Scalable vs. Non-Scalable Careers(ben.casnocha.com)
ben.casnocha.com
Scalable vs. Non-Scalable Careers
http://ben.casnocha.com/2009/03/scalable-vs-non-scalable-careers.html
39 comments
A hooker can marry a millionaire and get loaded, the "cap" on consultants / lawyers can be pretty high, a dentist could patent a new tool / technique, write a book, or just be happy with a pretty good wage.
Let us, then, limit this discussion to the average career person. The average Wall Streeter was making $300,000 a year 2005 - 2008. The average software developer is making, i think, 75-80,000 a year. And so on.
Let us, then, limit this discussion to the average career person. The average Wall Streeter was making $300,000 a year 2005 - 2008. The average software developer is making, i think, 75-80,000 a year. And so on.
why bother caring about the average pay?, there are people that make a hell of a lot of money doing virtually any job.
Just pick something that you enjoy, then you have a better chance of doing better than the average, and if you dont make your millions, then youve enjoyed the ride.
Just pick something that you enjoy, then you have a better chance of doing better than the average, and if you dont make your millions, then youve enjoyed the ride.
In a discussion like this you need to talk about averages, otherwise you can claim anything. Your example with the hooker shows that she can make a million, but I can just as easily come up with an example of the hooker that repeatedly got robbed by her pimp and made no money at all. Neither example proves anything about the average hooker.
Is that correct? 75-80 average? I'm in NY. I think that's more like entry level here.
on either coast, sure, but in the rest of the country, $80K is pretty good.
>do what you enjoy
If you know of a career that excites you like no other, consider yourself lucky.
If you know of a career that excites you like no other, consider yourself lucky.
As a startup casualty, I can relate to this.
I've been an early stage employee (< 10) at 4 startups over the past 10 years and I haven't made a dime, relatively speaking. These weren't obviously doomed startups, either. At least one of them is still wistfully mentioned by other successful software entrepreneurs as an inspiration[1].
It is a bit trying on your psyche when personal friends have 10s of millions of dollars and you're scrambling to justify why you want to get paid $100K. In a down economy, you often are scrambling to justify why you want to get paid $60K or should be hired at all. At these times those jobs where even the worst get paid $150K sound like a better idea.
Of course it's not all about the money but your landlord, wife, kids, potential dates, aging parents, car salesman and cellular data plan provider will tell you otherwise.
[1] None of whom actually worked at that startup
I've been an early stage employee (< 10) at 4 startups over the past 10 years and I haven't made a dime, relatively speaking. These weren't obviously doomed startups, either. At least one of them is still wistfully mentioned by other successful software entrepreneurs as an inspiration[1].
It is a bit trying on your psyche when personal friends have 10s of millions of dollars and you're scrambling to justify why you want to get paid $100K. In a down economy, you often are scrambling to justify why you want to get paid $60K or should be hired at all. At these times those jobs where even the worst get paid $150K sound like a better idea.
Of course it's not all about the money but your landlord, wife, kids, potential dates, aging parents, car salesman and cellular data plan provider will tell you otherwise.
[1] None of whom actually worked at that startup
Yeah, I too know this feeling. I started out my career working at a BigCo making a nice salary/stock/bonus. After 3 years there I left to join a early startup (engineer #4) and took a 30% paycut so I could get more stock.
2.5 years later and I've earned a bunch more stock grants, but my salary has stayed flat (my choice -- we were on a good trajectory so I always preferred stock options over salary bumps). Now our prospects are not looking good and I doubt there is any upside to the stock.
I definitely considered this scenario when deciding to join the startup, and I always rationalized it as "at the very least it will be a good experience". Well, it definitely was good experience, and I learned a lot more at the startup than the BigCo, but as I consider my next career move I'm not exactly sure what the right move is.
Who knows, w/ the economy how it is I will probably just have to take what I can get :).
2.5 years later and I've earned a bunch more stock grants, but my salary has stayed flat (my choice -- we were on a good trajectory so I always preferred stock options over salary bumps). Now our prospects are not looking good and I doubt there is any upside to the stock.
I definitely considered this scenario when deciding to join the startup, and I always rationalized it as "at the very least it will be a good experience". Well, it definitely was good experience, and I learned a lot more at the startup than the BigCo, but as I consider my next career move I'm not exactly sure what the right move is.
Who knows, w/ the economy how it is I will probably just have to take what I can get :).
so true... completely agree on this.. I am exactly in the same boat. It is tough out there.
What this leaves out is Taleb's advice from the book -- to pick a non-scalable career that is guaranteed to pay a high wage. His reasoning is that scalable careers are at the mercy of Black Swans. The vast majority of rewards are distributed to the lucky few at the top. This is not due to any remarkable talent, but luck and the nature of scalable success (it builds upon itself). If you hope to become an author who sells a million copies of a book, you will almost certainly wind up never selling more than a few thousand, while the guy at the top who is no more talented sells millions upon millions.
