While I don’t want this to be a series of essays about “politics” (whatever that really means) or to be intentionally provocative, I’m also not trying to stay away from anything that might be controversial.
With that in mind, I’ve been wanting to write about privilege and entrepreneurship for a while, and finally came up with something that I think gels.
The framing started listening to David Runciman’s excellent podcast, Past, Present, Future, and in particular the episode he did on Ta-Nehisi Coates’s “Case for Reparations” essay in The Atlantic.
He makes the more general point that, paradoxically, being in poverty is expensive. If you’re barely surviving, you probably can’t afford to buy a pair of durable $100 shoes that might last you years. You don’t have $100 to spend on anything. Instead, you have to get by with shoddy $10 shoes you replace every few months, so you in fact spend more on shoes in the long run, even though you’re less well off financially.
You can’t “invest” by buying with a longer time horizon in mind, or exploring options because you can afford to put off a decision or afford to make a mistake.
This was front and center in my life recently when my $200 Patagonia coat started falling apart. I took it to one of their stores expecting to pay for a repair — itself probably cheaper in the long run than having to buy a new coat — and they gave me a brand new $200 Patagonia coat for free as part of their product guarantee. But you only get those dividends if you can afford to spend $200 on a coat to begin with.
I think a similar phenomenon plays out in people’s career progression in the context of risk. The more risk you’re willing to assume, the faster you can advance. But in many ways being able to assume those risks — because sometimes you won’t win the bet — requires a degree of privilege. You need to have savings or a family safety net to take on those uncertainties. And so it becomes another vector for reproducing inequality.
Consider a hypothetical game. It costs $10,000 to play. If you toss a fair coin and it comes up heads, you win $15,000. If it comes up tails, you walk away with nothing, meaning you effectively lose $10,000.
Would you play?
If I could only play once, I would probably say no thanks. While the expected value is positive, it would be pretty painful to lose $10,000. Certainly a lot more painful than getting an extra $5,000, which would be nice, but isn’t going to change my life as much as losing twice that.
If I could play that game repeatedly, of course I’d say yes. Because if you play a game with these rules over and over, you are mathematically guaranteed to come out ahead eventually.
Critically, though, this only works if you have the financial cushion to sustain sometimes losing $10,000. Or indeed even have $10,000 to start with to play the game at all. For a lot of people that’s a complete non-starter.
Here, for example, I’ve run a few simulations of this game through repeated plays. Note how even with incredibly favorable rules, it takes time to achieve a large net positive position. For all the samples here, no one is doing that well for the first handful of plays. In more than one simulation, you’re tens of thousands of dollars behind before you eventually win enough to be meaningfully ahead. Considering the blue run, it looks like you’re failing pretty badly until you get 50 tries in.
This is more or less how I think we could frame career choices throughout our lives. Getting onto a faster path requires taking more risk. That’s why you advance faster or get paid more: you’re being compensated for doing something where the outcome is iffier. Sometimes you’ll fail painfully — it is less certain — just as sometimes you have to eat a $10,000 loss in my hypothetical game. But if you can play the game enough times, you’ll eventually come out ahead. Your successes when they come are bigger and more impressive.
At the extremes, consider someone who works as a financial analyst for the US government versus someone who founds a company. The person working for the government basically has a job for life. The odds of the US government completely collapsing are pretty slim. But the odds of them making it big are also next to zero. There are many reasons for that, but among them is a lack of any real jeopardy they need to be compensated for.
Compare that to the entrepreneur. The person who founds a company will probably fail. Most people are not the next Steve Jobs. Most people aren’t even going to have a successful exit at all. But evidence suggests that even if you found a company and fall on your face, you progress more quickly in your career. Maybe you join a larger more stable company at a higher level than you might otherwise have. And, of course, simply by putting yourself in the running you take your odds of being the next Larry and Sergey from zero to at least a positive value.
If you want to learn, there’s nothing quite like joining an early-stage venture that starts to go places.
But critically, you can only do this if you have the ability to assume that risk. Being a founder, even if you’re one of the rare people to get venture funding, means taking a pretty significant pay cut. Even being an early employee at a new venture means getting paid less in cash than you might at a more established software company.
And it’s definitely not a walk in the park from a workload and emotional perspective. Even when you’re working with people who know what you “should” do in terms of HR or other internal processes, you may not have the resources or time to do it. It can be chaotic and stressful.
You have to be in a position financially and mentally that you can sustain this.
