In it for the Money: Independent Risk

How a coworking space called Workantile in downtown Ann Arbor helps mitigate risk for independent workers

Editor’s note: Nelson’s “In it for the Money” opinion column appears regularly in The Chronicle, roughly around the third Wednesday of the month. At the May 20, 2013 meeting of the Ann Arbor city council, a resolution will appear on the agenda that would establish a task force on “economic development.” This month we asked Nelson to write about a segment of the local economy we think is likely to receive scant attention from that task force: independent workers. [0]

David Erik Nelson Column

David Erik Nelson

In abstract, my monthly column is about money – how money is a way that we signal our values, the way we track our interest, and the trail left by our investments of time and attention.

Last month I wrote about the stuff I do to earn money. This month let’s talk about something I do that can’t conceivably ever earn me a damned dime: The Workantile.

The Workantile is a business-like entity on Main Street in Ann Arbor [1]. In contrast to pretty much any other “business” on Main Street, we sell neither goods nor services.

Our business is maintaining a space where a community of independent workers can sit together and work on their own things. Our space is around 3,000-square-feet, and has lots of rolling tables and chairs (so that the space can be reconfigured in any way that interests the members and serves their ends), as well as a kitchenette, a clean and commodious bathroom, a couple of phonebooth-esque things, a couple of conference rooms, some lockers and bike racks, and an awesome printer/scanner/copier.

We also have half of an ancient, homebrew quadrophonic stereo hooked up to a wifi bridge which, combined with our brick walls, high ceilings, and hardwood floors, means that we have a pretty sweet-ass dance hall sound system, too. [2]

Some of our members work together formally – either for the same employer with home offices in some distant and exotic place (usually California), or on projects of their own devising. But mostly we work separately, tapping away on our keyboards with headphones on.

We work on our own without having to work all alone. It’s nicer than a coffee shop, because there’s no milk-steamer roar, no awkward break-up happening at the next table, and no creepy old dudes leering at your sandaled feet. Our doors lock, so the crazies are limited to those who stay current on their membership dues (i.e., me).

You can go to the bathroom without worrying that someone is going to steal your laptop or rifle your purse. Also, when clients meet you in a coffee shop, they think, “Ugh. I guess this is how we have to do business in the 21st Century.” When clients meet you at Workantile — with our industrious brick walls, antiquey tin ceilings, and huge windows — they think “I can’t believe this gal isn’t charging me more!”

That, my friends, is an excellent thing for your clients to think.

So, to dispense with the hard sell: Come down today (or any other weekday) for a tour and a FREE Day Pass!!!

But, believe it or not, Workantile hasn’t been kept up and running since 2009 in order to furnish freelancers with hardwood floors and a kitchenette. Most of us already have those in our actual houses, conveniently located near our actual beds. Heck, several of our members have other downtown offices already, in addition to home offices. For these folks, we’re sort of their third place workspace.

There are scads of things our members love about the place – the Social Thursday lunches, the liquor tastings, having smart folks in other industries to bounce ideas off of, the shockingly fast and stable Internet connection, the classy downtown digs so close to so much damned good food – and none of them are our most vital offering. But these are our easiest-to-enumerate offerings, because things like conference rooms and Zingerman’s coffee and a kegerator are really easy to see and touch and understand, while our vital offering is obtuse and confusing and abstract.

The Wily American Freelancer

The thing we’re here to provide our members is a need that otherwise goes unmet:

Workantile exists to mitigate risk for independent workers.

How many “independent workers” are there in the U.S. workforce? [3]. According to the U.S. Bureau of Labor Statistics (BLS), as of 2010 just shy of 11% of the U.S. workforce was “self-employed” That accounts for 15.3 million people. A more recent study puts this number up near 17 million for 2012 – but is sort of a macintoshes-galas comparison to the 2010 BLS number.

However many millions of Americans are “self-employed,” we all agree it’s a diverse crowd: It includes graphic designers and plumbers; it includes me, and also includes Warren Buffet. I’m told Warren is a rad dude, and I’ve met plenty of plumbers who I’d gladly call brother, but just to be clear: Workantile doesn’t have room to store Roto-Rooter machines, and doesn’t exist to help mitigate Warren Buffet’s risk. We serve the interests of much smaller fish.