Hmm, are software startups really high risk to founders? Does this argument even matter?
Liberal industry culture lets founders move in and out of startups, consulting and full-time arrangements. High compensation lets founding teams take sabbaticals often. If one has a reasonably low cost of living and a solid hourly rate, working 1/3 of the year vends 2/3s startup time.
Given that PG has said many YC founders are older, I'd expect they've moved into the low-risk category, extra responsibilities of life included. And the cost of software startups keeps coming down.
Edit: ignoring non-software, here.
Liberal industry culture lets founders move in and out of startups, consulting and full-time arrangements. High compensation lets founding teams take sabbaticals often. If one has a reasonably low cost of living and a solid hourly rate, working 1/3 of the year vends 2/3s startup time.
Given that PG has said many YC founders are older, I'd expect they've moved into the low-risk category, extra responsibilities of life included. And the cost of software startups keeps coming down.
Edit: ignoring non-software, here.
When I was reading this part in the Black Swan I realize how fortunate we are to work in software. It's one of very few fields where you can make a decent non-scalable income while at the same time (sometimes via the same actual product) being exposed to potentially huge scalable rewards. Guess we're just lucky :)
I'm curious about this. I've heard that failure is a badge of honor in Silicon Valley.
But I'm not comfortable starting up a company and going bankrupt. So if I was involved in a start up that ended up going bankrupt, how would that affect my career options? Is the employment rate for founders of failed executives high because a lot of jobs are open to them, or because the ones who can't find jobs end up quickly leaving Silicon Valley?
I realize that this probably isn't the right attitude to have if I would take a risk like founding a company. I'm just trying to decide how comfortable I am with the worst case scenario.
But I'm not comfortable starting up a company and going bankrupt. So if I was involved in a start up that ended up going bankrupt, how would that affect my career options? Is the employment rate for founders of failed executives high because a lot of jobs are open to them, or because the ones who can't find jobs end up quickly leaving Silicon Valley?
I realize that this probably isn't the right attitude to have if I would take a risk like founding a company. I'm just trying to decide how comfortable I am with the worst case scenario.
In my experience, nobody cares. Most people admire you for having the guts to have started one in the first place, and executives (often people who have started companies too, and have buried them) will be happy to hire you.
And I actually moved into Silicon Valley, coming off a failed startup. I'm not sure I could've gotten my job here otherwise.
And I actually moved into Silicon Valley, coming off a failed startup. I'm not sure I could've gotten my job here otherwise.
> Bottom Line: If you swing for the fences, you'll either hit a home run or strike out. If you swing for a single or double, you'll probably get there, but no farther.
What about doing both: swinging for a double for a while, then swinging for the fences (saving up money, then taking up to a year to try a startup)? Or, swinging for a double during the day, then swinging for the fences on the side, until you're successful enough to hit home runs full time (37S model)?
What about doing both: swinging for a double for a while, then swinging for the fences (saving up money, then taking up to a year to try a startup)? Or, swinging for a double during the day, then swinging for the fences on the side, until you're successful enough to hit home runs full time (37S model)?
OR, just steal a bunch of bases. /
While I think the concept of scalability in careers is very interesting, I'm not sure Taleb's "look at everything in the world in the context of my last book's title" framework provides the right perspective for the discussion. While the true home runs are indeed low probability events, risk/reward is quite asymmetrical in many scalable careers(i.e. there are no fat-tails to the downside). In the case of the author, the worst case is you spend a year writing a book, and receive zero revenue from the book. That is a pretty well defined worst-case, and is not particularly disastrous (assuming you can afford your expenses while writing).
Put differently, scalability does not imply high-risk. In the most literal sense though, non-scalability does imply limited potential reward.
Put differently, scalability does not imply high-risk. In the most literal sense though, non-scalability does imply limited potential reward.
I agree this is a good topic and it shouldnt just have to be centered around probability.
The scalability idea points to the fact that starting a company while your working for someone else is not a bad idea. If you can make 100K-200K doing a 9-5 job then you should keep it and keep trying to start businesses until you succeed.
Live cheaply and execute as many ideas as you can. Ie your job is your VC. Now this is obviously not easy but if you can build the emotional and hard-working capacity for this I think its possible.
The scalability idea points to the fact that starting a company while your working for someone else is not a bad idea. If you can make 100K-200K doing a 9-5 job then you should keep it and keep trying to start businesses until you succeed.
Live cheaply and execute as many ideas as you can. Ie your job is your VC. Now this is obviously not easy but if you can build the emotional and hard-working capacity for this I think its possible.
