Month: August 2020

Here’s a question. Which of these three pictures looks right to you? Do you see reality through your client? Do you both look at reality from different sides, or does the client see reality through you?

Trick question! The answer is all of the above and more. Because there isn’t just one salient reality in the picture, but several.

Here is a better view.

Can you spot how each of the 3 cases in the first picture also exists in the second one? The tricky one is (b).

These pictures are the key to solving what I called the dog-fooding problem for indies last week. To understand why, you need to understand a single key heuristic, which I’ll call…

The Reality Proximity Principle: Other things being equal, those closer to a reality will think faster and better about it.

Sometimes one can be too close, and miss forests for trees, but in general, being closer is better.

Consider a typical business with the following 7 relevant realities:

• X: Reality of how the manufacturing processes work

• Y: Reality of how long-term b2b customers’ needs evolve

• Z: Reality of how the culture makes decisions

• A: Macro trends in the environment

• B: How a relevant disruptive technology is evolving

• C: Political/regulatory environment for the sector

• D: How a competitor is thinking about the market

In this particular case (not in all), as a consultant, you have to see through the client to realities X, Y, and Z. They’re closer. But for realities A, B, C, and D, they might see that reality through you, depending on what position you chose to adopt. In some configurations, you might see different sides of the same reality (like the client and consultant in position 3 with respect to reality Z).

In other words, depending on which reality is salient for a problem or situation, you might be closer to it than they are. For example, many of my clients outside of Silicon Valley have at times relied on me to see Silicon Valley trends and practices better. They’re not interested in me and my ideas as much as the fact that I’m closer to the realities of Silicon Valley than they are while also being closer to their realities than most outsiders.

Now, how is this relevant to the dog-food problem. You may have already spotted the connection: dog-fooding is a behavior based on proximity to an internal reality.

Let’s recap the dog-food problem before talking about how to solve it for indies.

Recap

Last week, I wrote about the dog-fooding problem for indies, which is to apply the dog-food principle to indie consulting practice:

Dog-food principle: When a product or service could be an input for the vendor of that product or service, it should be used by the vendor as an input

Eating your own dog food is good for a variety of reasons: you can iterate faster by being your own lead customer, you create a better marketing perception, and you lower your costs. These advantages are so strong that being able to eat your own dog food is one of the biggest sources of strategic advantage for a business, and a big risk-mitigator for new businesses, including startups and indie consulting practices.

The flip side: all these great benefits only accrue if you are the market leader, or have a decent shot at becoming the market leader. For those already behind, being forced to eat your own dog food is a liability.

Now here’s the problem: as an indie consultant, not only are you very different from a business, you can’t even relate to employees at a human level because you don’t even face the same day-to-day practical problems. So “eating your own dog-food” becomes a hard principle to practice.

Now there’s many specific approaches to solving the problem in particular cases, but I want to share a general formula of sorts for solving it, based on the second picture above: reality arbitrage.

Reality Arbitrage

This might sound obvious, but your biggest advantage as a free agent is that you’re not inside the organization you’re serving. It’s not about who you are, but about where you stand.

This position makes it harder for you to see inner realities. Having to see those through your client creates a bit of a teaching burden on them, which means you start out with a liability even before you’ve proven your value. Why should they bother to help you understand the intricacies of their manufacturing model, or the mindset of their key customers, without knowing what you can do for them better than they can do for themselves?

And what exactly can you, as an individual living an ordinary individual life, do that’s so special?

But being outside their organization means you can get closer to outer realities relevant to their business, while also remaining closer to their inner realities than most outsiders.

This closeness may be some form of literal closeness. Maybe you spend more of your time going to industry conferences than they do, or spend more time tracking academic literature. Maybe you just happen to live in the city where their biggest customer or competitor is based, and you pick up a lot from overhearing routine coffee-shop gossip.

Or it could be psychological. Maybe you can get inside the heads of their competitors better than they can because you don’t share their identity hang-ups.

Don’t underestimate this: the NIH syndrome (Not Invented Here) is very real, and being inside an organization makes you systematically weaker at comprehending certain aspects of outside reality that might be inconvenient, dispiriting, or otherwise unpleasant. Interestingly, dog-fooding itself is the source of many such blindspots.

Whatever it is, the fact that you can be closer to some reality than them puts you in a position to do some reality arbitrage. As an intermediary, you may not understand the outer reality B as well as insiders of B, but you can understand it better than your client can from within their organization. By being closer to the the relevant inner reality X on the other hand, you can also apply the ideas of B better than insiders of B.

It’s basic arbitrage: you’re closer to both than they are to each other.

Reality arbitraging is not the same as dog-fooding, but it is a more than acceptable substitute that delivers many of the same advantages.

Reality Arbitrage vs. Dog Food

Both reality arbitrage and dog fooding are examples of a broad class of strategic advantages that have to do with being able to iterate and learn faster by being closer to a reality: ie turning the reality-proximity principle into a time advantage.

Dog-fooding is about being turning your natural closeness to yourself into an advantage. Reconsider the 3 benefits I listed in terms of distance-to-oneself:

1. Being your own customer makes you closer to your own needs

2. Your marketing works faster without the moral hazard/principal-agent problems, and this can be considered being closer to your own biases

3. And finally, the cost advantage of dog-fooding makes you closer to your own profitability

Dog-fooding is a special case of a know-thyself strategy. Being closer to your own needs means you eliminate some iterations based on misunderstanding of needs. Being closer to your own biases means you eliminate some iterations based on moral hazard. Being closer to your own profitability means money not used paying someone else’s margins turns into money devoted to speeding up pursuit of your own opportunities.

It’s a great principle for everybody in their personal life too, but your personal life is unlikely to be very relevant to your consulting work. So you have to look elsewhere for a similar structural advantage in time.

Reality arbitrage is that kind of advantage. When you play intermediary, you acquire a speed advantage that’s mostly useless to you personally, and pass it on. You’re a pass-through entity. And the reason you can do this is that as an individual you can occupy positions in the environment that larger entities cannot, and enjoy perspectives that are unavailable to them.