Meanwhile, folks like the Freelancer’s Union (who have a very similar mission to Workantile, albeit with an entirely dissimilar execution) currently estimate that about one-third of the American workforce is composed of freelancers of the kind Workantile serves. That’s up from one-quarter a few years ago. [4]

Business Risk

Even at the absolute low-ball of 10% of the workforce, that’s still a healthy chunk of workers, and like all workers from sea to shining sea, they’re likely to get screwed by their employers. But there are some idiosyncratic ways that freelancers get screwed – ways that take advantage of the psychological isolation that traditionally goes hand-in-hand with freelancing.

Take, for example, the “design contest.”

Here’s how you run this con – pardon me, I meant “totally legitimate business practice.” Let’s say you run a company and need a new logo. You could hire a graphic designer, negotiate a fair rate with him or her, and launch into the process of developing and executing a design. In the end, you’d wind up with all of the “assets” you need (e.g., a high-resolution image of the logo, files in all the various graphical formats and sizes you need, maybe a stripped down mini black-and-white version for business cards, etc.) and the designer gets paid.

But that sorta smacks of effort – all that placing ads and interviewing people! – as well as risk: Once you invest the time in finding candidates, narrowing them to the most promising, and hiring someone, what if he or she flakes out, or produces nothing you like? What if you misread the relationship, and it’s just not a good fit? Your big company might lose a small sum of money! Heaven forefend! There’s got to be a better way!

Well, there is! Instead of hiring a freelancer, why not run a “contest”? Ask graphic designers to come up with a new logo for you – for no fee, promised or implied – and submit it. Once you see some things you like, you can ask these “finalists” to make the revisions you want, and the best logo – the one you decide you want – is the “winner.” What’s the prize? Well, duh, getting paid the fee you earned, silly artists! [5]

But what about all the other artists who did the same amount of work at your behest (resulting in a final product that no one but you would conceivably buy)? Doesn’t their labor deserve remuneration? Nope! They’re losers! Only the winner gets money – because this isn’t payment; it’s a prize!

I’m going to level with you: Lots of freelancers are “fine” with spec work like this. If you want to work for free, they say, then you should do so. On the other side, lots of freelancers get really lathered about this, since injecting free labor into the pool drives down the value of everyone’s work.

I have opinions on both of those takes, but none of them are germane here – because my beef isn’t with the payment model [6], it’s with the risk.

A larger entity can always absorb more risk. If AT&T hires me for $10,000 to design a logo and I botch the job, then someone has egg on their face, but it isn’t gonna sink AT&T  [7]. On the other hand, if I invest $10,000 worth of time into working with AT&T and they decide I’m not the Big Contest Winner, I lose my house.

The Psychology of Isolation

“Fine,” you might say, “It’s a free country; you shouldn’t do spec work if you can’t afford it.”

To which I generally say “Amen!” – because there are times where working on spec is totally reasonable and appropriate. The “corporate logo contest” isn’t one of them, but that doesn’t mean that legit on-spec situations don’t exist.

The problem is that isolated independent workers – isolated humans – are so easily manipulated. We’re social animals, and social animals will tend to agree with a unanimous majority, even when the thing we’re agreeing to is absolutely outlandish. [8]

This, to me, is what makes something like the Workantile superior both to public, quasi-social workplace stopgaps (like coffee shops) and to “virtual” communities like this or that forum, Facebook Group, Tumblr coven, or even the Freelancer’s Union.

The problem with the “on spec contest” is not that we don’t know that it’s a fool’s wager. The problem is that in the moment when we’re asked to work for free, we feel outvoted. When a bunch of people (albeit all on the same “team”) are telling you it’s a good idea to do something that’s in their interest (and not in yours), it’s devilishly hard to hold the line.

But when we sit together day after day with fellow travelers – even if they are from “outside our industry,” and even if we do so mostly in silence – we draw strength from the knowledge of their existence, from our confidence that they share our view. When you go to the negotiation chamber, these coworkers are with you in spirit, and when someone asks you to give up something for nothing, the still little flame in the center of your brain whispers: “Fuck that noise! Trek or Bill or Sarah would never agree to that bullshit!” And so you don’t, either.

We don’t second guess ourselves as much, because we have a tribe, too, and that tribe is a powerful thing.