I got a better idea, pick a fucking career you enjoy instead of one with the highest ROI. Money (beyond necessities) is a worthless life goal.
Not much in this that you couldn't get by reading The Black Swan, which has a lot of other interesting content.
This attribute isn't quite boolean.
For example, a big rock band may have to show up to do a set, but the dissemination of their music (i.e. advertisement for their live shows) is now highly scalable.
($1000 tickets for upcoming Phish show: http://www.nytimes.com/2009/03/05/arts/music/05phish.html?pa...)
For example, a big rock band may have to show up to do a set, but the dissemination of their music (i.e. advertisement for their live shows) is now highly scalable.
($1000 tickets for upcoming Phish show: http://www.nytimes.com/2009/03/05/arts/music/05phish.html?pa...)
I'm not sure I follow your reasoning. Rock bands are scalable careers. They don't get paid a wage, and the income between the top performers and the mass of wannabes is huge. Being physically present is not a necessary nor sufficient condition for non-scalability. To serve a marginal customer, rock bands essentially don't have to do anything, but doctors need to put in time for the new patient.
How about computers, then? Working as a software engineering employee or contractor is not a scalable profession: you get paid for your time, and your time is limited. However, working as a micro-ISV or startup founder is scalable: you get paid for selling a product, and it costs you nothing to produce additional copies of that product.
I think the grandparent's point is that some careers have multiple business models, some of which are scalable and some of which are not. So scalability is not a property of the career, but rather of a particular revenue stream. Heck, many firms do both, like his example of a rock band, or like the software company that both sells a product and then makes money supporting that product (eg. RedHat, 37signals, and Fog Creek).
I think the grandparent's point is that some careers have multiple business models, some of which are scalable and some of which are not. So scalability is not a property of the career, but rather of a particular revenue stream. Heck, many firms do both, like his example of a rock band, or like the software company that both sells a product and then makes money supporting that product (eg. RedHat, 37signals, and Fog Creek).
Thanks. Now I think I understand. I guess it would be the difference between, say, a session musician or your average member in an orchestra versus a rock band trying to make it big.
However, if you focus on how you get paid rather than the cost of marginal increase in the big-picture sense, are there any purely scalable careers? Every scalable job has parts where you need to be present, from writing books to writing code. Clearly skills like writing well and proficiency in coding can work for most multiple jobs; you can just as easily be a journalist instead of nonfiction writer, for example.
Regardless, it feels great to be able to code. It's something I love to do, and can take different forms with every job. Sometimes, life is just good.
However, if you focus on how you get paid rather than the cost of marginal increase in the big-picture sense, are there any purely scalable careers? Every scalable job has parts where you need to be present, from writing books to writing code. Clearly skills like writing well and proficiency in coding can work for most multiple jobs; you can just as easily be a journalist instead of nonfiction writer, for example.
Regardless, it feels great to be able to code. It's something I love to do, and can take different forms with every job. Sometimes, life is just good.
If you wanna put it in economics terms, it's basically the difference between fixed costs and variable costs. Scalable professions have high fixed costs and low (or no) variable costs. So it may take you 10 years to learn how to program well and 3 years to write a killer application, but then once you've done that, you can sell as many copies as people will buy for zero cost. Naturally, this is high risk & high reward: many people give up before they've built a product that other people will buy.
It gets a little complicated because in a profession that's innately scalable (like computers, writing, or any sort of IP), the distinction between scalable and unscalable business models usually comes down to who's bearing the risk. So, if you're an entrepreneur, you front all of the fixed costs of developing the product yourself (or you get investors to do it in exchange for equity). In return, you get all the rewards if it's successful. However, if you're an employee, you sell your labor for a fixed price (= unscalable, since you have only a fixed amount of time), and then the company bears the risk of the product not succeeding in the market.
Personally, I think you should think of an employer as an insurance company: they underwrite the risk that your venture will fail in the marketplace, in exchange for taking the vast majority of the rewards if it succeeds. Whether or not this is a good tradeoff depends a lot on things like external economic circumstances, your skill level, ideas you have for new markets, etc.
It gets a little complicated because in a profession that's innately scalable (like computers, writing, or any sort of IP), the distinction between scalable and unscalable business models usually comes down to who's bearing the risk. So, if you're an entrepreneur, you front all of the fixed costs of developing the product yourself (or you get investors to do it in exchange for equity). In return, you get all the rewards if it's successful. However, if you're an employee, you sell your labor for a fixed price (= unscalable, since you have only a fixed amount of time), and then the company bears the risk of the product not succeeding in the market.
Personally, I think you should think of an employer as an insurance company: they underwrite the risk that your venture will fail in the marketplace, in exchange for taking the vast majority of the rewards if it succeeds. Whether or not this is a good tradeoff depends a lot on things like external economic circumstances, your skill level, ideas you have for new markets, etc.
