of meetings, status updates and other items that could probably be replaced with a disciplined email. If you are successful in ascending the management ranks, you can look forward to a high amount of time spent posturing to appear important or influential. Once you rotate out into the 1099 world, none of this matters anymore. If you want to generate earnings, it requires results ... period.

This phenomenon does not need to be frightening. It is highly likely that you will develop the ability to produce results with a lower time investment than is required in a corporate environment. If done correctly, this calculates out to higher hourly compensation and greater quality of life.

The reason for this is because the average worker is not productive for anywhere near eight hours per day. The survey measurements vary quite a bit, but most people generate value-positive output for somewhere between 30 minutes and 3 hours of a typical workday. If you are able to successfully focus on the critical results-based items that need to be done, this means that a disciplined 1099 contractor can produce their results in half the time of a traditional worker.

Compound this with the fact that the actual value of output often exceeds the combined salary value of all the people working on it and there is a great opportunity. (If this seems odd, think about it ... The value of your contributions to the company MUST exceed your salary or the company will go out of business. There are some exceptions for functions that get carried by the rest of the company or government entities, but this principle generally holds true across domains.

Output: Getting paid for results has a lower floor and a MUCH higher ceiling than a W-2 salary

2) You will need to go out and find your own clients

The secondary shock that most people experience is the necessity of going out to find their own clients. This is a stark difference from most corporate jobs where a person shows up, is given tasks, and is paid on a regular schedule. Success in the 1099 nation requires consistently extending yourself out into the broader world for the purpose of developing new business relationships.

When you have become accustomed to a structured work schedule, this unknown element can be completely frightening. It brings in a swirling universe of unknown variables and continued uncertainty that cannot ever be brought under control. All of this is true and it is reality ... the real world contains continued uncertainty that will never, ever, EVER actually be under control.

The good news with all of this is that you will be shifting from dependence on an employer to sustain an artificial facade of predictability to architecting your own reality.

Again - there is a serious silver lining here. All of us who have been in corporate employment have paid a very high price for stability and security. This price comes in the form of surrendering our ability to chart our own path and only being paid a fraction of the full value for our skills and abilities. (Granted, this is not 100% accurate ... There are always people who manage to hang on in corporations without generating real value, but for the sake of illustration I am focused on the core value-effort dynamics)

Now we get another serious silver lining ... Your 'performance review' is now based on your results. The days of annual reviews where subjective assessments, favoritism and group politics get logged in your HR record are coming to an end. Instead of posturing against the other people in your work team for the coveted 'Exceeds Expectations' performance rating, you are now in the business of generating high value and being fairly compensated for that value. This can feel frightening at first, but is ultimately very liberating.

The economic value of organizational politics is negative. This means that real value must be generated in other parts of the organization to offset the value drag from all of the aggregated politics. The more politics are involved at your company, the more of a value offset is required.

This creates a very serious problem for many people: Ascending the 'corporate ladder' requires acquiring significant skill in an area that has negative economic value.

Output: The 1099 nation doesn't have the ability to hide behind a corporate balance sheet. We need to generate value and do it without drama.

If you find yourself in the 1099 nation (Either by choice or not) it is a tremendous adventure. See it for what it is and seize the opportunity to create the life that you want.

If you have read all the way to this point, thank you very much for your attention. Please stay tuned for the next iteration of the '1099 nation' and its impact on our lives.