This is an unnatural advantage to exercise, based on extrinsic position rather than intrinsic qualities. For most of us, our own inner realities are the most powerful ones. We are constantly aware of them. The urge is to build an identity around them, locate your advantages within them, and draw on them to provide value to others.

That’s why dog-fooding is not just powerful, it is the default natural source of strategic intuitions. Even more crucially, at the individual human level, to be “seen” by others is to have your inner realities acknowledged and appreciated. It is one of the primary things people look for in a paycheck job after basics like compensation. People take jobs where their inner realities will be most relevant to the inner realities of the company, allowing them to express those realities and be seen.

For consultants though, it is less important to be seen, and more important to be seen through.

In both senses of the world: you are an optical instrument that enhances the vision of another, and your motives are transparent and easy to factor in. Just like a good optical instrument should have easy-to-correct aberrations and flaws.

This explanation is perhaps a bit awkward, but it’s a hard point to explain, or see early on in your indie career. Quitting a job and going indie is so much about listening to your inner realities that systematically deprecating the importance of those realities in favor of a different one can feel hard. Suspending the need to be “seen” can be actively painful, especially if you felt appreciated at your last job.

But consultants do best when they keep their identities small (Paul Graham had a good essay about that).

Examples

The most obvious example of reality arbitrage is of course playing “chess postman” of sorts: picking up tricks watching one client, and putting them to work on behalf of another. There’s a broad class of such tricks that you can safely transmit without fear of falling afoul of NDAs on either side.

For example, if one client runs meetings based on pure opinion-sharing, and another has a workplace norm that all meetings should begin with some data sharing, you can suggest data-driven meetings to the former where appropriate. You can say something like “I’ve seen some of my other clients use this data-driven meeting model and it works well for situations like this.”

Note what you’re doing here: you’re not testifying to your own experiences, or asking to be seen and valued for who you are. You’re not saying “I run my meetings this way” (which would be dog-fooding). You’re testifying as a credible witness to others’ experiences.

Another example is keeping up with macro trends. There’s a reason this is one of the bread-and-butter things consultants tend to offer. It is easier for consultants to stay on top of trends not because they have special access to information (especially for trends which are mostly playing out in public via media reports), but because they can get closer to them.

If you’re the Vice-President of Widgetry at BigCorp, you carry a gravity field wherever you go, and you’ll alter conversations wherever you go. But if you’re an unaffiliated nobody, you can participate in relevant conversations and learn a lot more. People will be more candid with you.

There are many other examples of external realities that you can help intermediate for clients. The key to all of them is to locate a valuable reality that you can get closer to than your clients can, for whatever reason.

In my case, a big one is simply staying on top of management trends and practices. Not by reading the latest airport bestseller, but by simply talking to a wider variety of people, and having a good handle on what’s actually being tried, and what’s actually working vs. not. Very few things covered by airport bestsellers are about actual management trends. Most are about things the authors wish would become management trends.

This is one reason I almost never make up my own management frameworks. I simply work with whatever is around and catching on. The moment you make up your own framework and start trying to sell it, you’re no longer really a consultant. You’re an entrepreneur selling a product. You’re not just at an advantageous viewing point, you have a point of view. You don’t just have perspectives, you have opinions.

You’ve expanded your personality and made your inner realities potentially relevant to others.

This is not a bad thing. It’s just a different thing. One that allows for dog-fooding as it happens: if you’re shilling a System X, you’d better be applying it to your own work and life somehow.

Maybe it’s just me, but I think there’s a certain deep pleasure to be found in resisting the temptation to do that. In working purely as a transparent intermediary of larger environmental forces around you, without trying to put your own dent in the universe. It is one of the existential pleasures of indie consulting. One that inventing and selling your own dog food ruins at least a little bit.

They say about the wilderness: take only pictures, leave only footprints. The indie consultant is the wilderness explorer of the economy. There is something rather poetic about taking pictures in some realities and leaving transient footprints in others.

Should indies “eat their own dog food”? It’s a surprisingly interesting question, when framed correctly for indies, but at first glance, it doesn’t even seem to apply to us in the general case.

It’s not a beginner question. It’s one that is hard to appreciate at all in the beginning, but gets more and more important as you log more years in the game. By the time you’re at say 6 or 7 years, it can start to feel practically existential.

I want to frame the question in this post, and give you a chance to think about it, before sharing my own answer in a future issue. But first, we need to understand the principle in its ordinary business context.

In the regular business world, including both b2b and b2c, the dog-food principle holds very strongly. I’ll state it as follows:

Dog-food principle: When a product or service could be an input for the vendor of that product or service, it should be used by the vendor as an input

It’s of course a big cliche, but an important and broadly true principle nevertheless.

Part of the reason is obvious. It is not a good look when you, as say the maker of a productivity app, don’t use it to improve your own company’s productivity. It’s a bad enough look that you may not be able to sell your product at all.

Curse or Blessing?

Eating your own dog food is obviously not an option available to all businesses, but where it is, it should be exercised, otherwise you’ll have some very awkward explaining to do when you attempt to sell it. Often you have no choice but to exercise the option. It’s a forced option.

But whether forced or free as an option, is the dog-food principle a blessing or a curse?

When your dog food is not actually the best dog food around, the principle can feel like a burden. This is not merely a soft psychological effect but a hard financial one.

There’s a reason companies often have to offer steep discounts to make sure their own employees use their products over competitors’ products. The size of the discount is in fact a good measure of the size of the burden.

For example, where I went to graduate school, in Southeast Michigan, there were a disproportionate number of Ford, GM, and Chrysler cars on the roads (I drove a Toyota). Some of it was of course regional or company loyalty, but a good deal of it was due to the employee discounts.