I think this says a lot about why so many people who start companies or join early are either young and from reasonably well-off families, or are later-career professionals who have a stable family and financial situation.
When you’re young, single, and have a strong family safety net, you can afford to go for broke. When you’ve got teenage kids who don’t need constant supervision, a supportive partner, and a financial cushion that means you don’t really mind missing a year’s pay, you can also swing for the fences.
This excludes a lot of people.
Which is not to suggest that we need overbearing regulation or a giant handout from the government. It’s good to have something that nudges people to be daring and make progress happen.
Rather, I think it points to certain structural problems that need addressing, and it should make people in leadership roles reconsider some of their dogma. Both to make society a better place for its own sake, and because I think it’s better for organizations’ performance.
On the structural side, the sorry state of healthcare in the United States is a great example. Putting aside the exorbitant cost of providing healthcare to your team, the administrative burden alone is a drag on entrepreneurship. Finding a plan and provider, getting it set up, and then hounding your employees to enroll is time you could spend building your product. But at a certain point you have to do it (and pay for it) — employees in the US expect it — despite the burden.
Internally, I think it’s a reminder to be considerate of different perspectives. For example, startup leaders I talk to have good reasons for giving people a mix of compensation that leans more heavily on equity than cash. When you’re not a gigantic profitable business, you want to eke out the most of your limited cash resources.
That can create blind spots when someone doesn’t fit the cookie-cutter idea of an “ideal” early-stage employee. The parent with aging relatives and whose husband has taken time off work to help care for them isn’t less “passionate” because she asks for a more cash-heavy compensation package. More likely, she needs that to cover expenses or provide reassurance. That a 24-year-old from a well-off family with no other obligations can enthusiastically accept a different set of tradeoffs is a product of circumstance, not competence or character.
It’s a reason that some economists and other researchers see as a barrier to women climbing into more senior roles, despite the fact that, for example, women tend to have more years of education than men. If you can’t because you’re more likely to have caring obligations or you don’t want to for deeper social reasons, you’re never going to really get ahead.
In the aggregate, I see this as a social justice problem and a missed business opportunity.
We’re not rewarding ingenuity as much as we are existing privilege. Maybe more perniciously, we’re feeding a framing that not getting ahead is the product of lack of effort as much as it is circumstance. But I don’t want to dwell on this part too much here.
It’s also worth worrying about from the perspective that we’re losing valuable insights that can solve problems or unlock new opportunities in our businesses. People who grew up in rural communities have different insights than urbanites. Parents have different insights than people without children. Women have different insights than men. Not accommodating them is throwing away useful perspectives.
One of my favorite examples in this vein is something called “WAF” or “wife approval factor” that pops up on a lot of discussion forums for audio and video equipment. Think people obsessing over the TVs with the best image quality or the speakers that sound the best.
To my frustration, it often feels like the people who design high-end speakers and electronics all dream of being prop designers on the next Star Wars film. I’m sure there are people who think having a black box with blinking lights and a million knobs and dials is cool from a decorative perspective. There’s nothing per se wrong with that. I’m not one of them, however. On average, I’d venture that women are more inclined to think this way too.
Which is why so many — let’s be honest here — men are plotting and venting to one another on these discussion boards about how to sell their latest dream TV to their significant other.
Meanwhile, I’m pretty skeptical that being a woman means you can’t appreciate or don’t care about good picture and sound quality. That suggests there’s a potential unexplored market for nice TVs and sound gear that doesn’t look like it’s pulled from an episode of Star Trek. I think that’s part of what’s made companies like Apple and Sonos successful. If you buy a Sonos speaker, it almost certainly sounds better than your TV’s awful built-in speakers. It also doesn’t become the visual focal point of your living room.
I won’t pretend I know how to unknot all these problems. Changes like running structured interviews can certainly make a difference. If I had my policy druthers, I’d make a point of making business easier by unloading the burden of healthcare.
As with so much else, though, we have to start by understanding what’s going on.
From a personal perspective, I know that thinking about bets I make on myself in this framing has helped me decide what makes sense. Both in terms of maximizing the opportunities in front of me — taking more risk because I can — and contextualizing my successes and failures.
From a broader perspective, I think it’s important to keep in mind, especially if you’re in a position of power. Trying to jam everyone into the same mold may close you off to people who could bring important perspectives to your organization. Different perspectives are good for business. But we can only get those when we understand pathways that are potentially locking some of those perspectives out.
Enjoy this? Have an idea for something you’d like a perspective on? Drop me a line: I’d love to hear from you.