When I speak to classes at UC Berkeley and Stanford, most of the questions center on career advice:
What should I do? Should I get my masters now or later? Should I join a start-up, start a company, or join a more established firm?
My answer: It is too risky not to take a risk.
That’s right. Doing the “safe” thing is the riskiest thing you can do in today’s environment.
What’s “safe”?
Joining Google, HP, McKinsey. Huh? That’s right … joining one of these firms is way too risky.
What’s better?
Joining a start-up or starting your own company. It is counter-intuitive, but it is actually far less risky to take a risk. Of course, that assumes you live in a place like Silicon Valley and not in a place like Germany.
Let me explain and compare to opportunities:
Let’s say you’re a newly minted Harvard MBA with an engineering background and you get a sought-after product management job at a large tech company at $105,000. You’ve got a few stock options and a potential bonus. Sounds low-risk right? Wrong.
Another job offer is a newly funded start-up. 18 people. Has 18 months of cash to burn. Seems to have a good plan and good potential. You get a product management offer for $80K and lots of options. Seems risky? Wrong again.
The big company is the wrong move because your up-side is capped and your downside is roughly the same as the start-up. The down-side at the start-up is it goes under and you’re out of a job. The downside at a large company is they do another re-org and you’re out of a job. Of course, the bigger downside is that they never do a re-org and you actually keep your job at big bertha for the next ten years. What then? Maybe you’ve worked your way to a VP and have to deal with bureaucracy and in-fighting … and you cannot understand how your SVP still has a job because he’s so incompetent.
Let’s a assume you do lose your job (the downside in each scenario). Guess what? Who cares? You can always get a job. I repeat, you can always get a job. Of course, this assumes you live in a place where failure is embraced (Silicon Valley) and not in a location where failures are shunned (Germany). In Germany the bankruptcy court might go after you personally. In Silicon Valley, if a large company offers you a job today … they’ll likely offer you that same job two years from now … even after a failed start-up.
Now to the start-up … we’ve already discussed that your downside is low (basically it is earning $25K less a year and a slightly higher possibility of being out of a job earlier). But your upside is outstanding. And not just financial upside, but the learning, the dynamism, the fun, and the opportunity to help change the world. Put it this way — joining a start-up (loss of $25K/year) is much less risky than getting an MBA (loss of $150K/year) and both have similar upside.
Some people say that working at a big company is like investing in a bond that gives you a guaranteed 4%/year while working at a start-up is like investing in a high-beta hedge fund. That’s not a good analogy. Because your downside is capped at a start-up. It is like investing in a hedge-fund where the upside is limitless but the downside is capped at 2%/year — wouldn’t you take that option over investing in the guaranteed 4%? Of course, you’d take it any day.
The real problem is that finding a job a cool start-up (or founding your own company) is hard work. It takes a lot of time and effort. Finding a big-company job is easy. But the job market is changing fast. Vertical job search engines like SimplyHired (www.simplehired.com), referral rewards systems like karmaONE (www.karmaOne.org), and candidate centric sites like The Ladders (www.theladders.com) and WooMeNow (www.wooMeNow.com) are changing the way people find jobs and how companies find people.
Summation: it is far more risky not to take a risk.
you come to google today to meet with all your friends and then you call us “safe?” That’s it – no more Chinese Chicken Salad for you!
whoops. sorry Hunter. i actually posted this entry from Google using your wifi. after spending the day at Google today, i will admit that massive innovation is going on their and i meant to delete “Google” from my blog entry (but forgot).
after today … mea culpa — i am wrong about Google. Work there. they’re awesome.
Auren, on the whole I would agree with you. But not entirely. It sounds to me like you’re looking at the world through the lens of someone for whom the start-up environment is the right place to be. In my experience, that’s not the case with everyone.
So I would amend your post to say, “Do your research. Talk to people in start-ups and people doing the work you want to do at Megacorp. After that, if when you set aside the notion of risk a start-up feels like the kind of place you’d like to be, go with the start-up.”
Which job offer is the riskier?
Auren Hoffman suggests [it is too risky to take a risk](http://summation.typepad.com/summation/2005/08/it_is_too_risky.html#comments). It’s a good article and I agree with Curt Rosengren’s comments – different types of people will view the same scenar…
Hi Auren,
Will comment on this on my blog 🙂
Thanks for letting me know!
regards
Gautam
Auren, excellent post. I agree with this and I think your analogy is really good. I think a lot of people forget that the potential downside of both types of companies is actually the same – you lose your job. But like you said it is very, very hard work to actually find the right startups to work with OR starting your own and building it.