Another example. A decade ago, when I worked at Xerox, we had to use an intranet content management system made by Xerox called Docushare. It wasn’t exactly the best product of its sort around. It felt like an imposition to some of us who wanted to use other things, like Sharepoint, which was officially a competitor, and integrated better with all the other Microsoft products being used internally for other purposes (Docushare may have improved since then, but thankfully I don’t have to use either product now).

So the dog-food principle has a general reputation as a burden you need to be compensated for shouldering. But this is because most products and services are by definition not the leaders of their respective categories.

That is in fact the discriminating factor between whether it is a blessing or a curse. When you are the market leader, or have a decent shot at becoming the market leader, the dog food principle works for you and feels like a blessing. But when you are behind, with no realistic hope of catching up, it feels like a curse. Or at least a significant liability.

When the dog-food principle is a blessing, it is generally a huge blessing. This is due to at least three positive effects.

1. First, there is the natural advantage of having a major customer — your own organization — in the design and development loop, allowing you to iterate and innovate faster than when you are not your own customer.

2. Second, using your own product well gives you a significant marketing advantage. “We use it ourselves — and look at how well it works for us” is a very powerful marketing position, since it counter-programs the default perception of moral hazard that accompanies all selling (this is why products try to borrow the dog-food effect when they can, like toothbrush makers claiming their brand is most preferred by dentists for their own use).

3. Third, where the dog food in question is an important component of the vendor business cost structure, eating your own dog food translates into a big cost advantage. Not only do you get your own product at cost, your employees are trained to use it well, and even hack it/adapt it (which also feeds innovation, reinforcing the first advantage).

The dog food principle is so powerful, if you’re an entrepreneur, it is worth actively looking for business ideas that can benefit from it.

Serving a customer base that does not include yourself is in fact so much harder, other things being equal, I’d estimate dog-food businesses have a 3-10x overall advantage over comparable non-dog-food businesses, in terms of risk/return profiles.

In many cases, the dog food principle is so compelling, it is the reason the product or service exists at all. Not only does Amazon eat its own dog food when it comes to AWS, for a long time, it was the only customer for the service.

Often this kind of value is so high, you can even give it away free to others, as is the case with many internal Google products which went on to seed open-source projects.

Here’s a picture. Dog-fooding opportunities exist where the vendor’s needs overlap with those of the customer. It’s not rocket science.

Obviously, the dog food principle applies to some kinds of indie businesses as well. Anything where the client is typically a single person retaining you in an individual capacity in their “whole life” context rather than their job, is typically a regular dog-food business, just at indie scale.

Fitness instructors should be fit. Life coaches should not have train-wreck lives. Therapists should be mentally healthier than their patients. Executive coaches should have leadership traits. Yoga instructors should be better at yoga than their students. Dentists should have good teeth.

Now when does the principle not apply? When is the deep strategic advantage not available? And what are the consequences?

Big Dogs, Little Dogs

Obviously, the dog food principle does not apply, and is not available for strategic leverage, where the idea/product/service is not an input for the vendor at all.

A cancer drug maker is not staffed by cancer patients for example (though perhaps cancer survivors or relatives of cancer survivors might be over-represented among the employees — this would be interesting to look into). A cancer drug maker has biochemists, lab equipment, computers, staplers, and coffee machines as inputs. Not cancer drugs.

But the more subtle case where the principle fails to apply is when the customer and vendor are significantly different in scale or scope of operations. This causes an impedance mismatch. The version of the product or service you sell isn’t the one you need yourself. Big dogs don’t have the same needs as little dogs.

When there is an impedance mismatch, similar business needs might be served differently, and a vendor or its employees might not use their own products for needs analogous (or even, at a superficial glance, identical) to those of the customer. This is not hypocrisy, merely specialization of needs.

• For example, if you make large pickup trucks, it is unreasonable to ask all your employees to drive large pickup trucks, or offer big employee discounts to encourage it, since most people only need/want small sedans.

• If you make large airliners, your executives probably should not fly around in large airliners where they really need a small executive jet.

• Office printer makers should not expect their employees to buy them for home use (while at Xerox, I had a Brother printer at home because Xerox doesn’t make good home-sized ones, though they did offer an employee discount).

Knowledge-based service businesses are even more subtle. For example, have you noticed that big advertising agencies (so-called “agencies of record”) don’t advertise? Have you ever seen an Ogilvy ad?

Advertising, unlike the mass-influence-marketing businesses it serves, is itself a high-touch boutique relationship business, where sales happen via interactions between account executives and creative directors on the one hand, and CMOs on the other.

There would be no point to an advertising agency advertising its own services on TV. High-end advertising agencies are typically much smaller than the clients they serve. The latter also sell differently (through mass media, and large-scale distribution), to customers modeled in the aggregate as personas or demographic/psychographic groups. They do not sell to individual prospects modeled individually as in relationship businesses. So there’s no hypocrisy to advertising agencies not advertising.

At best you can look for more limited applications of the dog food principle. You wouldn’t trust an ad agency with a poorly designed logo or bad photographs on its website for instance.

Indie Double Jeopardy

It should be clear that the dog-food principle is generally not applicable to indies, either as a blessing or a curse.

For example, I consult on topics like organizational structure, business models, technology roadmaps, product strategy, innovation, and sustainability. Almost none of these topics is very relevant to either my personal life, or to my tiny 1-person business. The approaches I use with my clients would be cartoonish overkill for the versions of those problems I face myself.

Even where there is apparent commonality, there is likely to be a very strong impedance mismatch.

For example, companies big and small require web pages. But as an indie, your need for a website is very different from that of a Fortune 100 company. If you’re doing web design for big companies, it would be silly to pretend that a huge, complex, heavily trafficked website should follow the same principles as the typical indie consultant site (which might be a single static page hosted for free on Github, like mine).

But the effect is in fact worse than that. Indies face a type of double jeopardy because they don’t share a common input shared by all traditional businesses — being organized as a traditional multi-person business. This input is normally invisible, except during events like mergers and acquisitions between companies, when it becomes clear for example that “corporate culture” is a kind of dog food that matters when you try to sell the company itself to another company.

