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The Most Important Start-Up

Wednesday, March 21, 2012

Ben Casnocha discusses the end of the labor mentality and how short-term risk can yield explosive rewards.

Editor’s note: Ben Casnocha and Reid Hoffman are the co-authors of the new book “The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career.” Casnocha is an award-winning entrepreneur and writer, and Hoffman is the co-founder and chairman of LinkedIn. Casnocha recently talked to AMERICAN editor Nick Schulz about embracing risks and the unknown in an uncertain age.

Nick Schulz: This book calls for a radical re-conceptualization of how individuals should think of themselves in the context of the economy. You say that for centuries people have “been acting like labor,” and you don’t mean that in a good way. Tell us what you mean.

Ben Casnocha: For the last 60 or so years, we've been telling ourselves a story about how careers work in America. The job market for educated workers worked like an escalator. After graduating from college, you landed an entry-level job at the bottom of the escalator at an IBM or a GE or a Goldman Sachs. There you were groomed and mentored, receiving training and professional development from your employer. As you gained experience, you were whisked up the organizational hierarchy, clearing room for the ambitious young graduates who followed to fill the same entry-level positions. So long as you played nice and well, you moved steadily up the escalator, and each step brought with it more power, income, and job security. Eventually, around age 65, you stepped off the escalator, allowing those middle-ranked employees to fill the same senior positions you just vacated. You, meanwhile, coasted into a comfortable retirement financed by a company pension and government-funded Social Security.

It's the interplay between science and liberal arts where the magic happens. Steve Jobs spoke to this point eloquently.

People didn't assume all of this necessarily happened automatically. But there was a sense that if you were basically competent, put forth a good effort, and weren't unlucky, the strong winds at your back would eventually shoot you to a good high level. For the most part, this was a justified expectation.

And as a result, you could be rather lackadaisical about managing your career. There were pre-designed paths that you could pick. Then, you hop on the escalator at the bottom, you depend on your employer for the upward lift, and bank on Social Security when you step off the escalator. That's acting like labor.

Of course, the problem is that the world has changed. The career story is no longer true, and acting like labor won't cut it anymore.

Muhammad Yunus has useful thoughts on labor and entrepreneurship. Yunus says that when we were in caves, all humans were entrepreneurs. We had to forage for food and support ourselves. We had to create lives. We were entrepreneurs of our own lives. "As civilization came," Yunus went on to say, "we suppressed it. We became labor because they stamped us, 'You are labor.'"

NS: Reid has a background in philosophy. Peter Thiel is another hugely successful Silicon Valley entrepreneur who studied philosophy. Now, liberal arts degrees are not celebrated much these days. And yet it seems to have served folks like them well. What do you make of the argument that we need to tip American education toward science, technology, engineering, and mathematics (STEM) and more technical fields and away from softer fields like philosophy?

BC: We need more STEM in elementary and junior high, certainly. Kids need exposure to science and technology at a younger age so that they have the opportunity to discover and develop passions in technical topics.

At older levels, I think both disciplines matter equally. It's the interplay between science and liberal arts where the magic happens. Steve Jobs spoke to this point eloquently.

But not every liberal arts education is as high quality as Steve Jobs's (admittedly brief) experience at Reed College. We have way too many college students who graduated in the bottom quartile of their high school class who are pursuing low quality liberal arts university degrees. Abysmal graduation and job placement rates follow.

Those students should be developing vocational skills. This doesn't necessarily mean they should be studying hard science or engineering, but it does mean less philosophy and poetry.

NS: You devote a chapter to the importance of risk and the need to embrace risk. Maybe it’s me, but a lot of public discourse today (outside places like Silicon Valley) tends to focus on the negative aspects of risk and on the need to minimize risk as much as possible. To the extent you are swimming against a powerful tide, how do you convince people to see risk as something to embrace?

BC: Risk as it relates to individuals is best understood as the downside consequence of a possible action, and the likelihood that the downside actually occurs.

Every action in life contains risk, whether it's finding a new job or going on a walk through the park. So you first convince people that risk is inevitable, unavoidable. This may surprise some. "Risk averse" people sometimes think they can reduce risk to zero. But you never can. By reinforcing this point, you get people thinking, "Since I'm going to face risk no matter what, how can I be intelligent about taking on the right kinds of risk?"

First convince people that risk is inevitable, unavoidable.

Then you have to convince people that certain types of risks are actually lower-risk than they think. We are wired to overestimate risk—a "negativity bias" kept our ancestors in the caves safer, and the bias continues today. Whatever the situation, it's probably not as risky as you think.