I think you make another good point about Silicon Valley. In the Valley in many ways the startup spirit is contagious. I think that is why so many people work such crazy hours. But other cultures just aren’t like that and may never be that way despite the pressures globalization are forcing upon them. The advice you give your students at Berkeley and Stanford may go down a lot better there than it would at say, Tokyo University.
Auren, Your analysis is interesting. I think that to
succeed at a Startup, you need to
be well-rounded. At a startup, there very few people so you
have to do many different things
I think in a large company, you
are assign usually to one position
and you do that for 1 or 2 years.
To summarize, if you want to
specialize in function, work
at a large company, if you want
work at different things, work
at a startup
Dean
Auren – I like your style. The thing one has to keep in mind is…personality style often determines the type or kind of company one joins.
There are many who by nature are “less risky,” or not risky at all. Some, by nature, scream risk from every cell in their body.
And some, have 15+ years in a company and children at home while college tuition looms in the near future. Their hearts scream “give me risk!”, yet they will tend to veer toward that which appears to provide some similation of security (but that’s a whole ‘nuther topic)!
Neither is good or bad, in my opinion. But one thing is for sure – they need to be in an environment that allows them to flourish (that, too, is different and varies by individual).
Me, I like risk, but I’m currently in a non-risk work situation. Will I be there forever? Not on your life. There is a risk-laden opportunity out there right now with my name written all over it – and find it I will (gotta stop…I’m starting to sound like Yoda).
Summation
Summation
I agree with Curt. Depends on the person. When you say that if your company fails, you can always find “a job”…who wants “a job”? What about a “career”? What about thinking of your resume as a portfolio?
I think tht if a person does start up work and the start up fails, it’s more likely that they will get a new job at another start-up. I could see that getting tiring. Though I understand that this is how things are in Silicon Valley. Many big companies like prior experience from other big companies because the roles carry similar scope and similar challenges. Not to say we don’t hire people from start-ups, but the start-ups that we know the most about are generally the ones tha are successful. Would I hire someone from an unsuccessful start-up? Yes. Would I want to see some other experience in their resume? Yes.
I would advise doing the research up-front on the company, finding out whether the culture suits you, thinking long term about how it’s going to add to your professional portfolio and whether (if you like the company)there’s career path. If there’s no career path, run away as fast as you can (I’ve been there…you end up leaving anyway).
What you wrote, to me, seems more focused on the financial risks involved. I like getting paid (as much as possible, please), but that’s not the only motivator. I would prefer to work where I get to do things that are interesting and add value. Given my background, I wouldn’t be interested in a “jack of all trades” role at a start-up, but that’s just me. I suspect that it’s an individual decision as Curt suggests. I thikn he’d also likely tell you to follow yo0ur passion. I agree.
Auren, I have to agree with the Masked Blogger (maybe I need to see someone about that). A persons situation and their personality tends to dictate where they end up. Having said that your post makes a lot of sense if your situation allows for you to join a start up.
In Australia it can be very hard to join a startup because there are very very few true start ups around. Our business environment just does not allow for them in the same fashion as in the US, a very sad situation.
Also I like your style, not just the post but how you have generated some interest.
Career Choices and Risk Tollerance
I received a kind email from Auren Hoffman who, among many other things, has a blog called Summation. He has an interesting post called It is too risky not to take a risk and provides some career advice. Specifically, when deciding on a career is it ri…
Career Choices and Risk Tollerance
I received a kind email from Auren Hoffman who, among many other things, has a blog called Summation. He has an interesting post called It is too risky not to take a risk and provides some career advice. Specifically, when deciding on a career is it ri…
Auren,
Back in 1998 or 2000 I might have disagreed with you. The internet bubble was exploding, and most companies back then offered options instead of cash. Big Corp was safe and secure.
However, in today’s economy, this isn’t true anymore. Many people that worked hard to get their annual 3% raises found themselves out of work. Big wasn’t safe and secure anymore, and still isn’t.
And small companies and start-ups offer so much more, if you are passionate about work. The tables have turned and I agree fully.
I have included a link to this entry in my blog (jobstuff) and a lengthier reply. http://jobstuff.blogdrive.com
Great thought provoking article! thank you.
stephen
http://www.sph-associates.com
Leveraging the Power of the Internet for your Business
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