Not only do you, as an individual, not need the same inputs your clients need, or need them at the same scale or scope, you’re not even the same when it comes to ordinary human needs. You might legally be a corporate entity, but you’re really just a single worker, not an organization. And a very different kind of worker than an employee.

This means many basic inputs shared by all businesses are different for you, making selling to businesses twice as hard.

• When a typical employee at a large company needs a stapler, they go look in the supplies closet or ask the office manager, making do with the standard stapler. When you want a stapler, you order one from Amazon, picking out one you like.

• When a typical employee goes to work (pre-Covid edition), they go to an office laid out in an open plan that they probably hate. As an indie, you’ve probably arranged a pretty sweet home workspace for yourself.

• A typical employee has many friends “from work” especially in smaller cities. As an indie, it is very unlikely that your friends circle and clients circle overlap very much. And if a friend becomes a client, chances are the client aspect starts to dominate.

• A typical employee probably uses Microsoft Office at work. You probably use Google Docs.

• A typical employee has to deal with a lot of day-to-day corporate bureaucracy. You are free of much of all that.

All these factors make it harder to “eat your own dog food” at a very basic level of business behaviors. You can’t even easily recommend a stapler!

Over time, it becomes hard for long-time indies to even relate to employees of client organizations and recognize their ordinary human needs in a business setting. Because you no longer operate in the context of a large organization, you lose the ability to operate in anything but an individual capacity.

Don’t underestimate the slow erosion of empathy and emotional and lifestyle distancing that occurs unless you do something, as you log the years as an indie.

The longer you’re in indie mode, the stronger the impedance mismatch between your needs and client needs, because you gradually lose the internalization of big-org needs at a business level, and empathy for paycheck employee mindsets and needs at a more fundamental human level.

You might say — it’s hard to eat your own dog food at a basic human level in relating to client employees because you slowly start turning into a cat.

You eat cat food while making dog food for them. Not only do you lack the dog-fooding advantage, you suffer a cat-fooding liability.

A sort of double jeopardy in short.

You’re not a b2b, b2c, or c2b business. You’re a c2d business: cat-to-dog.

Framing the Indie Dog-Food Problem

So we can now state the indie dog-food problem.

How do you apply the dog-food principle to your independent consulting practice, in order to realize the strategic upside, despite the lack of strongly overlapping input needs with clients, the lack of impedance-matched scale and scope of the few needs that might exist, and the growing human distance from employment-based lifestyles?

Or a shorter version: how can a cat sell dog food, and extract dog-fooding advantages out of cat food?

(Incidentally, as pet owners among you might know, cat food is in fact different from dog food. As obligate carnivores, cats can’t digest plant-based ingredients easily, unlike dogs).

Big hairy problem, isn’t it?

You might not see why it’s an important problem if you haven’t been in the game very long. But part of the reason so many people flame out so early in the indie lifestyle, and head back to employment, is that the lack of a dog-fooding strategic advantage (plus a cat-fooding liability) radically increases the crash-and-burn rate.

And if you do survive, the growing distance effect makes it increasingly hard to care about the kinds of problems businesses, and the people within them, face.

After all, you went indie in part to escape those problems in the first place. Learning to care about them again from the outside takes work, and can feel strangely perverse.

Left unmanaged, the indie dog-food problem can turn into a one-person “employee engagement” problem. You become disengaged from your own practice, slowly more ineffective, and start losing gigs. Eventually the practice can become unviable.

So how do you fix it?

I’ll share my own answer (I’m sure there’s more than one) in a future issue, probably next week.

If you’ve been in the game a few years, and have ideas about how to address the problem, take a stab at it. Either do a response on your own blog or newsletter, or if you like, send me your response. I might feature it in the issue where I share my own answer.

You may have noticed that a career in the gig economy is inextricably linked with lifestyle design. People who live off gigwork also tend to design their lives a lot more actively than paycheck people.

Why this confluence of gigwork and lifestyle design? It’s a historical moment thing.

People in the gig economy are at the vanguard of the world getting off a century-long artificial separation of human lives into producer and consumer aspects. We in the gig economy have been the early pioneers of the prosumer economy for a couple of decades now.

For normal people now uncomfortably cast into work-from-home mode, it is slowly becoming clear that we represent the mainstream future, rather than a present sideshow.

That that what they used to think of as “work-life balance” is a pale shadow of the real thing. That it’s something we figured out years ago, and they’re just beginning to wrap their minds around.

The Prosumer Moment

From the point of view of “normal” middle-class people fully invested in the paycheck lifestyle, gigworkers appear to unreasonably and perversely reject perfectly fine standardized consumption life scripts, scripts that have worked for a century for billions.

We have weird lives with lots of non-default aspects. We live in unexpected places relative to our personal and professional backgrounds. We have strange circles of friends, and associate with disturbing and sketchy people. We come and go unpredictably from the scenes we are part of. Our living arrangements and relationship patterns are illegible and confusing. We are a lot more freakishly invested in our side activities and hobbies than is seemly.

Our “normal” friends and family feel slightly embarrassed by us, and constantly feel the need to make excuses for us.

But we don’t lack respectability so much as being outlaws relative to respectability norms.

Ever so slightly, each of us undermines those norms by our very existence.

There is a general, undefinable air of slight disreputability to us, but it is a disreputability alloyed with a vaguely threatening presence that makes normal middle-class people uncomfortable rather than contemptuous.

Gig workers present as threatening counterexamples to the assumptions that certain scripts must be universal. Scripts that embody a way of life a majority of people, and entire developed societies, are very invested in.

We live prosumer lives that are hard to directly compare with the producer-consumer Joneses. Lives that are hard (and rather pointless) for others to try to imitate or compete with, due to the many bespoke elements.

For people living lives based on imitation and comparison, this can feel like an existential threat.

The Fundamental Theorem of Postmodernism

You could even make up an equation for this historical moment. I’ll call it the fundamental theorem of postmodernism.

