The Impact of the COVID-19 Pandemic on the Gig Economy and Small Businesses

[Danyelle] Hello everybody. Welcome to Comets discuss, part of the UT Dallas CometCast network, where we give you mini episodes on big, trending topics. For this series we’re talking about COVID-19. With nearly every aspect of life now affected by this global pandemic, we’re interviewing UT Dallas experts — while practicing social distancing – to provide you various perspectives during this evolving situation. I’m Danyelle. Today we’re talking about the impact the COVID-19 pandemic has had on small businesses and the gig economy with Paul Nichols. Paul is the executive director of the Institute for Innovation and Entrepreneurship at UT Dallas. He also teaches corporate innovation and entrepreneurship in the Naveen Jindal School of Management. Thank you so much for joining us today, Paul.

[Paul] happy to be here, Danyelle. Thank you very much for the invite.

[Danyelle] First off, we wanted to ask you a question we’ve asked most of our other guests, which is: have you found any ways to implement lessons from the COVID-19 crisis into your online courses?

[Paul] Absolutely. I mean this is not only a major shift in the economy and in our society right now but it’s a great teaching opportunity. Obviously it’s about something that’s horrible but adapting to the new situation is all about innovation and entrepreneurship so we’re absolutely looking at how we can incorporate that into our lesson plans. So what I’ve done specifically for mine is at our undergraduate pitch course — ENTP 3301 Innovation Entrepreneurship, subtle plug, rapidly becoming a very popular course on campus — this is where we have the students form teams and come up with their own business ideas. At the end of the semester they do a pitch that would be good enough for an investor to talk about, here’s our product idea, here’s our market, here’s how much money we’ll need, here’s our business model. All that together in like a ten minute presentation and what I had all of them do was include another slide in terms of how would their theoretical company deal with the COVID situation and it was really fascinating. The students did a great job trying to dive into that and some, we found some companies would be in serious trouble. Others would be able to adapt to the new situation and others would actually do better because of the COVID situation and how people have had to stay at home and how work and life is altered. That it would actually help their business. In one of the other courses I teach — which is a venture capital course for the executive MBAs — we talked about, what does the future really hold for high technology startups, startups in general and the entire venture capital industry? Because I used to work in venture capital and I lived through the boom and bust years at the early 2000s and let me tell you that wasn’t any fun at all. But we’ve got some historical precedent. We looked at the actual charts — what happened in early 2000s, with the financial meltdown of 2008-2009, and how long it took for markets to recover and what particular industries or markets did better and which ones did worse. And so that was about as timely as you can get. But it lent some good insight into what we can expect over the next year maybe two years.

[Danyelle] That is one silver lining, that students are able to get some real-world application from this crisis, so I’m glad you guys are able to implement that in your courses. You’re also the executive director of the Institute for Innovation and Entrepreneurship. How are you guys implementing the COVID-19 crisis into what you guys are doing at the Institute?

[Paul] Let me briefly go over the Institute and all the different things that we do. So it’s kind of like a three-pillar stool. One will be the academics, which are all the courses at the undergraduate and graduate level we do at the School of Management. The other are the non-academic programs we do such as the Big Idea competition in the fall, the Women’s Summit that we do in the fall, the Emerging Technology summit in the spring, all the specialty programs like CometX and GalXc and the speakers that we bring on campus. A lot of these are done out of the Blackstone LaunchPad facility. And then the third pillar of the stool is our incubator space on campus called the Venture Development Center where we have about 20 to 25 startup companies housed there and these are spin outs of UTD technology or UTD students or alumni or faculty creating their own company. So we manage all of that. So we’re a university-wide institute, one of the few institutes that belong to the whole university. And it has absolutely impacted all three. We talked about the courses. On the non-academic programming, we’ve had to go online. We figured out how to do that this and also how to plan for the fall. Normally we bring in guest speakers to talk with students. How can we set up sessions for that? How can we do some of our events online? That’s something we’re discussing. And then finally for the incubator space we actually had to close that down, too, just like a lot of other businesses. But we left that option open to some companies and some companies were able to qualify as an exception early on that they could stay in business, they could stay physically located there because what they were doing was critical. Some were working on communications equipment, some are working on some new materials and chemicals that are necessary. So we were able to keep some of the labs and office space open for them. But also had to make some adjustments to our rent policy because it wasn’t really fair to charge them full rent when they weren’t able to be there. So we’ve had to make some adjustments, too, but so far everything’s working out just fine. It’s not ideal but we’re absolutely making it work.

