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.
Joining Google, HP, McKinsey. Huh? That’s right … joining one of these firms is way too risky.
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.