Prosumerism = Gig work + Lifestyle Design

In some ways, this equation describes something like the pre-modern economy, where most work and life happened within the domestic sphere of agrarian life for most people, and working for cash in globalized markets was only a small part of life, relating to dealings beyond the family.

But in other ways, it is nothing like the premodern way of life. It is radically postmodern, and makes highly leveraged use of the most advanced capabilities civilization has to offer.

Instead of pointing to the vast majority of humans living very similar, miserable lives without modern conveniences like running clean water and well-stocked grocery stores, it points to a flourishing variety of lifestyles that combines the best of pre-modern and modern into post-modern.

That’s prosumerism as postmodern praxis (check out the Yak Collective report, New Old Home, for more on the home-design aspects of this)

We gigworkers and lifestyle designers are the true prosumers, and I want to claim the term for us. Which means kicking out the people who are currently squatting on it.

Prosumerism as Postmodern Praxis

The term prosumer has so far mainly been used in weak ways for ordinary paycheck-earning consumers who participate in minor, peripheral ways in the production aspects of things they consume, but are not employed in the production of.

This is just prosumerism as a form of shadow labor, an industrial lifestyle++ rather than something new. Bagging your own groceries, assembling your own IKEA furniture, completing surveys in exchange for gift certificates, entering contests to provide “customer-led innovation” ideas to companies. It’s all just ways for the consumer economy to sneakily make you do uncompensated, inefficient, low-value production activity for it, in the guise of empowerment and voice.

And the median human in the paycheck world is so disempowered, this feels like actual meaningful agency (check out Paul Ford’s great riff on this point)

The slogan of this kind of prosumerism is enter for a chance to win. Extreme couponing is what counts as lifestyle design within it.

So many layers of irony and existential despair folded into that phrase.

But there’s a better way to understand prosumerism: as an imaginative blending of production and consumption enabled by deliberately engineered and risky flexibility on both ends.

You need to do two things to qualify as a real prosumer by this definition:

• First, you have to give up the perks of your paycheck job by going free-agent. That gets you production flexibility.

• Second, you have to give up standardized consumption scripts as your source of status validation. That gets you consumption flexibility.

These are risky things to do, financially and socially. But what you get in return is enough flexibility on both ends to make prosumption worthwhile, and preferable to separated production and consumption.

If you have the imagination, you can use that flexibility to overcome the risks and come out on top.

This is the prosumer gambit. It is neither an exit decision, nor a voice decision. It is a way to cut your own personal deal with postmodern realities. Instead of playing the twin games of “employee engagement” and “customer satisfaction,” you make up your own game of living a quality life as a whole human.

Let’s understand this through 2 pictures. I just got a nice whiteboard for my office so you’re going to get artisan, hand-drawn whiteboard drawings for this issue.

The Producer-Consumer Life

The paycheck lifestyle can be understood as 2 funnels that meet at their narrow ends, a producer funnel and a consumer funnel.

The paycheck lifestyle is a split-brain producer-consumer lifestyle bridged by the all-important paycheck as the conduit of all value. It is the corpus callosum of the 2 sides of your industrial-age brain.

The key point is that all work ends with paychecks, and all of life begins with paychecks.

Work-life balance is a cash balance. Ideally you want the equation balanced, or running a surplus. There is no other pathway for effort to turn into value. Cash is the enabler of all things, and the bottleneck in all things.

On the producer side, your job is your immediate income-generating activity. Behind that is your job strategy, which is how you maneuver for promotions and plum assignments within a job. Behind that is your career strategy, which is how you manage your job-hopping.

And finally, at the mouth of your funnel is your education strategy, which is how you charge up your potential energy to drive all the kinetic maneuvering at narrower parts. It’s education rather than learning because almost all of it is front-loaded into formal education. As you grow older, and time/opportunity for continuing education decline, you run out of potential energy and top out into your terminal career role. Learning in an open-ended sense is not naturally integrated.

On the consumer side, your life begins with immediate cash expenses. Then you have bad debt (credit cards, payday loans). Then you have supposedly “good” debt which may or may not be actually good — home mortgages and education loans. And finally, if you’re lucky, you have a zone of equity accumulation: home equity and retirement portfolios. These are passive for you. They’re not an actively managed part of the income/production side of the equation. Investment as income is for rich people. For the rest, investment is a build-up-when-young/draw-down-when-old/pass-on-to-kids activity. It’s part of the consumption side, as deferred future consumption. And it rests on the obviously false assumption of risk-free 3-8% growth embedded into retirement calculators.

Note that both sides are funnels with leak-proof walls and a directionality. You can only progress via linear stages from broader to narrower on the producer side, and narrower to broader (and more dangerously leveraged) on the consumer side.

There is no strong pathway for education to improve your life besides being converted into career strategy, then into job strategy, then into a job, then into a paycheck.

This isn’t necessarily a bad picture. It’s just a picture that’s a lot more attractive for a small minority of big winners than for the median person trapped within it.

Now for the gig economy version.

The Prosumer Life

Now consider the prosumer lifestyle. It is tempting to map “gig work” to “producer” and “lifestyle design” to “consumer” and simply reproduce a relabeled version of the two funnels, but that’s not how it works.

There are two sides, but they don’t map cleanly to production and consumption. There’s a lot more going on.

They map, instead, to risk management and living life. Each side is a set of nested circles that again meet at the almighty dollar, but unlike in the two-funnels world of paycheck people, these circles have porous boundaries, and value can flow across the two sides of your life in much more open-ended ways, not just through paycheck dollars.

Here, there is no clear mapping of “work” on one side and “consumption” on the other.

For example:

1. You might start with a “hobby” (say astrophotography, something I’m getting into right now) that’s nominally on the “live life” side of the equation. There’s no significant risk-management involved.

2. There you meet someone interesting in the “social network” circle (say a fellow amateur astronomer at a star party). Note that it’s just one generic social network, not a “work” or “friends” network.