[Danyelle] That’s so great. I love that, like we talked about with the academic stuff, you’re not only getting the timely information, our students are able to actually see it happen in real time with the way the Institute has to be flexible in this time. Before we get into talking a little bit about what small businesses like the types of entrepreneurial endeavors that might come out of the Institute, let’s talk a little bit about how the economy — specifically the gig economy — has been affected in this. I have a very loose understanding of the gig economy. I’m sure our listeners would be really grateful to get a quick overview about what the gig economy is and what a gig worker is so can you give us a quick overview of those two terms?

[Paul] Yeah. This is, this is a relatively modern term that’s happened in the past number of years and like with any new terms a lot of people have a lot of different definitions for it. But what you can pretty much always count on a true gig job or gig worker job is it’s something short-term or they’re freelancing or they’re doing something on the side. They’re not really an employee. They’re legally a contractor so they’re working for themselves but they’re working with a company on either a contract basis or a per-job basis. They’re not a full employee and a lot of these types of jobs are jobs that people can cycle in and out of very quickly based on their own schedule or their own needs. So they can get hired very quickly, they can also get out or be let go very quickly. Then there’s a lot of pros and cons to that but the term “gig” basically comes from I guess like the old days and music business where people would play a quick gig you know to make some quick cash but for some people this is more than just a side hustle or something they do to fill in the time. For some of them they’ve been able to grow it into be either a full-time or part-time or three-quarter time or even full-time employment and for some it’s all they can find because, you know, just because of the employment situation right now.

[Danyelle] So I know a lot of gig workers have been very active during this COVID crisis with a lot of us needing to do the stay-at-home guidelines and home delivery. What has the effect been on the gig economy and gig workers during this crisis?

[Paul] Yeah it’s, it’s been good and bad and it really depends on the type of job. For some, like delivery drivers, delivery people, it’s been an absolute boon because everybody’s at home, no one wants to go out and shop or drive and totally get that so like good entrepreneurs we go where the need is and the need is more people to help out with deliveries. But then we get into the whole, is somebody an essential worker versus are they an expendable worker, which is an unfortunate reality of this. Somebody may be essential but you know they’re not really paid very well, which means that, you know, they’re also replaceable which isn’t really a fair assessment of somebody’s true worth, is it? And that gets into the other downside of being a gig worker, is that since you’re not a regular employee you don’t have any benefits. So health care is entirely up to you and right now health care is a rather important concern and it gets into the larger issue of just health care in general, how we handle it in this country versus other countries and that’s still a big problem that has not been adequately addressed. Hopefully, hopefully COVID will force some good changes in that direction. So it really depends on the type of job. Another type of gig worker that isn’t often talked about can be contract programming where people can help out with websites or social media or writing code, helping somebody develop an app, where it’s like short-term part-time work but it’s very skill-based, very sno– very specialized. A lot of people can be a driver, you know, for a car and to do deliveries. Not everybody can do a really good website design or can help write an app. So there are other parts where they can absolutely be essential and have a pretty good — I hesitate to use the term job security in a time like this — but at least there’s definitely demand for them, especially as companies are trying to figure out what they really want to do, what projects do they want to accelerate, what projects did they want to put on hold. If they can bring in people on a contract basis that can help them fill in some gaps.

[Danyelle] But you did mention that these gig workers, even if they are highly skilled, are potentially a little more vulnerable.

[Paul] Oh, yeah.

[Danyelle] What do you think companies can do to change, to make any changes to make it a little safer for these gig workers? I know that you said you didn’t feel comfortable using the word security but is there anything companies can do to make these jobs a little more secure and take better care of these gig employees?

