If 2022 has proven anything, it’s that we’ve been miscalculating risk. There’s pain at every level, but to keep it simple, let’s stick to the job market. Our faith in FAANG and Big Tech as a bastion of job security is unravelling.
Job risk is understandably top-of-mind… but what if we’re thinking about risk in the wrong way? I’m seeing too many people take the wrong lessons. While it’s unsettling to see layoffs in vogue, it’s also a wake-up call to update our beliefs around career resilience.
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Miscalculating risk
Which of these decisions seem risky?
Starting a business
Joining a Series A startup
Joining a Series D startup
Joining a publicly traded, profitable company
Most people would consider each decision less risky than the one above it. But that misses a big point. When it comes to professional decisions, there are two distinct types of risks:
Job risk is the odds that your job will disappear
Career risk is the odds that your career will be worse off
When you bet on something new, you take on short-term job risk that the venture may not work out. But you could be learning unique skills and forging relationships faster that make you more valuable, which actually reduces your long-term career risk.
It’s easy to conflate job risk with career risk.
Surprisingly, they tend to have an inverse relationship because the best way to become resilient is by developing the right skills and reputation. To do that, you need scope and responsibility which scrappy environments are more generous with, out of necessity. Of course, scrappy environments can also be dumpster fires with limited upside, so DYOR (doing your own research) is important.
Instead of flinching at “risk”, go one step further by asking: Which type of risk? And on what time frame? Because decisions that reduce your career risk will eventually reduce your job risk.
But why not have it all? Surely, there are opportunities that are low-risk across the board? Well, as we’re learning now, job risk can be hard to predict.
Tale of two layoffs
Two common scenarios where companies do layoffs:
They have to shut down the business
They overhired / hired the wrong people for their current needs
Both suck, but I would argue the first scenario is more obvious. When a business isn’t working, the writing is on the wall for months. Growth is sluggish, customers don’t stick around, cash runway is evaporating. All the signs are there to get out.
Overhiring / mishiring is less obvious. The core business can still be humming along, lulling people into a false sense of security, which kills precious response time. When shit hits the fan, there is inevitably some randomness in who goes. Panic ensues. A warning sign for this is bloat.
Why bloat is risky
On a bloated team, individual impact is obscured or hard to measure. This means status is often derived from growing headcount instead of impact… which further compounds bloat.
Bloated teams are usually well-funded or flush from the core business, so they tend to pay well in cash, but the career and equity upside is capped. This sounds like an ok trade-off until we get to the inconvenient truth: a bloated team is more susceptible to layoffs because the expense actually makes a difference on the P&L. It’s like taking on hidden job risk without being rewarded in upside.
All this to say, joining a bloated team is one of the riskiest things you can do. This begs the question: how can you uncover bloat? It’s not always easy to tell from the outside, but here are some angles to consider:
Is the team’s scope high-impact, high-visibility for the business?
How does scope get split into swim lanes for people on the team?
How is team vs. individual impact measured?
Ironically, the companies that people flock to for “safety” because they’re established or have raised big rounds tend to be more likely to have bloated teams. Playing it safe can backfire without team diligence.
Upside of lean teams
It’s easy to forget that lean teams can do incredible things. Some examples:
Instagram had 13 employees serving 30M users when they were acquired for $1B
WhatsApp had 55 employees serving 500M monthly active users when they were acquired for $19B
The company that built Minecraft had 37 employees generating $100M in annual profit when they were acquired for $2.5B
Craigslist still generates around $1B in annual revenue with about 50 employees
Some say lean teams are not sustainable because each person has to shoulder so much work. I would argue that the nature of the work is different.
On a lean team, there is lots of work to go around, but the coordination costs are minimal, and it’s fairly easy to get people rowing in the same direction. On a bigger team, the work shifts towards coordinating, aligning and performance optics. The hours fill up, just with different activities.
I believe that people want to feel useful. To that end, lean teams are probably healthier. When everyone has a real job, not a bullshit job, there’s less lingering insecurity about whether your work matters.
The road ahead
When people come to me debating what to do, I often ask: do you want to build something great, or do you want to join something great? The answer is very telling. We’ve had an exceptionally long bull run, which has made it peak enticing to join something great.
What gets overlooked is that no matter which choice you make, your career and equity upside come from the road ahead. The bigger the company is, the harder it gets to squeeze out extraordinary growth. Gravity pulls on every business.
I don’t believe in guaranteed formulas, but there are some principles that I think will stand the test of time:
Job risk can be random, but career risk is in your hands — focus on what you can control
Get in the arena: take on more scope, responsibility, find ways to help the company win
A down market is the perfect time to ensure you have uncapped upside to ride out the (eventual) recovery
In any market, capping your career and equity upside is rarely worth it
Practice building something great because we can’t always rely on joining something great
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