3. Then this relationship sparks an idea and bleeds over to the exploration circle on the “manage risks” side via a partnership to take a financial risk together (like pool funds to buy photography and telescope equipment, which is expensive and low-utilization).

4. That then leaks through to the income-generating assets circle where maybe the two of you create a website (say a site devoted to great astronomical photographs that also affiliate-markets telescope and photographic equipment, and offers a course on astrophotography or DIY telescope-making).

5. This makes some money that you then share.

It’s not that this sort of interesting story can’t play out in the two-funnels paycheck world, it is that it is highly unlikely within the two-funnel structure. In this particular example, astronomy is a night-time hobby that seriously disrupts a 9-5 paycheck job (and the associated evenings-weekends earmarked “family and social” time), but fits easily into a gig economy/lifestyle design prosumer life.

“Converting” the fun hobby into an income-generating asset is a much more natural thing to do as well, since gig economy people tend to not have values based on purist separations of work and play. For paycheck people, a “hobby” is likely to be a very sacred escape from “work” (says a lot about work as a psychic prison) that it would be profane to try to make money off of.

Collaboration is also easier. Paycheck people rarely have patterns of availability that allows for serious collaborations outside of their jobs.

Finally, note how risk management plays out here. Paycheck people have steady incomes, which means they have stable marginal values for both their time and money. If you make a $4800/month salary at a 40-hour/week job, every work hour is worth $40, and if you strive for work-life balance, so is every leisure hour. Which means you’ll want a significantly higher than $40 expectation to “sacrifice” a leisure hour on a risky venture.

But if some months you make $10,000 and other months you make zero, the marginal value of your time (and money) varies wildly around that mean. It is much easier to randomly throw a dozen hours at building a website that might make no more than a few dollars a month in affiliate commissions. It is much easier to simply take a low-value gig just to learn a new industry. It is much easier to get very seriously into a hobby during slow periods.

Consumption and Status

Don’t underestimate the status constraints of the consumption life-script side of paycheck lives either. For a paycheck person with a nice title and a house in the suburbs, who meets coworkers everyday (now on videoconference), keeping up with the Joneses and conspicuous consumption are inescapable parts of life.

It is much harder to “break status” and do schleppy things “beneath” your status, either at work or home. It’s like breaking character as a worker in a theme park.

For a paycheck person, it can feel seriously degrading to do things that would seem menial in relation to their work, like running a website with affiliate links, or teaching a self-published course.

Things paycheck people do outside of work must reinforce the status they project at work and in their communities (or at least, harmonize with it).

For a big, important Vice President at a major company, menial things — like say working with blue-collar tools — might only be acceptable if they are done as part of a status-reinforcing hobby, like building hand-crafted furniture in a garage workshop that’s kitted out with only the finest equipment. The idea that your workshop might be the backend of a side hustle selling little wooden boxes on Etsy can feel really demeaning.

If you’re a Senior Fellow as an experienced engineer at a famous company, you might only be willing to teach what you know if it is as an adjunct professor at a well-known university (even if it makes you little to no money relative to an equivalent self-published course). For a respected engineer, teaching and marketing their own course, without credits from a prestigious university attached, and without an existing pipeline of prestige-branded students conditioned to respect you, can feel demeaning.

But for a gig economy person, these sorts of things are what makes prosumption lifestyles both fun and flexibly risk-managed. When your marginal hour is worth anywhere between $5 and $500, and status considerations are much weaker in your life, you can do a lot more with all your time.

During a slow period on the high-end consulting front, it feels perfectly natural and fun to spend long periods of time doing “menial” things.

During a high-demand period, it feels perfectly natural to let work-life “balance” get seriously out of whack for a while, as you make hay while the sun shines.

When you tire of an activity, it feels perfectly natural to level up and turn it into an online course, so others to whom it is new, fresh, and interesting can take over what you used to do, and you can move on to your next adventure. It’s not about status as a respected teacher. It’s just another hustle.

At any time at all, it is easier to do what you want, rather than what a script tells you to do.

Beyond “Evenings and Weekends”

Chris Dixon once famously observed that “What the smartest people do on the weekend is what everyone else will do during the week in ten years”

Drew Austin recently tweeted a snarky version: “what hot people are doing today, smart people will be doing in 10 years.”

Chris’ version gets at the nature of the entrepreneurial escape hatch from the producer side of the paycheck world, driven by smart people jailbreaking themselves.

Drew’s version gets at the nature of status competition on the consumption side, driven by trends and fashions set by attractive people pwning the social status game.

What both have in common is that they accept as a given the central role of imitation in the producer-consumer divided lifestyle model. Work and life as competitions fueled by imitation, signaling, and envy. To win is to have others want to be like you, but without beating you.

The great allure of the prosumer way is to break out of the straitjacket of a lifestyle unnaturally divided into production and consumption aspects, each driven by its own patterns of imitation and competitive signaling. This is why going free agent feels synonymous with “getting out of the rat race,” even if you actually work a lot harder.

Done right, it can be a lot more fun, and a lot less rat-racey, while actually being more impactful than being the Joneses.

The first step is gaining radical control over your time. Everything else follows naturally.

What might a prosumer version of the line be?

While imitation is still a big piece of the puzzle (witness the huge subculture of Tim Ferriss imitators in South East Asia), it tends to be conscious, critical, and cautious imitation driven by pragmatic and strategic considerations, with a lot of experimentation and tweaking to make it work for you. When free agents take courses from each other, they tend to act like canny prosumer shoppers investing in themselves, not resume-stuffers trying to get an A+ with the lowest effort possible.

Imitation for a prosumer is not a simple matter of “I’ll have what she’s having.” It is imitation as strategic borrowing of a good idea as a starting point for life-energy investment. It is not some sort of depressing and gloomy trajectory of Girardian mimesis underwritten by a paycheck.

So a prosumer version of Dixon’s line is definitely not something like “what gigworkers do today everyone will do in 10 years.” We do represent the mainstream future, but not in that literal-minded way.

