“It’s Never Been Worse to Be Information Smart Than It Is Today”
– Gary Vaynerchuk at SXSW, 2014
I was sitting at a restaurant in Argentina four years ago talking with Angie, a friend of a friend at the Spanish school we were going to that had invited us all out for dinner.
Angie didn’t strike me as particularly criminal. She was definitely hippyish, wrists covered in bracelets too big for her narrow wrists and sporting a pair of those just-a-bit-too-colorful balloon pants.
As we kept talking, I wasn’t surprised Angie had graduated from Harvard undergrad or NYU law. She was exceptionally smart and not a little bit ambitious, alternating between rants about GMOs and the role of precedent in Argentine law.
Her parents had been firmly American middle class and she’d managed to get into Harvard based on an outstanding high school track record. She’d blazed through her four years there before heading off to NYU to get her law degree.
A year into her law career at a large NYC firm, it became clear to her that the path she had in front of her spending the next decade of her life to pay off over $200,000 in student debt from undergrad and law school wasn’t the future she’d imagined. So she’d bought a one way plane ticket to South America and hadn’t been back.
Her story was similar to that of Megan Parker, the receptionist at a law firm with a bachelor’s degree and over $100,000 in student debt. Stories like Angie’s and Megan at this point are becoming cliche and cookie cutter: ambitious middle-class kid goes to good University attempting to realize ambition only to find it wasn’t everything they’d imagined and now they have a bunch of debt and fewer opportunities than they were implicitly promised. You probably know someone that fits the bill.
These sorts of stories aren’t the norm, they’re still outliers, but they are extremes evidencing a broader trend: for the young and ambitious, certain degrees seem to be less valuable than they once were.
Even as the rate of unemployment has improved gradually following the 2008 financial collapse, the numbers of people who are underemployed, settling for part-time jobs, or giving up looking all together aren’t counted.
Tracking those individuals in the U-6, which, in 2014 (six years after that Recession ended) was still in the double digits: 11.2%. To put that in perspective, that’s around 30 million people in the U.S. Or one in every ten people.
Could it be that we’re under-educated? That the jobs people are looking for require more education than they have right now?
In 1900, less than 10% of 14-17 year olds were formally enrolled in education. BY 2000, that rate had grown to a respectable 90%. As a result, many would argue that the problem is instead that jobs in today’s market require far more than a high school degree.
Yet the number of college graduates has been steadily climbing since the 1940s and is at an all time high.
A paper published by the New York Federal Reserve sought to explain the phenomenon declaring “individuals just beginning their careers often need time to transition into the labor market.” Still, the percentage who are unemployed or “underemployed”—people like Angie and Megan, working as a runner and receptionist respectively with college degrees—has risen, particularly since the 2001 recession. Moreover, the quality of jobs held by the underemployed has declined with today’s recent graduates increasingly accepting low-wage jobs or working part-time.
An article in the Atlantic in April 2012 reported that “more than half of America’s recent college graduates are either unemployed or working in a job that doesn’t require a bachelor’s degree.”
Perhaps it’s that we’ve passed the point where a college degree is enough. Perhaps what is really needed is a graduate education? In 2014, the overall employment rate for recent law school grads fell for the sixth year in a row to 84.5 percent according to a report from the National Association for Law Placement. While the overall number of jobs increased, law school class graduation sizes are growing faster than the demand for the lawyers.
A lawyer that graduated in the early 2000’s said there were 30 New York-based firms doing on-campus recruitment. When she went back to speak at the campus ten years later, there were two. There were too many lawyers and not enough work. While the Dean’s Office was optimistic, the evidence indicates that even for individuals with an advanced degree that are able to get a job, the value of a degree is dropping.
In a 2012 study done by PayScale, which collects salary data from individuals with MBAs through online pay comparison tools, median salaries had stalled over the past four years and, more significantly, the value of the MBA over the course of a career has stalled.The supply of job-seekers being produced by colleges and universities is as at an all-time high (and so is their level of debt) and the demand from corporations and governments can’t keep up.
