There was a kilo of white powder resting in a plate on the kitchen table. An empty cigar tube rested next to it. Judging by the grooves, the tube had been used to rake the powder to resemble a mini zen garden. I walked through the living room and opened the sliding door onto the balcony. Looking down from the skyline, an infinity pool stretched to the edge of the floor below.
I had come to see a friend I hadn’t seen for a few years. I’d originally met Alex in 2011 when she was scrimping while “working on a couple of new ideas with fingers crossed.” At the time, she had just been turned down for a poorly paid, entry-level apprenticeship at a small publishing company.
Four years later, standing on the balcony of her luxury apartment staring at a white petal floating in the pool below, it was obvious that things had changed for her since 2011. Fingers crossed had turned into three profitable companies and a growing team she managed remotely while she bounced between Europe, Asia and the U.S.
Sitting in a cafe across the street from her apartment, I got an email from someone who wasn’t happy about the pay for an entry-level, apprenticeship position. It crystallized in my mind about the situation of career starters right now that I wish someone had told me five years ago.
The advantages of apprenticeships was something that Alex understood clearly.
If you are a career starter (meaning you have no professional track record) looking for an entry-level position, you get to make a choice between two things:
- Good Pay and High Social Status
- High Learning and a Steep Career Trajectory
That sucks, why can’t I get both?
1. Globalization
At $8-12/hour, an entrepreneur or employer can find tens of thousands (probably more) of people all over the world in countries with a lower cost of living than yours who do have a track record of success.
If someone is hiring you with zero track record at that same rate, they’ve sacrificed return on investment from day one. They are effectively paying you while they teach you a skillset and give you a platform (their business) from which to learn it.
They’re doing that because there does seem to be something about Western liberal education which facilitates creativity and higher-level thinking (once you understand their business to be able to apply it) that education in many parts of the developing world still doesn’t do very well.
They’re betting on you getting to a point in three to twelve months where you’re not just generating positive ROI but actually growing the business in ways they didn’t know was possible.
Keep in mind, they can hire someone in Bangladesh that’s positive ROI on day one, but they’re rolling the dice, hoping maybe you have a better long-term trajectory.
2. Your $200,000 degree is actually a commodity
I know you’ve been fed some version of the implicit promise that if you go to a good school and get good grades that you are now going to get a good job.
Historically speaking, that was true. If you graduated with a good degree in 1970, you could probably land a position that had decent pay out the gate, some social status, and a good career trajectory to boot.
That is no longer true. We’ve seen the number of college graduates globally go from ninety million to one hundred and thirty million between 2000 and 2010. It took all of human history to get to ninety million and then only ten years to add another forty million.
What was once scarce is now abundant. Even though the cost of a degree has risen tenfold since 1978, its value is stagnant or declining. According to the Economic Policy Institute, workers with undergraduate degrees (but not graduate degrees) earned, on average, $30.05 an hour in 2001. In 2014, they earned $29.55 an hour. Other sources show even more dramatic falls.
3. The changing nature of careers and work
The deal companies and employees used to make in the day of “the organization man” (and some still do) was that they paid you well straight out the gate and took a loss on you for the first five years of your career. The implicit promise was that you were going to be there for 20-40 years and generate a lot of value towards the middle and end of that period, So, over the course of your career, the company would make back their money.
There’s less of these types of jobs than ever, and the trend is heading down. As the length of time people spend at one position goes down, many companies invest in someone for the first five years of their career and then those people leave before they contribute value to the company. This is a raw deal for companies, and many have responded by cutting costs and not investing in people so heavily.
Those jobs still exist. If you have the right pedigree and the right connections, you can probably get one but there’s a few things about that option worth noting…
Option 1: Good pay, social status (and turkeys)
The one thing that seems almost universal in these positions is that you aren’t going to learn a lot. Your grandfather worked for Morgan Stanley for 40 years and after he introduces you, you’re going to take your social science degree and get a $60k job/year straight out the gate with Bank of America or KPMG and spend the next five years shuffling paper. You’re not going to learn much, and, well, you’re going to have to work for Bank of America. Not exactly a dynamic, rapid-learning environment with a high trajectory.
This is a turkey situation. While everything seems great now (just like a turkey getting fed every day leading up to Thanksgiving, only for Thanksgiving to finally come), you’re not doing anything very valuable. More significantly, that job isn’t going to stick around for the next 40 years once Bank of America figures out what all the startups know: some guy in India will do your job for a third of the cost, or some guy in Silicon Valley will build software that does it for a tenth of the cost, 24/7, without sick leave, or complaining, or emotions.
I had a long conversation with someone (we’ll call him Julian) a few months ago who had gone through this exact situation. His dad had been a VP in a large multinational company, and he got a great gig ($60k+) right out of college. He worked in “marketing” for five years (yet, from what I could tell, never read a single book on marketing in his life).
When the company did a round of layoffs and he wasn’t doing anything which generated value, Julian got the axe. He had been unemployed for six months when I met him. All the jobs Julian was finding either were at entry-level salaries (often half of his previous salary) or required skills he didn’t have. Even though he had “five years of experience,” when I asked him to explain what exactly he had done in his marketing role, he didn’t have a lot to say.
As a good rule of thumb, you should generate around 3-4x ROI on your salary. If you can make a legitimate case for how you are generating 4x your salary in value, you’re probably safe. If you can make a numbers-driven case for how you’re generating 10x your salary and the skillset is transferrable to other businesses (i.e. not based on your ability to fill out TPS reports specific to one company), that’s job security.
