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If 2022 has proven anything, it’s that we’ve been miscalculating risk. 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’ve seen a lot of people “play it safe” and still get burned. When times are unsettling, it’s a sign to update our beliefs: what have we overlooked? What do we change moving forward?
Miscalculating risk
Which of these decisions seem risky?
- Starting a business
- Joining a Series A startup
- Joining a Series D startup
- Joining a post-IPO profitable company
Most people would consider each decision less risky than the one above it. But that misses a big point. There are two types of professional 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 higher job risk given the venture may not work out. But you could be learning unique skills and forging relationships that make you more valuable, which reduces your long-term career risk.
It’s easy to conflate job risk with career risk.
Surprisingly, they tend to have an inverse relationship. After all, the best way to be resilient in your career is by becoming harder to replace. To do that, you need scope and responsibility to develop the right moat of skills and reputation. Scrappy places that carry higher job risk are more generous with both, out of necessity. (Scrappy places can also be dumpster fires, so doing your own research is important.)
Instead of flinching at “risk”, it’s worth asking: Which type? And on what time frame? Because reducing your long-term career risk is always a good idea.
But why not have it all? Well, as we’re learning now, job risk is tricky.
Tale of two layoffs
Imagine two layoff scenarios:
- They shut down the business
- They overhired / hired the wrong people for their current needs
Both are grim, 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. A warning sign before it gets bad? Bloat.
Bloat is the ultimate risk
On a bloated team, individual impact is hard to see. This means status is often derived from growing headcount instead of impact… which further compounds the problem.
Bloated teams are usually flush with cash (that’s how they got bloated in the first place), so they pay well. The downside is that bloated teams have a target on their back because the expense makes a big difference on the P&L. It’s like taking on hidden job risk. But unlike the job risk of a new bet, this one doesn’t even come with as much career and equity upside.
All this to say, joining a bloated team is one of the riskiest things you can do. Which begs the question: how can you detect bloat? Some angles to consider:
- Is the team scope high-impact, high-visibility for the business?
- How does scope get split into swim lanes for people on the team? Will your lane be critical enough?
- 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 are more likely to have bloated teams. Playing it “safe” can backfire without careful team diligence.
Lean teams
After so many hiring sprees, it’s easy to forget that lean teams can do incredible things. Some examples:
- WhatsApp had 55 employees serving 500M monthly active users when they were acquired for $19B
- 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, there’s more coordinating, aligning, 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 disillusionment about whether your work matters.
The road ahead
When debating what to do, a useful question is: do you want to build something great, or do you want to join something great? The last 10+ years of a bull market 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
- Get in the arena: take on more scope and responsibility; play for the front of the jersey
- Practice building something great because we can’t always rely on joining something great
- Capping your career and equity upside for more cash is rarely worth it
- A down market is the perfect time to get uncapped upside to ride out the (eventual) recovery
👋 P.S. If you're interested in lean, fast-growing startups, check out who's newly funded and hiring!