Why is this? Why is it that intelligent and hard-working people can’t find jobs?
While everyone can relate and recognize that there’s a shortage of jobs for highly credentialed individuals, no one seems to have a clear answer as to why that is. The glut of lawyers in the U.S. may be the most obvious example, but even professions like science, technology, engineering, and mathematics, which were long considered lock-ins for employment, are growing more competitive.
Jobs in almost all industries are becoming increasingly commoditized and competitive. This isn’t equally true across all industries, and those requiring higher levels of education are certainly better protected, but even law and engineering are significantly more competitive now than they were ten years ago. It makes sense for low-skill industries that are being affected by globalization and technology, but what about the highly educated ones?
The Cynefin Framework and Your Career
The Cynefin framework (pronounced Kih-neh-vihn) was developed by Dave Snowden after studying the management structure at IBM. It categorizes work and management into four separate domains: Simple, Complicated, Complex and Chaotic.
The “Simple” domain is one where the relationships between cause and effect are obvious; anyone can apply a best practice to solve a simple problem. It’s something that can be documented, like putting together an Ikea table or a set of legos.
“Complicated” occurs when the relationship between cause and effect requires analysis and investigation. Operating in a Complicated domain requires investigation and/or the application of expert knowledge. It’s something that requires thinking and consideration, but getting it done can be handled by utilizing existing expertise. Think of it like buying a franchise: you need to think about how to run it, but there’s existing knowledge about how to do it effectively.
The “Complex” domain is where the relationships between cause and effect are only clear in retrospect. The problem is solved by testing new solutions and seeing the reaction. It’s an emergent practice. This is the field that startups and entrepreneurial small businesses spend most of their time in.
When no relationship exists between cause and effect, you’re in the “Chaotic” domain. We must act in spite of the heightened difficulties to develop novel practices.
Because of the advances in technology and globalization, the average business today confronts far more Chaotic and Complex situations now than they did 100 years ago. As the systems in our modern world have grown more complex than the systems that existed in the past, connecting cause and effect is more difficult.
On an average day for an American worker, he’s much more likely to confront a Complex problem than that same worker may have been a century ago. In the early twentieth century, most people were operating in the Simple domain, employed in agricultural and industrial positions.
Over the course of the 20th century, we’ve shifted the workforce counter-clockwise around the Cynefin graph. The rise of credentialism was the result of a need to train people to operate within the Complicated domain. In a world where the solution can be found by using existing expertise, it made a lot of sense to develop a system for evaluating people based on their knowledge and expertise.
Where we now find ourselves is with machines in the process of taking over the Simple domain. As machines drive workers out of Simples jobs and into Complicated jobs, globalization has dramatically expanded the competition for those same Complicated jobs.
Meanwhile, work is moving yet again. The move from Simple to Complicated that was a hallmark of the twentieth century is being outpaced by a move from Complicated to Complex and Chaotic.
Just as demand is moving from Complicated to Complex, the supply for Complicated work is increasing.
To get a credential that proves you are effective at operating in the Complicated domain is missing the point. Acquiring credentials to prove you’re better at operating in the Complicated and Simple domains is increasingly a race to the bottom.
One of the roots of credentialism can be traced back to 150 years ago when Horace Mann started the Common School. The purpose of the common school was to teach students how to follow directions. In an industrial economy, we needed to train children to do what they were told and sit still and listen to instructions and say them back to us. At the time, competence was, culturally and economically, in demand. We needed kids to go work in factories. Our whole educational system is built on the back of this premise.
A small business owner (an IT company in the midwest) whom I interviewed related to me his current dilemma. His felt like his business was awash with opportunity. He believed that a new marketing campaign could bring in customers from a neighboring city, and he saw new opportunities to improve internal processes to deliver more value, at a lower cost, to existing customers.
There isn’t a best practice for “run a new marketing campaign.” There are plenty of books on marketing and courses that would all be helpful, but at the end of the day someone has to sit down and think about marketing principles, the specific capabilities of the business, and the market, and then start implementing those. They have to operate in a more Complex and sometimes Chaotic environment.