[Paul] There absolutely are things companies can do but here’s where we get into the downside of capitalism. And I will readily admit I am a red-blooded capitalist pig. I have worked in the venture capital world. I’ve had my own startup company. I teach business so I am absolutely a firm believer in the benefits of capitalism. But it’s not an end-all solution for everybody and companies only spend money on things that they have to and that also comes down to employees and if companies feel that they can pay people the absolute least then that’s what companies are gonna end up doing. It’s really unfortunate but a lot of companies will only pay people or compensate people if they feel forced to do it and that’s part of the downside of the gig economy is that a lot of companies feel that they can get by with the absolute minimum forms of compensation for these people because they consider them so replaceable. So what can companies do? There’s a lot they can do. They can work on limiting human interaction, contact. They could absolutely go ahead and provide some type of benefits or COVID testing but a lot of those type of benefits are usually going to be reserved for regular employees which is why a lot of companies prefer gig workers because they don’t have to give them any type of benefits. What I’m hoping one of the silver linings out of the COVID experience is that we’re gonna realize that a lot of these workers need protections. We really can’t let them be taken advantage of. They’re an essential part of the workforce, too. They deserve as all the rights and all the protections just like any other worker in this country. So it’s really gonna be up to the company until they’re forced to. Some companies absolutely want to be good agents in their community. Others will will never spend a dime unless they’re absolutely forced to.

[Danyelle] What do you mean by “forced to?”

[Paul] Either, either legally or because it’s the only way they can attract the people, the talent that they need, the types of workers.

[Danyelle] That’s interesting. I wonder if this whole crisis will make companies realize, like you said, that gig workers aren’t as expendable perhaps as we thought they were in the past.

[Paul] I hope so. Time will tell.

[Danyelle] It will indeed. So we’ve talked about the economy. Let’s talk a little bit about small businesses. You were recently interviewed by media about the impact this pandemic has had on small businesses and you said that the survival of small business is essential to the nation’s ability to regain its footing once this crisis is over and done with, if it’s ever over and done with. Can you explain what you meant by that?

[Paul] Certainly. Here are some quick numbers. Over half of all the employees who are working in this country work for a small business and over 90 percent of all the companies that employ people are considered small businesses where they have 10 or fewer employees. So this is a major segment of our economy. The largest segment. The other being working for large companies are working for government or other entities. So whatever happens to the small business sector will happen to the rest of the economy whether you like it or not. And you can be a big pro-corporate person but how goes small business will goes the rest of the country. So it is absolutely essential that they have some type of help, support, assistance, protection. The programs that were created by the Federal Reserve and the Department of Treasury are absolutely essential. I hope they do more. They’re clearly not enough and there’s classic debate on who should get more financial help — the large corporations or the small businesses. I am absolutely all about helping the small businesses because that’s where the employees are. Those are the people that don’t have all the assets of a large company like Boeing at least can get very large loans from banks to help them whether through this. A small business can’t and gigging workers certainly can’t. The other thing is that it’s small businesses that are able to hire people faster. So as an economy goes up and down small businesses have to layoff people or hire people but they do it at a faster rate than large corporations do, which means they can respond that much quicker. They can hire people a lot faster when things stabilize or turn around. They are on the frontlines of the economic activity in the country and I don’t think enough people realize that.

[Danyelle] So you talked about how in your classes a lot of your students were realizing whether or not their project business would make it or not make it. What are some things that business owners need to think about when they’re considering monetary relief? What are some things that you might tell your students if they were in these small business’ shoes?

