The following thoughts may serve as a contribution to the discussion about the policy frameworks that may be needed for economies to thrive in an Entrepreneurial Society:

1. Downscale rules and regulations

Rules and regulations have been introduced over time to ensure quality, safety and consumer protection. However, bureaucratic red tape slows down businesses dramatically. The Sharing Economy demonstrates that a lot less regulation would suffice. A middle ground between laissez-faire and the current status seems advisable for public policy along with the creation of a level playing field for all market participants. If businesses and the economy are to thrive, bureaucratic red tape needs to be dramatically curtailed – the red tape created by legislation as well as self-inflicted red tape caused by information and controlling overload within companies. There is an essential need to move from a society of control to a society of trust – not just in management, but overall.

2. Rethinking taxation and social insurance for low income groups

For many the only option to find work will be to become freelancers. Economies that wish to maintain a living standard that will enable growth will need to rethink their taxation and social systems. Many countries still tax people on earnings below the poverty line or even push them below the poverty line through taxation.

Rather, small incomes would need to remain untouched and taxation would need to start at higher income levels. For societies this would present a far less expensive option and would ensure that people create jobs for themselves and continue working, earning their own dues without the need for government welfare programs. While insecure contingent jobs will increase further, a new social contract will be needed because existential fear will not enable economies to grow.

3. Don’t allow credit crunch to derail growth

Often SME owners and freelancers find it difficult to raise funds for their businesses or to purchase a residence: banks rate their income as too insecure. SMEs and startups may turn to crowdfunding. A recent study of crowdfunding platforms showed that their fees and conditions are costly (currently up to 14 percent for the funds received in addition to yearly dividends). Lawyers and auditing services add to these costs. Even for high risk investments this seems too expensive. If we pin our hopes on startups and SMEs to induce investment and growth, then public policies will need to address these issues.

4. Prevent tax leakage

Many countries have closed their doors to platforms like Uber and Airbnb because their  current legal framework is geared toward the stabilization of pricing or securing minimum standards in quality, security and income. Companies in the Sharing Economy charge an average of a 15 to 30% commission on the earnings that people make on their platform, which extracts value from the countries where the services are rendered. Should platform companies commit to setting up local branches so they can be taxed on their local profits and provide quality assurance to consumers locally? This would ensure all market participants and users of an infrastructure in a country contribute to the upkeep of those services.

5. Education and skills gap: We need to teach the adults!

The willingness to retrain and upskill will be necessary for future employability. Linear predictions of masses of unemployed people imply that people will resist learning how to do new jobs. Historic evidence demonstrates otherwise: Throughout the industrial era, people sought education whatever their role.

Graduate-level education for adults should be of similar significance as educating children, as well as be affordable if we seek to qualify an existing workforce and to make knowledge operational quickly.

6. The age of individual uncertainty: risk-taking and effort should be rewarded

For societies to prosper, conditions need to be rewarding for many, not just for a handful of people. In extractive societies the societal layers are impermeable; therefore, effort isn’t rewarding and so stops. Inclusive societies that reward risk-taking and hard work have enabled economies to thrive because people were able to move upward socially [3]. For engagement and entrepreneurship to be sustained in an economy, prospects need to be provided.

7. Disrupt Yourself – become a network, be part of networks

In today’s highly complex and fragmented world the network is the most successful organizational form. Therefore, governments and businesses are well advised to work with and in networks. In networks, changes can be created collaboratively and will be endorsed instead of imposed. “Cooperation creates prosperity, closed systems deteriorate” is the distilled analysis of Alexander Pentland [4]. In a networked economy it is no longer only about “competition is good for business”. Today, “cooperation is good for business“.

About the authors:

Isabella Mader is Director of the Excellence Institute and university lecturer at several universities mainly in the fields of Knowledge Management, Information Science and IT Strategy. 2013 she was awarded “Top CIO of the Year”. Her current research focus lies with Network Economy and Collaboration.

Wolfgang Müller is Deputy Chief Executive Director and Chief Operations Officer of the Vienna City Administration. He has a Masters degree in Law and a Master in Business Administration.

The opinions and views expressed in this article are those of the authors, and do not necessarily reflect those of the institutions to which they are affiliated.

[1] Pofelt, Elaine; Shocker: 40% of Workers Now Have ‘Contingent’ Jobs, Says U.S. Government. Forbes, 25 May 2015. [Online]: http://www.forbes.com/sites/elainepofeldt/2015/05/25/shocker-40-of-workers-now-have-contingent-jobs-says-u-s-government/

[2] Deaton, Angus; The Great Escape: Health, Wealth and the Origins of Inequality. Princeton University Press, 2015

[3] Acemoglu, Daron; Robinson, James A.; Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Publishers, New York, 2012.

[4] Pentland, Alexander; Social Physics. How Good Ideas Spread – The Lessons From A New Science. The Penguin Press, New York, 2014.

In addition, such commoditized labour experiences a globalization of competition (unless it’s bound to a site like taxi driving). Crowdworkers (freelancers on platforms) will also not have a work contract, but sign standard terms of service instead. Pay is determined by auction, not by minimum wage and work may be allocated by an algorithm, i.e. the boss is a computer.