That would be a failure of this historical moment to live up to its potential.

Instead, it’s something like “what a gigworker does today will either not exist, or will exist in a hundred variant flavors in ten years.”

And that’s the real attraction of where this historical moment can lead us: to a world of flourishing variation and natural selection in life and work, instead of a world of depressing, in-bred, purebred dog-show sameness.

What exactly are free agents free from? In sports, a free agent is someone who is free of allegiances to a particular team. In knight-errantry, a freelancer is somebody who is free of allegiances to a particular feudal estate or monarch.

So what are free agents in the gig economy free from?

In the gig economy, freedom is primarily freedom from being managed. It’s a freedom that can seem like a curse to those who either enjoy being managed, or are too inexperienced to have learned adequate self-management behaviors. But like it or not, this is the freedom you have in the gig economy, and there is an art to thriving under this freedom you must learn, or it turns into a burden.

This freedom exists not because we free agents brave the wild open economy and carve out sweet manager-free territories for ourselves, but because there are rapidly growing regimes of valuable work (knowledge intensive ones in particular) where traditional people management as a function simply fails, and where the typical organizational response is increasingly to just eliminate it in those regimes. Such elimination moves often create gig economy roles as a side-effect.

The regime of effectively unmanaged work is increasing in size in the modern economy. I don’t have numbers to back this up, but my anecdotal experiences suggest managerial failures are a significant driver of growth in the gig economy.

Bad managers — represented by fictional archetypes such as the pointy-haired boss in Dilbert, Bill Lumberg of Office Space, and Michael Scott of The Office — are a symptom rather than the cause. Their existence points increasingly points to the growing untenability of people management as a function rather than individuals failing to be good managers.

Does this mean good management does not or cannot exist under modern conditions? Of course not. But it is playing a shrinking role.

The free agent economy in some ways represents a civilizational bet on a radical idea: what if, instead of trying to FIX managerial failure, we try to do without it altogether?

For students of management and organizations, the free-agent economy is in some ways the control group of people management theories. If your theory of people management cannot deliver better outcomes than the essentially unmanaged work processes of the free-agent economy, it is not a contender.

The existence of pointy-haired bosses, Bill Lumbergs, and Michael Scotts in the world is a symptom of the failure of management as a paradigm for coordinating work. It is no accident that many of these familiar contemporary “bad manager” archetypes are from fictional software companies.

Are Free Agents Managed?

I have had about 5 years experience being managed in a traditional sense, and 9 years in the gig economy where even if I stretch the definition, I cannot say I have been managed at all, in any sense I recognize.

As a free agent, you might have a client with expectations, and you might deal with someone in a “vendor management” function when it comes to paperwork and contracting logistics, but you are generally not managed the way employees are. The exception is subcontracting. If you’re managed at all, there’s a good chance another free agent — a prime contractor — is doing it. There’s also a good chance they’re doing it badly, but that’s a story for another day.

As a free agent you might also be free of other things, such as a 9-5 schedule, certain kinds of paperwork and training burdens, and so on, but those freedoms are generally not as robust. On a big gig with significant coordination needs with client employees, you might end up on a 9-5 schedule anyway. Your paperwork burdens as a small business owner or contractor might end up being greater than those of employees, depending on the client. You might have to put more effort into training yourself and acquiring certifications that open doors to gigs than employees do.

But the one robust freedom is freedom from being managed. So it is important to understand what it is to be managed, either well or poorly, and what it means to do without.

What Managers Do (In Theory)

One of the very interesting things I’m learning as a result of writing this newsletter is that increasingly, young people are directly entering the gig economy as their first foray into the workforce, and since the gig economy doesn’t really have managers (unless you count algorithms), they acquire no experience of being managed, have no idea what managers do, and no idea how to do it for themselves when necessary. So the freedom from management turns into a curse because they don’t know what they don’t know. Because they’ve never seen it. From a yearning distance, “being managed” can even start to seem like a blessing, something to aspire to if you haven’t experienced the reality of it.

So let’s review what managers actually do.

Managers do many things in organizations, but traditionally, the core of what they are supposed to do is manage the risks of individuals failing. Individuals can fail in many ways:

1. Do the wrong thing (misdirect effort)

2. Do the thing wrong (make mistakes)

3. Cut corners and do poor work out of laziness

4. Work too slowly, creating delays

5. Game incentives and work to minimal standards

6. Act maliciously due to unresolved resentments

7. Act unreliably due to personal life issues

8. Lie or cheat in reporting on work

9. Fail to resolve conflict with other employees

10. Become unable to work due to illness

11. Fail due to lack the right resources to succeed

12. Fail due to essential tools or systems failing

Managers exist because organizations need to function despite this vast potential for individual failure. Historically management arose as a function out of the need to mitigate the risks of such failure. Many of the other things managers traditionally do, such as set targets, supervise training, fight for budgets, and relay information, arise out of the primary job of managing the failure potential.

The cynical assumption that employees will fail in various ways unless actively managed is often known as Theory X, while the opposed idealistic theory, known as Theory Y, popularized in the 60s by Douglas McGregor, holds that left to themselves, employees will generally do the right thing. Under Theory Y, the core of what a manager supposedly does is promote the growth and well-being of employees, rather than manage the risks of their failures.

Both theories are empirical on the surface, and could in principle be tested. You could research a company to see if employees are succeeding or failing by default, and whether failure mitigation or growth promotion adds more value. But in practice, Theory X and Theory Y tend to be workplace ideologies adopted as untested values, rather than being selected as the more accurate description of the specific workplace.

Theory Y was popular for a couple of decades, but with deregulation and increasing competitive pressure in the 80s, Theory X enjoyed a renaissance.

The early phases of digital transformation of businesses in the 90s and 00s saw the increasing strengthening of Theory X tools (Big Brother at work basically) — worker surveillance tools, self-documenting, high-transparency workflows, open-plan offices, and an increasing emphasis on “collaborative” cultures (which is usually code for reliance on a culture of peer surveillance).