When we talk about “independents” and “coworking” and the new migratory workers and the spaces to accommodate them, we always mention the hardwood floors and the wifi and the ping-pong tables, or whatever.

But none of that matters. What matters is that this hidden nation of wandering workers is finally finding a way to locate each other and gather around the same fires, to put the gloom to our backs and see our vital connection.

My Shameless Hard Sell

And here we come back to the hard sell: Maybe the thing we do down at Workantile (118 S. Main Street, in the heart of sunny Ann Arbor!) is a thing you need to be doing, too. Come down for a free Day Pass, and see if working with us works for you.


[0] Some number of readers might have tuned in for the next installment in Dave’s Meandering Exploration of Guns in America. This is not that. You’ll get more guns next month – if The Chronicle can finish making whatever pie charts Nelson needs. But if you need to read something about guns right now, you can head over here and read Nelson’s thoughts about the hoopla surrounding Defense Distributed’s 3D-printed “Liberator” pistol.

[1] It may seem like this column is shaping up to be an advertisement for a business in which I have an investment interest. That is indeed the case. But fret not, for while I’ve invested thousands in Workantile, the way our operation is structured (and our cripplingly low membership dues) almost guarantee that I’ll never see a dime of profit. Heck, here’s my K-1 from 2012; please note those negative signs.

[2] These “coworking spaces” are increasingly common throughout the developed world. When we were founded in 2009-ish, there were a few dozen across the United States. Today there are around 800 (and more than 1000 worldwide) – which would seem to make us one of the oldest coworking spaces in the nation, if not the woooorld. Score!

[3] The term “independent worker” is tricky. The classic division is to say that anyone who receives a W-2 is an “employee” (since these are issued by employers to report wages and tax withholdings), while folks who received 1099s are “independents” (since this is what companies issue to independent contractors) – often called “freelancers.”

But there is lots of overlap here: I’ve had plenty of years where I’ve received at least a half-dozen W-2s and 1099s by April. And there’s also folks left out of the Venn Diagram entirely. For example, we rarely think of lawyers or financial advisors as “freelancers” – although many essentially are – and many one-person shops are actually organized as LLCs (“limited liability companies”). Many authors I know, for example, do so, and are essentially employees of a company for which they are also the owner. These might traditionally be thought of as “sole proprietorships” – that is, “businesses” owned and operated by a lone individual who basically draws no distinction between his or her business and personal assets.

On the other side of the coin, the workforce is increasingly populated with folks who look like freelancers, but are actually full-time employees with benefits and everything (so-called “remote workers”). But beware of that term, as it is also sometimes used to lump together both benefits-receiving W-2 employees who work from home with off-site temps and contractors.

All of these “independent workers” share the same “lifestyle risks” and “business risks,” but the key business risk I’m about to describe disproportionately falls upon the freelancer-like “non-employee independent workers.”

[4] I have no clue where they’re getting these numbers. I’ve been told on several occasions by third parties that this is based on the number of Americans filing at least one 1099. If so, then that number is pretty insanely inaccurate. For example, back when I was a fully employed teacher – and absolutely no one’s idea of a “freelancer” or “independent worker” – I regularly filed 1099s for tutoring work, as well as articles and stories I sold to periodicals.

[5] Big points to my dear pal Morgan Johnson for bringing to my attention this company whose entire business is running such “contests,” and thus screwing legions of earnest, well-meaning, inexperienced freelancers. 

[6] Although, just to shoe-horn this in, ethically speaking you should always be willing to pay people for work you ask them to do. Just sayin’. If they want to make a gift of the work, that’s their call, but it strikes me as gauche to ask – or even demand – someone give you a gift. We, in fact, have words for situations where the strong demand gifts from the weak. Those words are not flattering.

[7] $10,000 flushed down the toilet from trusting a graphically crippled guy like me to come up with your next logo would be essentially a rounding error to the Big Blue Death Star: AT&T saw $126 billion in revenue in 2012, up three billion from the year before. Even if you multiplied the graphic designer’s $10,000 fee by one million, it would still amount to less than 10% of AT&T’s revenue for one year.

[8] I know, I know: You’re a unique snowflake who knows his mind and no one’s the boss of you. You’re never swayed by groupthink. Please go read about the Asch Conformity Experiments.

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