Are You About to Be “Promoted” to Independent Contractor?

Your company wants you to do the same job for less security, but what if that's exactly what you need?

People are strange.

Take the cognitive bias of loss aversion. That’s where the pain of losing something is felt more intensely than the pleasure of gaining something else of equal value.

It’s likely a throwback of evolutionary psychology designed to help us survive. A bird in the hand is better than two in the bush, etc.

But this ancient psychological tic that causes us to prefer the “bird in the hand” can cause us real problems when evaluating opportunity.

In investment circles, it’s even called Gordon’s “bird in the hand” fallacy. The rule generally states that individuals often irrationally prefer keeping what they already have rather than risking it for greater rewards. 

This mindset can create a fear of loss that overshadows realistic gains. The obvious example here at Further is the fear of leaving a “stable job” to start your own business due to the loss of job security, even though you know that security is an illusion.

We’ve already talked about how many people who dream of starting their own thing often don’t do it voluntarily. It took a layoff to get them to take action, and that was the forced catalyst that made their dream come true.

But what if that trigger was less devastating than complete employment termination? What if instead you were forced to shift to independent-contractor status by your current employer? 

Would you view it as a loss or the opportunity of a lifetime?

Is It a Demotion or a Promotion to 1099?

Picture this: Your boss just called you into their office. You’re not being laid off, but your role will now be as an independent contractor instead of a W-2 employee.

This "exciting news" immediately causes your brain to kick into loss-aversion mode with negative ramifications: 

• Loss of steady paycheck. 

• No more health insurance. 

• What if clients don't pay on time? 

Even if you hate your job, you may suddenly feel like your security blanket is being ripped away. But here's what your loss-averse brain isn't calculating: This might be the opportunity you've been too psychologically obstructed to pursue on your own.

You’re now free to engage other clients. Continuing with bird-related metaphors, your eggs no longer have to be in one basket. And you’ve joined the fastest-growing segment of the total U.S. workforce:

The transformation isn’t coming — it’s here, hiding in plain sight. A remarkable 36% of employed respondents (equivalent to 58 million Americans when extrapolated from the representative sample) identify as independent workers, according to McKinsey’s American Opportunity Survey.

This isn’t the gig economy of Uber and Door Dash drivers. It’s the growing white-collar independent workforce, and those who embrace it as an opportunity are thriving:

Walk into any co-working space at 2 p.m. and count the laptops: former executives running fractional services, laid-off analysts selling expertise on demand. Approximately 3 million full-time gig workers (20%) are earning over $100,000 per year, while a third of employed respondents who earn more than $150,000 a year also say they work independently.

As Gen Xers, we’ve been conditioned our entire lives to think that having a job is normal, even though we turned out to be the most entrepreneurial generation. 

We’ve been conditioned to believe that retirement at 65 is normal, even as the death of pensions and the rise of the 401(k) make it difficult for most to see that as feasible. 

And worst of all, we’ve been conditioned within an ageist culture that told us being over age 50 means we’re on the way out, even while employers strive to keep it the norm.

The notions of traditional employment and retirement in your 60s are both falling apart, but when you zoom out just a bit from a historical standpoint, neither of these “normal” things has been around that long. And neither one is something you should regret losing, especially a job.

A “job” means someone else controls you while you voluntarily dedicate your mental and physical energy to advancing their profit margins. If there were true security in this arrangement, maybe it would make sense for some — a calculated choice of servitude in exchange for steady pay and a pension.

But as it stands, traditional, at-will employment, where an employer can terminate employees without cause, warning, or severance, is a historical aberration that deserves to die. It resembles what’s known in the legal world as an unconscionable contract, and the greatest trick the devil ever pulled has nothing to do with Keyser Söze and is instead about normalizing this one-sided arrangement that dominates your waking life and intrudes on your slumber.

But at long last, we may be on the cusp of traditional employment’s demise. This is not a drill; it’s likely happening this decade.

This Is Not a Thought Experiment

Pundits have been predicting the end of traditional employment in favor of “free agency” for decades. It started years back with the talent demanding work on their own terms, and the recent pandemic proved that the desire for independence is alive and well.

Many of these “future of work” pundits proclaimed that regular business would resemble what’s known as the Hollywood model, where film and television producers assemble teams of talent to produce specific projects. Perhaps you work repeatedly with the same people, like actor Don Cheadle and director Steven Soderbergh did for a decade. But it’s a contractual choice on both sides, not an employment obligation.

It looks like the pundits may turn out to be right. It just took much longer to happen than they expected.

Up until this point in the “normie” business world, people went independent because they wanted to and could, or because they had to and did. But now corporations are seeing the benefit of the model from their end, thanks to their ability to drastically lower headcount due to generative artificial intelligence.

The original prognosis was that up to half of all white-collar jobs would be lost to AI. Then the public relations narrative shifted around 2019. All of a sudden, employees would be “augmented” by AI instead of being out of work, and new jobs would replace those lost.