Theory Y tools also emerged — goal setting tools, “performance management” tools, “employee engagement” tools, and so on. But despite cosmetic Theory Y layers, most workplaces today, including knowledge-work-intensive workplaces, have a default Theory X culture.

In theory managers manage failures. So what happens when managers themselves fail?

When Managers Fail

Today, at the tail end of the neoliberal, globalized era, we can say that to a first approximation, Theory X (with a cosmetic veneer of Theory Y) is used to manage low-wage, low-skill, highly interchangeable and precarious employees, while Theory Y is used to manage a small subset of high-wage, high-skill, hard-to-replace secure employees.

Theory X is used to manage workers destined to have their jobs eliminated or dumbed down maximally through automation, while Theory Y is used to manage the shrinking number of workers who are irreplaceable by automation and very expensive to replace with other humans.

So why free agents?

Free agents exist because whether they are serving in a Theory X or Theory Y role, sometimes managers fail and turn into net liabilities. This is most likely when the work being done has a strong element of a principal-agent problem, due to knowledge or skill gaps (the manager doesn’t know or cannot do things the employee does). This can happen due to either specialization of roles, or situational differences when manager and employee are not collocated (as in remote work, or more recently, work-from-home conditions under Covid19; anecdotal evidence suggests managers are really having a hard time being effective under WFM conditions).

Either way, the ability of the manager to either address failures, or promote success, is sharply limited by lack of knowledge (contextual or specialized), lack of skills, or both.

So you have this matrix:

If the existence of managers isn’t helping failing employees become successful, or successful employees grow, what’s the point of them?

By presenting ways to do away with managers altogether, this is the question software tools allow you to ask, and often the answer is “there is no point.” So software eats managerial roles.

The resulting elimination of human managerial functions also drives the structural evolution that refactors the job itself as a gig economy job.

When the response to failing management is to do away with it, the free agent economy grows.

Managerial Failure = Gig Economy Growth

There are two potential outcomes of managerial failure: below the API gigs and above the API gigs.

In the below-the-API case, you can replace managerial roles with automated software layers that provide the necessary coordination function, dispense with the other softer functions, and rely on opt-in market dynamics and economic incentives to shape the managed function. This is how you get under-the-API gig economy: rideshare drivers and the like.

Note how this layer works. The failure modes are not “managed” for the most part. Absenteeism and slacking are not motivation problems to be “managed” for example, requiring either penalties imposed or a pep talk from a manager. Rideshare drivers simply work when they want to and are paid accordingly. If they do a poor job, bad ratings kick in and eliminate them. On the success side, if they do very well, the algorithm itself rewards them, along with better tipping dynamics.

Sweet deal, huh? Except of course that any job that is legible enough to be refactored this way is also very likely ripe for automation.

In the over-the-API case, you get the kind of free agency we mostly talk about in this newsletter: indie consulting, high-skill contracting and so forth. In this case too, there is no management. If you fail, you simply lose the gig. Management is reduced to hiring/firing free agents and dealing with them as vendors/suppliers of work rather than employees. If you do well, you get more inbound via referrals, and can either make more money by working more, or by raising your rates.

To succeed in either case, you have to learn the art of being unmanaged.

Managing Yourself

In the under-the-API case, being unmanaged is easy. You learn to play the algorithm’s game as best you can for your kind of work. As a rideshare driver, maybe you only work during surge pricing. Maybe you loiter in areas where you get many quick turn-around short trips rather than rare long trips with long empty backhaul legs. If the platform changes the algorithm, you change your behavior and figure out a new optimum or quit the system.

Managing yourself under the API simply means setting goals and then working the algorithms to hit them sustainably with the least effort possible. For example, I saw some research I can’t find now that showed that many rideshare drivers simply work till they hit a target daily amount, and then punch out, regardless of whether it’s a high demand period when they could make a lot more money in a short period. Where a managerial solution would try to motivate the drivers to work more to meet the demand, the algorithmic solution is to raise prices and move to a different market equilibrium. Customers change their expectations and intentions too. Those unwilling to pay surge prices simply wait out the surge or find alternative modes of transportation. As a result, the system, while not a one-to-one substitute for an equivalent “managed” service, works well enough to sustain itself.

In the above-the-API case, managing yourself is much more complex. The two obvious things you can do are simply supplying the Theory X and Theory Y functions yourself to the extent you need them. You can monitor your own failures and try to learn from them. You can watch for where you’re doing well and double down there by giving yourself pep talks.

But the biggest aspect of managing yourself above the API is to get to an oversubscribed state where you can pick and choose what gigs to take, and where you have the genuine freedom to walk away from gigs that aren’t working out. The better part of managing yourself is simply working on the right sorts of gigs, and saying no to the wrong sorts.

In other words, instead of managing yourself, you seek out work where you don’t need as much management.

The Unmanaged Future of Collaborative Work

As the free agent economy grows, and takes on more complex functions, requiring increasing coordination among free agents, the art of being unmanaged will evolve.

Some of the experiments we are doing over at the Yak Collective involve researching precisely this evolution.

How do you run team projects without a traditional project manager?

How can a multi-role project get staffed and completed with much less cat-herding by a manager, or even no cat-herding?

Can you create rideshare like algorithmic platforms at the scale of a single small project?

These are problems that we are just starting to figure out. In every case, there is a temptation to simply reproduce the traditional solution: “manage” the problem with a “manager.” But it is the solutions that reduce or eliminate the need for management, while producing equivalent or better output that will be the interesting and exciting ones.

In most cases, these won’t be 1:1 substitutes for managed project outputs. When you work in unmanaged ways, you tend to do different kinds of work as well. The nature of the economy itself changes. It creates wealth and meets needs in different ways than one with managers. You get more things that look like crowd sourcing, and fewer things that look like curated, “managed” outcomes. Things aren’t managed or left unmanaged via unexamined defaults or due to the inertia of past practices.

Instead, management becomes yet another design variable in business models.