Would it be better to run a direct mail campaign using first-class postage to make the letter stand out when someone received it, or to use a cheaper option and save money on the mail to invest in getting a graphic designer to design the postcard?
Or maybe they shouldn’t do a postcard. Maybe instead of a postcard, they should just do a typed, written letter in a very personal voice to make people feel comfortable with the company.
Or would that be unprofessional? Is it more important to use a more professional, corporate voice to establish a higher level of trust with their customers?
Or perhaps a direct mail campaign was entirely the wrong approach. Perhaps he should hire a salesperson in the neighboring town that already had relationships with companies there to call on them. But a salesperson would be more expensive than a marketing campaign, and it would take time for the new prospects to become paying customers. Did the business have enough cash flow to support the salesperson while he was landing clients?
Perhaps that wasn’t it at all. Perhaps the real issue was that IT was overly competitive in their area, and they should take their staff and pivot into a different industry and customer segment entirely.
These are all the questions keeping business owners awake at night; these are in demand questions.
When he held a round of one-on-one meetings with his team and asked them what they wanted, he offered them the opportunity to work on the marketing campaign or improving internal processes.
The best response he got? They asked for a company credit card.
This is the essence of credential-based thinking, which has trained us to believe that once we get a certain degree, we’ve put in our time.
And that worked for many people for the majority of the 20th century. If you got a good degree or a good set of credentials, you certainly learned some on the job, but you weren’t required to take ownership or start new initiatives in the way you are today.
What’s valuable isn’t implementing best practices or good practices, but the work of understanding the Complex and Chaotic of the systems and how to operate within them: entrepreneurship.
Entrepreneurship is, in the word of Jean Baptiste Say, the ability to “shift economic resources out of an area of lower and into an area of higher productivity and greater yield.” It’s the only non-commodifiable skillset.
As the demand for work continues to shift around the Cynefin diagram, it’s more in demand than ever before. And you know what happens to resources with high demand?
They become more profitable.
As work shifted from Simple to Complicated over the course of the twentieth century, credentials became more valuable and more profitable. A host of studies showing how much more someone with a college degree earned over the past century corroborate this.
Markets move. Demand shifts. Just as demand shifted from Simple to Complicated over the course of the twentieth century, we’re now in the middle of a shift from Complicated to Complex.
Imagine for a moment you were this business owner deciding between two applications:
Applicant 1: Well-credentialed. Harvard MBA.
Applicant 2: No Credentials. Dropped out of college to learn web development and graphic design from free online courses. Has relationships with business owners in the neighboring city because he started a Sunday brunch for local business owners to network. Has a small side business where he markets and sells a course for learning to skateboard.
This is overly simplified, but illustrative. No business owner looking to grow his business would think twice about the decision.
This is not to say what comes with a degree or set of credentials can’t be valuable. Harvard MBAs are not going to be begging for jobs in the near future. If you graduate from Wharton, you’ll almost certainly still have plenty of six figure jobs offers. But as many MBAs have told me, you aren’t paying $100k for credentials, you’re paying $100k for a network and social status. And depending on your goals, maybe it’s worth dropping $100k for that, but that’s what you’re getting.
I was speaking with the founder of a software company at a startup event last year. Walking to the after party, she paused to make sure no one was nearby, and leaned in to whisper, “I have a MBA.”
“Yea, I don’t really talk about it. We got turned down for funding twice because both my cofounder and I have MBAs.”
Is she an outlier or is her case an early indicator of what is only getting more scarce and valuable and what’s going to become a commodity over the next few decades?
The cost of credentials is rising. Tuition is getting more and more expensive at the same time as the value of the degree is falling. In a world where competence was scarce and information was opaque, credentials were valuable. In a world where competence is abundant and information is increasingly transparent, they care what you’ve done. In a Complex world, track records, relationships and skill sets, not credentials, reign supreme.
How will you invest?