Now, CEOs are dropping the spin. Ford CEO Jim Farley went back to what turned out to be the truth: "AI is going to replace literally half of all white-collar workers," he said at the Aspen Ideas Festival.

He’s not alone:

• JPMorgan’s Marianne Lake recently told investors that she could see headcount in operations dropping by 10% in the coming years as the bank implemented new AI tools.

• Amazon’s Andy Jassy called it "once-in-a-lifetime" technology that will shrink their corporate workforce.

• Shopify’s CEO told managers they can’t hire unless they prove AI can’t do the job. 

• Fiverr’s CEO warns "AI is coming for you,” referring to programmers, designers, lawyers, and finance professionals.

• Anthropic's CEO went further, predicting 20% unemployment within five years.

Why the honesty all of a sudden? Steven Wolfe Pereira writing for Forbes says it’s because corporate America still needs to be able to tap a human labor force after drastically cutting headcount, but it must be on demand.

It’s an exercise in ruthless practicality. CEOs get to clear hundreds or thousands of employees off the books, while getting instant access to expertise as needed in the form of independent contractors.

For example, that $95,000 salary you've been collecting? Add benefits, office space, management overhead, etc., and you're actually costing the company around $140,000 a year.

Your work as a 1099 contractor? The company can get the same deliverables for $60,000-80,000 annually, with zero overhead and the flexibility to scale up or down based on project needs.

But here’s the other side of the coin: That $95,000 salary that felt comfortable? As a contractor charging $125/hour (a conservative rate for experienced professionals), you'd need to bill just 15 hours a week to match it.

Most successful contractors bill 25-30 hours weekly across multiple clients, putting them ahead financially while working fewer total hours than their W-2 counterparts. All with no commute, no office politics, no mandatory team-building exercises.

But a resounding “yes” to living anywhere in the world you want. It’s starting to sound better, right?

Don’t forget that the same AI tools your company is using to justify converting you to 1099 status can be used to serve multiple clients simultaneously while creating profitable expertise-based products. You essentially become a one-person powerhouse with the productivity of a team.

The point is you can choose how to look at the shift. And that may make all the difference.

The Personal Enterprise Perspective

In the quote up top, Hamlet is giving you a lesson in perspective. The relatively recent status quo tells you losing a “real” job is bad, but it’s how you think about it that determines if that’s true. 

In other words, whether you view being shifted from W-2 to 1099 by your employer as “good” or “bad” may well determine how well things go for you moving forward. Thinking it makes it so.

I’m clearly in the “good” camp. If you’ve dreamed of starting your own business, you may be about to receive your undeniable permission slip. If that’s not a dream you entertain, I’m wondering why you’re reading Further. 😉

The main idea behind a personal enterprise is for you to develop multiple sources of revenue instead of one. You sell multiple products and services to a single market, which in this case is your specific audience that you’ve attracted with content that discusses solving a specific problem.

With that in mind, here’s a different perspective. When your boss tells you you’re being shifted to an independent contractor, they just handed you something that those who depart voluntarily would kill for — a guaranteed first client with predictable income while you figure out how to productize and scale.

Your loss-averse brain may still begin screaming about everything that’s being taken away. But the status quo isn’t necessarily smart, and a different perspective is called for when you know that.

You're not losing a job, you're gaining a business. You're not losing security, you're trading the illusion of security for the reality of self-determination.

An Entrepreneurial Revolution?

In the past, fear sparked by new technologies was largely unfounded. For every job or vocation lost, multiple new and often better opportunities were created. 

I don’t think that happens this time. More jobs will be lost than created, and the new jobs will likely be awful roles where you simply babysit and adjust algorithms.

But it won’t just be the corporations that benefit from the demise of traditional employment. Instead, we may be looking at an entrepreneurial revolution:

Because of the way these AI-powered advantages are improving how entrepreneurs operate, the real transformation AI offers Americans won’t result from the creation of a few more billion-dollar unicorns. This technology has the potential to create millions of million-dollar businesses — a distributed new breed of entrepreneurship where success is measured by sustainable income and meaningful work, not just hypergrowth and venture capital.

Am I being overly optimistic? Perhaps. 

I've seen layoffs become unexpected gifts for many, though. The gift of finally living the lives they always wanted because they were forced to pursue what they'd only dreamed about. 

But landing your first client the day you get “fired”? That's not a setback. That's the universe giving you a shove in the right direction.

Keep going-

Brian

P.S. Not a member of Further Premium yet? Join us to get instant access to the entire Personal Enterprise Accelerator course, plus the ongoing series of lessons in The Business of Expertise and much more.

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🎶 Janet Jackson – Nasty, Control, 1986 🎶

“No, my first name ain’t baby. It’s Janet… Miss Jackson if you’re nasty.” (YouTube)

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