Iit might make sense to take the Bank of America gig. I’ve seen people get that job and save money, pay off debt and get their learning through side projects. However, they were very clear that that was what the trade they were making and they were hustling like crazy on the side. Julian, on the other hand, mainly got drunk.
While the money issue is real, oftentimes the objection underlying it is not an ability to pay the bills but often at its root is a more primal concern: social status. Your parents, grandparents, and friends will all be impressed with your $60k+ job at Bamk of America or KPMG. The fact that it’s soul sucking, you don’t learn anything valuable, you don’t like the people you work with and it has no future will not lower their opinion of its prestige in their minds.
No one was impressed with my low-paid apprenticeship where I spent the first six months writing articles about hospitality equipment. The fact that I learned a ton about marketing and technology, liked the people I worked with, and got to meet a ton of people doing interesting, high-level stuff in no way increased anyone’s opinion of me.
While I was having dinner with Alex (who is in her early 30s at this point), she reflected on the last decade she spent working in, and on, entrepreneurial businesses. For the first few years, she was working service jobs for 20-30 hours a week to pay bills. When I met her about three years after she started her first business, her businesses had just gotten to ramen profitable: just enough to go full time on them.
She’s done quite well over the past few years, and if she were to sell her businesses at this point, it would probably be enough that in her mid-30s, she could retire. Even given that seemingly incredible accomplishment, outside of her circle of close friends who understand her businesses and what she has accomplished, she has effectively zero social status.
When she goes home for Christmas to visit family, everyone is much more impressed with her doctor brother who is in his 40s, still paying off student loans, and whose income is still going down every year.
Option 2: High Learning and a Steep Trajectory
The other option is to put yourself in a position with a small business or startup that is optimized for learning and long-term trajectory and learn directly from entrepreneurs in entrepreneurial situations.
This is not an unusual arrangement. It was the entry path into careers for hundreds of years preceding the rise of the 20th century knowledge economy. No one flinches at people taking out hundreds of thousands in debt to get a college degree (it’s an investment!), but the problem is few, if any, universities actually equip graduates with skills where they can walk into a business and start generating ROI on day one. If you were smart, hardworking and lucky enough to get into a legitimate top tier school, they’ll equip you with connections (which can definitely pay off).
If you did not go to a school with those connections, the opportunity I see is apprenticeships. Let me excerpt a section from my book, The End of Jobs:
Advantages of apprenticeships to the apprentice
- Relationships.
One common mistake early entrepreneurs make is that they think they need a business idea. That’s rarely the case: you don’t need a business idea— you need relationships. As you acquire relationships and entrepreneurial experience, ideas will become a bigger problem, but not in the way you think. Experienced entrepreneurs frequently deal with “shiny object syndrome,” a phenomenon where they see too many opportunities and have too many ideas, and not enough resources to pursue them. I’ve never met someone that has a lot of strong entrepreneurial relationships that was hurting for ideas. Samuel Hulick got started by working with Rob Walling when Rob was launching Drip. By doing a brief apprenticeship, he realized that user onboarding for SaaS apps was a major pain point, so he launched UserOnboard.com to help SaaS companies with their onboarding process.
- More effective in complex environments
While credentialism was an effective system for teaching people to operate effectively in the complicated domain— one where good practices can be measured and cause and effect can be correlated— it hasn’t proved an effective system for teaching people to operate in the complex domain.
When I first began working for other entrepreneurs, I was shocked when they would commit tens or hundreds of thousands dollars towards “gut” feelings. The nature of complex systems is that often the best ideas and approaches aren’t ones that can be taught, but are the result of experience in the domain. In his book Ready, Fire, Aim, Michael Masterson advises companies to develop new products by having the CEO sit down and brainstorm the top possible ideas based on their intuition. It’s usually by interacting with the market for ten years that great new products come about. No one can teach that, but an apprenticeship lets you stare, and fiddle, with the market on someone else’s dime.
- Better value aka play with house money
Instead of paying six figures to go to law school or get an MBA, you can get paid to learn skills and build relationships valued by the marketplace. Apprenticeships are also an astoundingly good value right now. Many people think free work or unpaid internships are exploitative, but find the idea of someone taking out a quarter million in debt to get a college degree and an MBA a smart investment. That may be a legacy of the knowledge economy that we haven’t adapted to yet.
In order to get one of these positions, you better have a legitimate track record (for instance, saying you spent two years doing conversion rate optimize and showing five projects you ran, their results proving 50% revenue increases = legit), or you better get hustling for cheap because you’re costing them money the day you start and every day until you get some real skills to leverage.
Is this really a dilemma? Are there ways to get around this?
The other option is that you can invest in yourself and get some real skills.
Early in her career, Alex wasn’t making a lot of money, but she was learning a ton and putting herself in a position where her trajectory was steep.
I got my first job because I spent a couple hundred bucks buying domains and SEO products to teach myself SEO. Then I went to a guy and said, “Hey, I ranked these sites, and they get a bunch unique visitors each month. Here are my analytics; want me to do the same for you?” Not much of a track record, but it’s still something (and a lot cheaper than law school).
Once you have a track record, the dilemma disappears.
Welcome to the hyper-meritocracy. Start generating ROI.
P.S. It was baking soda, not cocaine. Her apartment had damp air due to poor ventilation.
Edit: Richard Koch, Author of The 80/20 Principle wrote a response which is both more nuanced and based on his (more extensive) experience. You can read it here. Highly recommended. Also, If you haven’t seen Charlie Hoehn’s Ted Talk on How He Got Started With Free Work, highly recommended.