[Paul] It really boils down to two things, one being their finances. In their budget they’ve got to have a really good handle on how much money they have, what their debts are how much money they owe, how much money’s coming in. A surprisingly large number of small businesses and entrepreneurs aren’t really good at budgeting, which always shocks me because it’s the one thing that you can do to get better control over your future. So they’ve gotta do that as a quick assessment — where do they really stand? And that’s going to tell them what their options are. Because the other thing that they have to do is adapt very quickly. And this is something, again, small businesses do a lot better than large corporations. Think of a large corporation is like a giant aircraft carrier — it’s powerful but it takes forever to turn it around. A small business is a speedboat. They can turn it around on a dime, they can respond very quickly. So what are the new opportunities? The economy has not gr– it hasn’t ground to a halt. Over 80% of the economy is still working, which is frankly phenomenal. Thank goodness COVID happened while we have the access to the internet. Everybody still has needs, everybody still has wants and desires. Everybody still needs to spend money. So what are those needs? How can a small business better support the needs of consumers in these new and weird and difficult times? They can certainly do it a lot faster than large corporation could and we’ve seen that with my favorite example are the distilleries that stopped making whiskey and now they were making hand sanitizer. Cause boom! There’s all of a sudden a massive need for this and they already have the equipment, with some minor modifications. I thought that was brilliant. And a lot of other companies need to do that, too. What do they have and how can they alter what they do to provide a different product or slightly different service to stay afloat or even make potentially even more money based on the new reality. So those are the two things that got to do is that financial and budget assessment and then, you know, the adapting to the new reality and what kind of new products or services they can offer. Because the other thing that got it, and this is where the hard, the hard question comes into play is, should you shut down? At some point every entrepreneur and small business owner has got to make the decision, is this worth financially continuing on or I’m actually better off shutting things down or declaring bankruptcy and maybe trying to restart in a year.

[Danyelle] What can we as consumers do to help small businesses and gig workers to stay afloat in this time?

[Paul] Shop! [laughing] And it’s, it’s a silly, it sounds kind of silly and sounds kind of flippant but really it’s shop. The economy is kind of like, you know, it’s your circulatory system. It’s blood in the body. As long as blood is flowing you’re alive. When blood stops flowing you’re in serious, serious trouble. Same thing with small businesses and people consuming and shopping. Obviously shop within your means because everybody really needs be looking at our own personal budgets. You know, make sure you have a nice safety cushion but continue to buy from the small businesses wherever possible and support them and that really gets to the a big point that isn’t talked about enough. You know, it’s been argued in politics for a long long time that wealthier job creators because they invest and they create companies and businesses but no, that’s not reality at all. The reality is it’s the consumers who are the job creators. And we’re seeing that play out in real time right now. Because what happens when we all slow down our consumption? The economy takes a hit. When we increase our consumption, as we all hope we will at some point soon in the future, the economy will go back up again. Its consumers who are at the center of this. And as long as we have access to products and services we need, as long as we have an income coming in where we can continue it but that income and back out into the world then that’s how we keep everything moving safely.

[Danyelle] That was a great point for us to think of as consumers. Do you have any final thoughts to share with our listeners?

[Paul] There are some good impacts out of this I firmly believe and we can– it’s probably an entire– for another podcast — What’s the, what’s the silver lining to COVID and what will a post-COVID world look like? But I think a lot of good benefit, good things will happen from it. I think the ability to work from home, a lot more flexibility in employment, better ways to interact with healthcare professionals. There’s a lot of things that can actually come as a good benefit from this. But it also means that a lot of things are gonna have to break along the way for that to happen and we just need to be prepared for that.

[Danyelle] that’s a good positive note to end on. I really love that your final thought has that silver lining aspect to it. Thank you so much for joining us. Again we really appreciate you giving us your time. We know you have a lot going on. You’ve been an amazing guest so thank you.

[Paul] You’re very welcome, Danyelle. Thank you for inviting me and everybody be safe and be thoughtful and take care of each other and always plan ahead. Paul wanted to plug education in general, highlighting that this is a good opportunity to pursue additional education or kickstart your education. We’ll include website and social media links to the Institute for Innovation and Entrepreneurship and the Naveen Jindal School of Management in the show notes. Thank you for tuning in to “Comets Discuss COVID-19” and a big thanks to all of our guests for sharing their insights with us. This episode concludes this mini-series. Stay tuned for any future topics we may cover and if you haven’t already, check out our other show, “Could We Ever.” Until next time, take care, Comets. Thanks for joining us. “Comets Discuss” is brought to you by the UT Dallas Office of Communications. A special thanks to senior lecturer Roxanne Minnish for our music. Be sure to check out our other shows at utdallas.edu/cometcast. For the most up-to-date news at UT Dallas visit the university’s official COVID-19 information web page. Take care and stay healthy.Whoosh!

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