The Daily Deal, July 27, 2001
Judgment Call Corporate Governance

Free Agent Boosterism

by Susan Webber

Poor analysis underlies the bright talk and hyperbole of a report on how self-employment is changing the United States

Like Moliere's bourgeois gentilhomme, who was delighted to discover that all his life he had been speaking prose, many of the self-employed will doubtless be pleased to learn that they are part of a growing cadre of free agents. "Free Agent Nation: How America's New Independent Workers are Transforming the Way We Live," by former White House speechwriter and Fast Company contributing editor Daniel H. Pink, purports to be "a census of the Free Agent Nation." Pink scoured the available research and government data, but the bulk of his book relies on several hundred in-depth interviews.

What follows the research, however, is not journalism but boosterism consistent with Fast Company's editorial bias and business objectives. Pink depicts these liberated workers as self-reliant, technology-oriented, better paid, more satisfied, and more involved with their families than their salaried counterparts. Lonely? Heavens no; they form support networks and seek out project partners (note that conferences that target these hardy souls are a major source of income for Fast Company). Or they make friends at Starbucks and Kinkos, which serve not just as infrastructure but also as havens for the itinerant knowledge worker.

It's simply an accident of timing that the book's bright picture contrasts so sharply with a darker spectacle that stars growing legions of involuntary free agents. But underlying the hyperbole and happy talk is sloppy analysis.

Pink criticizes the Bureau of Labor Statistics for failing to distinguish among the self-employed and divides them into "soloists," "temps," and "microbusinesses," and estimates they total more than 30 million workers. However, his interviews focused almost exclusively on new economy denizens - programmers, designers, copy writers and consultants, plus people who founded businesses to serve them. The interviews ignored the large, less-glamorous pool of the traditional self-employed: painting contractors, for example; solo professionals such as accountants and doctors; massage therapists; taxi drivers.

There is also a bias in the interpretation of their comments. For example, he takes at face value the oft-repeated view that these independents enjoy an equal relationship with their clients.

Pink descends into unwitting self-satire, when, at length, he sets forth film character Jerry Maguire as a prototypical free agent and places quotes from the film next to ones from psychologist William Maslow, who came up with the theory of the hierarchy of needs.

Internal contradictions abound. Pink claims free agents on average earn 15% more than their peers on payrolls, but later complains about the difficulty of obtaining health insurance, ignoring that employer-provided benefits often constitute 25% to 30% of base salary.

He also argues that free agents are loyal - laterally, not vertically - yet cites research that shows that numerous weak ties help work-seekers more than fewer strong ties. Or is it that, in new economy newspeak, favor-trading is tantamount to loyalty?

Pink ventures onto even shakier ground when he looks into his crystal ball. He envisions new forms of finance for microentrepreneurs, including bonds issued by individuals, and, a la Martha Stewart, IPOs for the most successful. Yet he never makes the case that free agents are starved for capital or that current methods of financing - savings, friends and family, equipment financing, and credit cards - are inadequate. Indeed, scholars of entrepreneurship and venture capitalists (at least before the Internet boom) were well aware that too much capital can allow businesses to pursue and persist in unrealistic strategies, while scarce funding forces them to correct course sooner.

The good news for the dealmaking community is that free agency does not pose an imminent threat to high-level advisory business. Yes, Fortune 500 companies employ a smaller percentage of the work force than they did in the 1970s. But that is due to outsourcing and the divestiture of non-core businesses rather than a mass exodus of talent.

Nearly all the independents Pink surveyed learned their trade and build contacts at a traditional organization, and most get their business from these types of organization. So the underlying symbiotic relationship between independent contractors and large businesses limits the ultimate size of the free-agent market. In addition, free agents - save a few standouts like Tom Peters and George Gilder - find it hard to establish reputations that enable them to deal with top-level executives.

And Pink's repeated invoking of the image of free agents teaming up just like Hollywood talent points up the downside of relying on independents, which limits the size of the project entrusted to them: the large cost of negotiating and contracting with disparate parties, the risk they won't work well together.

Conventional wisdom has it that the biggest impact of the growth in self-employment lies in continued pressure for more flexible hours, benefits, and career paths. Yet Pink's interviews show that distaste for company politics was the biggest factor motivating free agents to strike out on their own.

However, despite more than a decade of the vogue for waving the teamwork flag, corporate behavior - which is simply human nature writ large - proves remarkably resistant to change.

The difficulty of emulating the management practices of firms like Goldman, Sachs & Co., which are able to keep politics to a minimum in a business known for large egos and bare-knuckle infighting, suggests that the free agency movement will enjoy a rosy future - whether the phenomenon is over-hyped or not.