Over Christmas I caught up with an old friend who runs a small business. Like many SME operators she is perennially challenged by the maintainance of her accounts.
Given my involvement with Mclowd it was not surprising that the conversation would turn to the savings she could make by using crowdsourced resources.
Compared to the $65 per hour she has been paying for a bookkeeper in Sydney, she can now post a project in the Mclowd Marketplace and pay $10 per hour for a comparable resource (a discount of 85%, which is typical of the price deflation which occurs when a task is transferred to the Crowd).
This got me thinking about how difficult it is for economic policy settings to have their desired impact in a flat world.
Monetary Authorities and Full Time Employment
Monetary authorities such as the US Federal Reserve and the RBA have three primary goals:
• Price stability
• Full employment
• Stability of the banking system
These (sometimes conflicting) goals have been reflected in the various tactics employed during and since the GFC.
In the case of the US the Federal Reserve provided explicit guidance that it would continue its ‘quantitative easing’ program (a euphemism for printing money) until the unemployment rate fell to 7%.
While the US government would never label it as such, QE is just one tactic designed to effectively ‘export’ unemployment out of the US by weakening the currency.
To the extent that zero interest rates and printing money has weakened the USD and triggered asset price inflation (which tends to support consumption and employment), these tactics have been successful in the short term.
However this is unlikely to be a long term strategy for sustaining full employment for the following reasons.
A Step Change
The twin goals of price stability and full employment are based on the somewhat outdated assumption that the US labour market is geographically discrete, and hence that the Federal reserve can directly influence employment outcomes within their jurisidiction.
However, crowdsourcing has triggered a step-change in the effective global supply of labour by allowing literally millions of people to offer their services to a worldwide audience of prospective clients.
As someone who has built Mclowd from the ground up ‘in the Crowd’, I can attest to the fact that there are millions of qualified and dedicated knowledge-based workers spread around the world who are becoming increasingly familiar with online work practices.
Given the per unit price differentials involved (70-90%), the ability to use currency deflation of 10 or 20% to influence long term employment outcomes is becoming increasingly difficult, and evident in ever higher underemployment in developed economies.
Implications for SMSF Trustees
As these qualified global resources become more and more accessible, this step-change in costs is permeating into all sectors of the economy.
At Mclowd our vision is to improve net returns for investors by applying these economics to the financial services industry, one whose fee structures are increasingly out of sync in a flat world.
The Mclowd marketplace is now putting global, qualified resources at your fingertips. That means services providers now have to compete for your hard earned dollars, based on globally competitive rates.
Try them for yourself here.