Hence we have work ‘above the algorithm’, creating the platforms, and work ‘below the algorithm’ receiving their tasks from platforms [2]. Work above the algorithm tends to program its ideology into the code. The ideology found in a number of on-demand platforms is wage dumping. In Turkers’ (casual for freelancers on Amazon Mechanical Turk) descriptive lingo: “Wage theft is a feature, not a bug“.

We have seen this before: As one era ends and another begins, change occurs at a pace and scale that disrupts all aspects of society. We are now leaving the industrial era and enter the network society. When, over centuries, ancient civilization morphed into the industrial era, traditional craftsmen were disrupted by early industrialists. Even government was disrupted: monarchies were replaced by republics and democracy. The early industrialists, the ‘Robber Barons’, could amass great wealth in that they owned machinery and factories, giving them the power to dictate work conditions and wages. Then unions formed and re-established balance.

Today, people, driven out of regular jobs or not making enough as freelancers compete for tasks that are paid a tiny fraction of any possible minimum wage – several hundred thousands of them on Amazon’s Mechanical Turk platform alone. Just like the last era change, but with one difference: the new ‘Digital Robber Barons’ own data and infrastructure as intermediaries, but not the physical assets needed to deliver the actual service sold. Uber as the largest taxi company in the world doesn’t own one taxi, Airbnb doesn’t own a single apartment and Facebook as the largest media concern doesn’t produce content. The physical assets required to do the job are paid for by the workers.

Business models and the way we work, even government, are ready for disruption again, and maybe this is a chance for millions of people to create work for themselves in a self-responsible manner. Following the thoughts of Angus Deaton this could even enable developing countries to better participate in growth. Mankind has come a long way negotiating and fighting for social standards evolving from the tribal and feudal system and early ‘Robber Barons’. As such, business models are up for disruption, but social achievements have to be safeguarded and even developed further to suit network society. In fact it’s less about humans against robots: the question is more about how humans treat humans.

It may not be too realistic to expect the economy to regulate itself in creating fair working conditions. There is no such evidence in history. Without some kind of unions and a suitable legal framework crowdworkers alone may not be able wrest sustainable conditions for themselves (no such earlier evidence either). The responsibility for a smooth transition of society, preventing upheaval and unrest due to poverty or mass unemployment lies with governments, along with setting the rules for a networked society – and co-creating a vision of how such a future should look like.

Governments could be disrupted by corporations that already operate like platforms and networks – later maybe starting to form corporate states similar to the seasteads (floating cities of likeminded people recognized as a sovereign state) as proposed by Peter Thiel of Paypal. Who knows? Government is under attack at its core: MIT’s John Clippinger is quoted saying “Who needs government?” Currently, governments are confronted with a very powerful private sector and face eroding trust by the population. How to regain this trust and re-enter the arena as a balancing factor vis-a-vis the private sector protecting citizens against eroding social standards? Short: How will government disrupt itself?

Across the historical divide the organisation charts of companies and governments of every era took the shape that society showed as a whole. Currently organisation charts are developing into a networked structure. Therefore, government, too, must interact with networks. This way contact with citizens can be re-established and mutual (!) trust may be regained. Change wouldn’t need to be imposed – it could be co-created. Such results may see better endorsement, too – something that current policies often lack.

Finally, when it comes to co-creating a vision and common understanding of how our future should look like, a book by Jonathan Lear comes to mind: In ‘Radical Hope’ [3] he tells the story of the Crow Indians who were confronted with the extinction of the buffalo – their almost sole source of work and food. They were faced with cultural devastation: The way they used to live for centuries would end. Realizing the desperation and depression of his people, Chief Plenty Coups realised that his nation had to develop a new vision of how they should live and eat in the future. He called this concept ‘Radical Hope’. The economist Lawrence Summers warned that the world currently lacked that kind of political leaders – similar to the ones who helped shape the public policy during the industrial era [4].

The Crow Nation survived. Today it is our generations’ common responsibility to build a future that is inspiring and worth while – not just for a few, but for society as a whole. A strong public sector needs to re-enter the playing field to help build shared prosperity in addition to shared economy.

About the author:

Isabella Mader is Director of the Excellence Institute and university lecturer in the fields of Knowledge Management, Information Science and IT Strategy. 2013 she was awarded “Top CIO of the Year”. Her current research focuses on Network Economy, Communities and the Sharing Economy.

[1] Pofelt, Elaine; Shocker: 40% of Workers Now Have ‘Contingent’ Jobs, Says U.S. Government. Forbes, 25 May 2015. [Online]: http://www.forbes.com/sites/elainepofeldt/2015/05/25/shocker-40-of-workers-now-have-contingent-jobs-says-u-s-government/

[2] Compare: Wing Kosner, Anthony: Google Cabs And Uber Bots Will Challenge Jobs ‘Below The API’. Forbes, 4 February 2015 [Online]: http://www.forbes.com/sites/anthonykosner/2015/02/04/google-cabs-and-uber-bots-will-challenge-jobs-below-the-api/
[3] Lear, Jonathan; Radical Hope – Ethics in the Face of Cultural Devastation. Harvard University Press, 2008.
[4] Hill, Andrew; Divisions emerge over effect of digital disruption. Financial Times, 24 January 2014- [Online]: http://app.ft.com/cms/s/3a7190a2-84df-11e3-8968-00144feab7de.html