Much better put than my post.
There's some resonance between the scalable & non-scalable revenue streams. The details of what one does in the non-scalable portion can be massively amplified in the scalable portion.
It's as if, for some combination of business models, the quality of the non-scalable aspect becomes the exponent for the scalable aspect:
r = s^(nt)
revenue = scalable to the power of the non-scalable * time
Versus a pure non-scalable play, like straight consulting:
r = nt
There's some resonance between the scalable & non-scalable revenue streams. The details of what one does in the non-scalable portion can be massively amplified in the scalable portion.
It's as if, for some combination of business models, the quality of the non-scalable aspect becomes the exponent for the scalable aspect:
r = s^(nt)
revenue = scalable to the power of the non-scalable * time
Versus a pure non-scalable play, like straight consulting:
r = nt
[deleted]
> "Career experts generally favor scalable professions."
Says who? In my experience, "career experts" want to make sure their advisees get a decent job. If 90% of people who follow your advice fail at their career, I'm betting you don't stay a "career expert" for very long.
Says who? In my experience, "career experts" want to make sure their advisees get a decent job. If 90% of people who follow your advice fail at their career, I'm betting you don't stay a "career expert" for very long.
"Career experts" mostly sell books and enthusiasm. Failure ensures repeat business.
Consider how much you can earn as a doctor or lawyer by choosing a lucrative specialty and working to establish yourself in the field -- why does he discount that? Because he's selling a dream, not a career. It's hard to fantasize about going to medical school, doing a residency, and then doing further postgraduate work, especially if you're already out of school. It's easy to fantasize about entrepreneurship.
Consider how much you can earn as a doctor or lawyer by choosing a lucrative specialty and working to establish yourself in the field -- why does he discount that? Because he's selling a dream, not a career. It's hard to fantasize about going to medical school, doing a residency, and then doing further postgraduate work, especially if you're already out of school. It's easy to fantasize about entrepreneurship.
> It's easy to fantasize about entrepreneurship.
Nail, head.
HN is entrepreneur-porn.
Nail, head.
HN is entrepreneur-porn.
HN is entrepreneur-porn.
Indeed. HN can inform and motivate.
But simply reading HN also satisfies the startup itch a little... and can thus wind up being an ersatz substitute for the real thing. For each person HN encourages, it might also satiate another in place.
Indeed. HN can inform and motivate.
But simply reading HN also satisfies the startup itch a little... and can thus wind up being an ersatz substitute for the real thing. For each person HN encourages, it might also satiate another in place.
> If 90% of people who follow your advice fail at their career, I'm betting you don't stay a "career expert" for very long.
Does the compensation of "career experts" actually depend on the success of folks who they advise?
Does the compensation of "career experts" actually depend on the success of folks who they advise?
It's vaguely charming/ironic that the Casnocha is doing pretty good in the scalable world of getting blog posts chatted about... Out of all the millions of blog posts, to be one of the few that random people will look at today...
A career should be about what you want to do, not about how much money you can make.
A life should be about what you want to do, not how much money you can make. But if making as much money as you can at your job is necessary to finance your life goals, then that's fair enough. Work to live, don't live to work. I've friends who simply make as much money as they can 4-6 months of the year and devote the rest of their time to personal projects, and there's nothing wrong with that.
Such trade-offs are common but they're still trade-offs. You're still effectively dividing yourself into two halves, and only because you're lacking the trust that life will favor those who engage fully to its offerings.
I don't mean to preach here as only you can know what kind of life is good for you at the time. But I think there's a immensely deep question beyond; that's why realising what you want is so damn hard in practise!
The reason I'm insisting on this is that I'm slowly beginning to hit the hard wall myself. I don't fully trust life myself either, yet. Trust also means letting go of lots of things you've believed that are important but which you're only attached to. Still, I'm afraid I can't prolong the current state of affairs for too long.
I don't mean to preach here as only you can know what kind of life is good for you at the time. But I think there's a immensely deep question beyond; that's why realising what you want is so damn hard in practise!
The reason I'm insisting on this is that I'm slowly beginning to hit the hard wall myself. I don't fully trust life myself either, yet. Trust also means letting go of lots of things you've believed that are important but which you're only attached to. Still, I'm afraid I can't prolong the current state of affairs for too long.
Aim for mediocrity because you'll pretty much get there anyway. And restrain your kids so they don't think big. Perfect recipes for a boring life.
Baahh... Its the old Risk v. Rewards thing all over again. Also easily explainable by standard economic theory. If some career/job/etc... carries a high risk of failure then those who succeed have to be richly rewarded to main the expected value at about the same.
I find most of the talk like this pretty irrelevant, do what you enjoy, then if you really want money, figure out the best way from there. I would much rather be an expert in the career I chose than be a "Career expert"