Finally, I think you tell the stories of folks who you might think took outrageous risk, but actually were prudent about it. Michael Dell is often called a college dropout-turned-billionaire thanks to Dell Computer. But you don't often hear that he was careful about taking a leave of absence when he left school, and only left for good once he felt like Dell was on track to being something special. He managed the risk he was taking. So can we all.

NS: In reading your book, I kept thinking about the mid-career professional, married with kids, tied to a community, a mortgage, etc. He might look at what you are advocating and say, “This sounds great in theory, but how, practically speaking, can someone like me find the time to invest in myself, my skill set, my network, etc.?” You argue that “short-term risk equals long-term stability,” to which this person might say, “Sure, but short-term risk also means short-term risk, and I can't afford that right now.” What do you say to him or her?

BC: Don't be tied to a mortgage! It reduces your flexibility to chase the best opportunities no matter where they are! Among the side effects of our country's obsession with home ownership, one is too many people not able to pick up and go where the job is. But that's a side point...

You raise a valid question that short-term risk may increase stability in the long term, but short-term risk can also mean ... short-term risk. For example, we suggest pursuing opportunities that offer the opportunity to grow your "soft asset" (e.g. knowledge, skills, connections) even if you have to trade down on how many "hard assets" the opportunity offers (i.e. lower pay). This makes sense for many people who can afford it because more soft assets eventually translate into more hard assets. But you're right, Nick, that not everyone can afford "eventually."

So there are other sorts of short-term risks that do not hit the immediate financial bottom line. For example, working to meet and build relationships with folks from other industries, or other departments within your big company, might introduce some volatility into your life—it's more hit-or-miss than spending time with people in your network you already know and who think the same way you do. But increasing network diversity, as we explain in the book, introduces valuable intelligence/information that in turns helps you make better decisions. So swap out the time you currently spend with likeminded people and spend that time broadening the informational reach of your network. It doesn’t cost you anything, and while you may have some boring lunches (this is the element of risk), at least a few of the relationships will work out.

NS: This is not a political book, but I kept thinking there might be some political (not necessarily partisan) implications to your argument¬ for, say, education, tax, or housing policy. Do you think so?

For every 14 people laid off in the Great Recession and now rehired, only one has recovered the same or greater salary.

BC: We have a phrase in the book: “IWe” —I to the We power. An individual's capabilities are magnified exponentially by the power of their network. But just as zero to the 100th power is still zero, if the individual doesn't have skills and abilities and passion and self-responsibility, it doesn't matter how expansive a network he is embedded in—he'll fail. Both the individual and the network/society in which that person is embedded shape the individual's chances—it's perhaps a simple philosophical point, but worth remembering by both extreme libertarians and extreme modern liberals.

At a more practical policy level, I'd make two points related to the Start-Up of You.

First, job training. For every 14 people laid off in the Great Recession and now rehired, only one has recovered the same or greater salary. To maintain as good or better wages in a competitive economy, you need better skills. The federal government spends $18 billion a year on 47 job training programs run by 9 different agencies. But, according to the Government Accountability Office, "little is known" about the effectiveness of the programs. How the heck do we design job training programs that actually work? How do we measure success? These are vital questions, and while there's plenty of agreement that the topic is important, I haven't seen as much on the nuts and bolts.

Second, education policy. We'd do better with more entrepreneurship training in schools—not necessarily teaching folks how to start a company but to become more entrepreneurial in life. But I'm rather cynical by this point about reforming the school system. So I'd just like for government to provide as much room for decentralized experimentation in education as possible. Charter schools are of course one example, but there are other types of experiments we could run within the system. And then I'd like to see for-profit and social entrepreneurs work on new and different education programs that are wildly different from what exists now in terms of structure, cost model, curriculum ... everything. If more people become the entrepreneurs of their own lives by living the Start-Up of You, we will need education programs that match and indeed enable the diverse forms of individual flourishing that should follow.

Nick Schulz is editor-in-chief of THE AMERICAN and the DeWitt Wallace Fellow at the American Enterprise Institute.

FURTHER READING: Schulz also writes “The End of Stagnation and the Coming Innovation Boom,” “Mitch Daniels Goes to School,” “The Four Players Driving Innovation,” and “Oiling the Innovation Machine.” Frederick M. Hess says “America Is Still the Most Innovative Country in the World.” Kira Newman asks “Is Startup America Bound to Fail?

Image by Darren Wamboldt / Bergman Group

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