The Rise of One Person Businesses

Paul Kedrosky just published a fascinating post entitled The Rise of the People-Less Business:

“Some fascinating data out in a new Intuit/IFTF study on small business. [pdf] One factoid that caught my eye right away was on the rise of “personal businesses”, the kind of one-person shows that helped drive the adoption of Ebay, Adsense, etc. :”

Personal businesses are a surprisingly large part of the American economy. According to the U.S. Census Bureau, at the end of 2004 almost 20 million Americans operated businesses with no employees. Businesses without a payroll make up over 70% of the nation’s businesses, and almost one million new businesses without payrolls were added in 2004 (the latest available data).

I’m not sure I’d call these people-less businesses — after all, their owner-operators are people. What we’re seeing though is the erosion of one of the pillars of society as we knew it, the industrial corporation. One effect of the internet and what Thomas Friedman calls “the flat world” is the re-empowerment of the individual as economic unit. These people aren’t working alone — it’s just that they don’t need to work in the same place or for the same company. It’s not just companies like eBay and Google AdSense that support this rise — it’s also ubiquitous communication infrastructure, the ability to take orders over the net, the ability to deliver products anywhere in the world via global overnight shipping. Sole proprietors were formerly village or neighborhood based. They can now be non-local players.

And as is often the case, we saw this effect first in the software development community. As Larry Augustin pointed out long ago, the open source software movement could be seen as the rise of the software developer as free agent. Of course, the data could also just be related to the economy, with companies trying to run lean by spinning off employees. But it’s still an interesting statistic, and possible “news from the future.”