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The Cruel Startup Job Market

Posted in Rant, Startups

It starts innocently enough with a Ben Thompson tweet:

I mostly agree his premise; when hiring engineers, I always figured that our industry standard of recruiting just from top schools and asking rote algorithm questions does not fully capture the best available talent. Startups who can’t afford to match public companies’ salaries and perks have to rely on moneyball hiring tactics to find talent disproportionate to established accolades. As you’d expect, the conversation went down a wholly different rabbit hole:

Keith Rabois is arguing that because some startup founders dropped out from college, it’s evidence that fancy degrees and prestigious schools are unnecessary to build huge, innovative businesses.

Except that they totally are.

Set aside, for a moment, VCs’ survivor bias in only remembering and citing successful college-dropout founders. The biggest problem with this dismissal of higher educational credibility is that it ignores everyone else needed to make a company successful. Founders formulate their initial ideas and work to establish traction, and it’s likely that their first employees are cut from the same cloth1. But every startup goes through phases of bringing in senior folks, managers, and executives, as a strategy to stabilize the personnel, strategy, and to further scale the company. Those hires tend to be overwhelmingly college-educated, and at the executive levels, often feature hires who have earned multiple advanced degrees.

Facebook? Sheryl Sandberg’s role as COO—while holding a Harvard MBA—was such a great complement to Mark Zuckerberg that she’s the standard bearer on what it means to onboard experienced operator to compliment a raw founder. Square? Keith Rabois himself—with a law degree—was the COO. In fact, the vast majority of C-level executives I’ve worked with, for, or have heard of, boast these impressive academic credentials, and the combination of their schooling and extensive experience form the basis of their qualifications. Correspondingly, startup employees tend not to skip college, and they’re the ones providing the operational excellence needed for a company to succeed past its earliest stages.

Hell, most of the journalists, analysts, venture capitalists, and those who make a living around the tech industry, while not being directly employed by a tech company, themselves went through college, and usually at one of the top schools in the country at that.

It’s worth stepping back to reason through why college dropouts as a group are disproportionally overrepresented as founders2. The common wisdom here—and a line of thought that Ben follows through on—is that non-college attendees don’t want to follow established systems and rules. By breaking away from educational and social norms, they’re able to invent new approaches, and create new products to challenge incumbents stuck with their stodgy, de-facto derivative.

The disconnect here is that, in our modern tech industry, the only area that out-of-the-box thinking is appreciated is in the initial product and direction. In pretty much every other area needed to build a successful company, following established rules and patterns is the default and often only choice:

  • Product idea implementation, with established engineering and design
  • Business models, with well-defined buckets3
  • Company culture and human resources
  • Company structure, hierarchy
  • Employee compensation
  • Sources of working capital, e.g., venture funding and IPO

In all these cases, following the rules is the accepted default, and any attempts to stray outside the lines makes for headlines4. It’s no surprise that the derided rule-followers, who definitely lived up to that label in obtaining their college degrees, are tapped to fill up the ranks, and are needed for sustainable execution. And in fact, one of the most important roles for a founder-CEO, college-dropout or otherwise, is to scale out their growing company5, which translates to learning and practicing established rules of management. Given that the reality of a company’s prolonged success is wholly dependent on riding established rails, it’s puzzling that people keep on encouraging college kids to “go for it”.

My slightly cynical explanation is that higher peaks—bigger companies—is reminiscent of an earlier take on variance within education systems. The ecosystem around startups derive more benefit by encouraging a bimodal distribution of success. Founders still have the most to gain and lose, but I’d argue that the risk they take on is disproportionately larger, with survivorship bias creating a filter which makes failed founders easy to ignore. In other words, if you’re an analyst or venture capitalist, you stand to gain from more extreme startup ideas, with the cost in the risk of failure borne by obscure founders who wouldn’t make the news anyway6.

Software companies often pride themselves on dogfooding their own products, to actually become the users of their own products. We’ll know when we’re ready to break more rules to when those espousing the virtues of rule-breaking have themselves dogfooded their own careers.

  1. Paypal famously made this their hiring philosophy, even though they came from Stanford and recruited former acquaintances from their schooling days.

  2. Reading through Twitter responses, I also noticed anecdotes of people finding talent in unusual places. The roles, though, were all confined to entry-level positions.

  3. Remember how everything was “Uber for X” for a while?

  4. Exhibit A: Holacracy.

  5. My former manager had this insight: hyper-growth startup employees have to scale themselves to successively larger teams as a company scales; the CEO has to scale the fastest as their “team” is the entire company.

  6. There have been a few notable exceptions: the Clinkle mess, and some of the Thiel Fellowship cohorts.