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Innovation, entrepreneurship, economic development and self-employed people

A new wave of caring

In June 2011, Vern Hughes contacted us with information about a technology portal which enables parents of disabled and chronically ill family members to engage carers directly. It's changing the face of the carer industry:
    I am active in the disability, aged care, mental health field, seeking innovation and empowerment of users of services. A major trend here is the global movement towards paying a package of money to the consumer rather than block funds to the provider, so that the consumer can purchase the hours of support and care they need, transport assistance, personal support etc, in an individualised way rather than in an institutional or provider-centric way. This means many people with disabilities, or families of ageing parents, now become the employers of care and support workers. Generally they can do this in either of two ways: they can acquire an ABN and do the employing themselves, paying workers from a personal earmarked account. Or they can have a host organisation doing the employing, while they do the self-direction in how the money is spent. In turn, many care and support workers can work in a self-employed way, and many are trying to work independently, shedding the agencies that supply them, and who take a hefty cut.

    A friend of mine, Siegfired Drews, who in retirement from a corporate career found himself managing the 24-hour care of his wife who had Motor Neurone Disease, has developed a technology portal to allow families of ageing parents, people with disabilities, or chronic and mental illnesses, to manage their own support package, employ and pay their carers. In addition, self-employed support workers can find online (much like an internet dating service), a person they want to work for in their locality, cutting out the middle man in the process. Some information on this is available here.

    The point here, for your interests, is that this opens up a whole new section of society that can operate in a self-employed manner, both in hiring support and care workers, and in supplying independent support and care, both by-passing the often parasitic middle men in the charities and provider agencies.

    I'd be happy if you want to run a mention of this sometime in Contract World, because no doubt many of your people will have ageing parents or family members with disabilities, and will understand immediately the value in this whole direction. We are trying to connect up people with this interest in order to develop the whole field, enhance systems, etc.


Discussion January 2011

8 January 2011: Ken Phillips starts a discussion on innovation and entrepreneurship which focuses on Joseph Schumpeter's ideas on entrepreneurship (1934). Ken says that self-employed people are perhaps the key, but ignored, element in economic development.

On 9 January 2011, Michael James from the UK wrote:
    "Schumpeter thought that entrepreneurship was necessary for early capitalism but would wither away and that production would be taken over by giant corporations. He actually agreed with Marx that the market generated permanent concentration of capital into ever fewer hands. Thus he foresaw 'corporatism' without being enthusiastic about it. He influenced people likeJ K Galbraith who thought the market and entrepreneurs had been superseded by organisation."

    This 1982 article explains the importance of entrepreneurship.

    In the Daily Telegraph an ex-adviser to the current UK PM, David Cameron, says the UK's plans for an enterprise society are inadequate.

On 10 January 2011, Dick Davies took Ken Phillips to task (nicely), explaining that entrepreneurship does happen in large corporations. Ken replies:
    Ken, innovation is a very important opportunity for independent contractors. I would like to make a few comments in relation to your excellent introductory piece:

    1. You rightly cite examples of successful innovators who have brought about big changes by building big institutions. But you suggest that this is the result of huge egos imposing on employees what they have to do, and in doing so, suppressing the natural creativeness that is in all of us.

    This is undoubtedly what a lot of big institutions end up doing, but not, I suspect, the successful innovators, who would be more inclined to grab every bit of help they could find. I was an employee of DEC in its glory days when the founder-president, Ken Olsen, a man much loved and admired throughout the 130,000-odd workforce, had built a culture that was much admired at the time. Every door in the company was open, passion ruled, and if you were a manager, you were either very brave or very misguided if you thought your position counted for anything against a subordinate with a better idea. This culture was pretty well replicated in Apple, Silicon Valley more generally and Microsoft. It would probably in many ways look passe to Google and Facebook employees.

    My point is simply this: power CAN be used to heighten innovation. The trick is how the environment is set: what behaviours does it reward?
Ken replied:
    Yes, Dick, large 'employment' firms can encourage entrepreneurship which is what HR departments sometimes are supposed to do. But this is dependent on the creative 'boss' allowing/demanding that all the subordinates to do this. It's not systemically independent of the boss. Change the boss to a despot and entrepreneurship goes. However, the legalities of self-employment align to the behaviours of entrepreneurship creating institutionalised entrepreneurship.
Dick Davies:
    2. Commercial contracts are outwardly the differentiator between employees and independents. But what matters in innovation is mindset and behaviour. My point above is that these can be promoted just as well by good employers. The advantage employers have is the option to use power to get what they want by simply getting rid of people who don't work effectively in the way they want.
Ken replied:
    Yes. Mindset and behaviour is everything and self-employment enables that entrepreneur mindset much more so than employment. And no, employers do not have the power to get rid of people. Modern employment law has effectively handed ownership of the employee's job to the employee.
Dick Davies:
    3. Independents face a challenge to build environments in which they can work together, so that they can take on big undertakings cooperatively. Power is still present, but it has to be understood and used in new and different ways. If a group can crack this, they have the start of a major economic breakthrough.
Ken replied:
    Yes. Self-employment doesn't guarantee entrepreneurship. People have to work hard at it. But self-employment gives the foundations of entrepreneurship.
Dick has supplied a longer think piece on encouraging entrepreneurship.


On 10 January 2011, Stephen Shaw explained how he's been denied contractor work because he refused to be an employee:
    I've just read your latest article and I wanted to congratulate you! It's wonderful. As a self-employed person for almost 8 years, I can attest to the barriers put in place by govt. I lost a contract with a firm once because I refused to sign up as a casual employee. That hadn't been the (verbal) agreement that was made before I started. I was there 3 days before I realised they wanted me to sign this casual employee contract! I was a sole-trader at the time and that company had been fined heavily by being charged with some kind of super-scam involving "contractors" that were deemed to be employees (even though, from what I was told, both the contractors and the company didn't want to have an employee/employer relationship---unfortunately, with the govt, it's all about revenue). It was because of that company that I started my own Pty Ltd company which is unfortunately expensive to run...

    Now that I'm moving into product development rather than simply contracting out my services, I am likely to not see any significant income for as long as 2-3 years while I develop my ideas. I do intend to supplement with freelance contracts when I get the chance---hopefully on a part-time, work-from-home basis. My R&D is partly funded out of my last contract but mostly self-funded (as I haven't paid myself a salary since then). I figured there might have been some kind of grant or tax concession for R&D. However, it seems that you have to spend more than $20k a year and have a certain number of employees to qualify, IIRC. Alternatively, you can have a "registered research agency" do the R&D on your behalf and then your expenditure has a tax concession from the first dollar. However, I found that it wasn't possible to easily become one of these RRAs :(.

[If you would like to contribute to the discussion, please e-mail your thoughts to us at: discussarticle@contractworld.com.au.]