August 2005
Thirty years ago, one was supposed to work one's way up the corporate ladder.
That's less the rule now.
Our generation wants to get paid up front.
Instead of developing a product for some big company in the expectation of getting job security in return, we develop the product ourselves, in a startup, and sell it to the big company.
At the very least we want options.
Among other things, this shift has created the appearance of a rapid increase in economic inequality.
But really the two cases are not as different as they look in economic statistics.
Thirty years ago you climbed the corporate ladder. Now we want to get paid up front: build the product in a startup and sell it, rather than build it for a big company for job security.
This looks like rising inequality, but the two cases aren't as different as they seem.
Our generation builds products in startups and sells them up front instead of climbing a corporate ladder for job security. The shift looks like a jump in inequality, but the two cases aren't as different as they seem.
Economic statistics are misleading because they ignore the value of safe jobs.
An easy job from which one can't be fired is worth money; exchanging the two is one of the commonest forms of corruption.
A sinecure is, in effect, an annuity.
Except sinecures don't appear in economic statistics.
If they did, it would be clear that in practice socialist countries have nontrivial disparities of wealth, because they usually have a class of powerful bureaucrats who are paid mostly by seniority and can never be fired.
While not a sinecure, a position on the corporate ladder was genuinely valuable, because big companies tried not to fire people, and promoted from within based largely on seniority.
A position on the corporate ladder had a value analogous to the "goodwill" that is a very real element in the valuation of companies.
It meant one could expect future high paying jobs.
Statistics ignore the value of safe jobs. A sinecure is, in effect, an annuity that never shows up in the numbers. If it did, socialist countries would show real wealth disparities, in their unfireable bureaucrats.
A ladder position wasn't a sinecure, but it was genuinely valuable: companies promoted by seniority and tried not to fire people. Its value was like a company's "goodwill" — future high-paying jobs.
Economic statistics ignore the value of safe jobs — a sinecure is an annuity that never shows up. A position on the ladder was genuinely valuable, like goodwill: it meant future high-paying jobs.
One of main causes of the decay of the corporate ladder is the trend for takeovers that began in the 1980s.
Why waste your time climbing a ladder that might disappear before you reach the top?
And, by no coincidence, the corporate ladder was one of the reasons the early corporate raiders were so successful.
It's not only economic statistics that ignore the value of safe jobs.
Corporate balance sheets do too.
One reason it was profitable to carve up 1980s companies and sell them for parts was that they hadn't formally acknowledged their implicit debt to employees who had done good work and expected to be rewarded with high-paying executive jobs when their time came.
In the movie Wall Street, Gordon Gekko ridicules a company overloaded with vice presidents.
But the company may not be as corrupt as it seems; those VPs' cushy jobs were probably payment for work done earlier.
A main cause of the decay was the 1980s takeovers. Why climb a ladder that might disappear before you reach the top?
The ladder was also why raiders succeeded. Balance sheets ignore safe jobs too: carving up 1980s companies was profitable partly because they'd never acknowledged their implicit debt to long-serving employees.
In Wall Street, Gekko ridicules a company stuffed with vice presidents. But those jobs were probably payment for earlier work.
Takeovers from the 1980s decayed the ladder — why climb something that might vanish? And the ladder is why raiders won: balance sheets ignored the implicit debt owed to employees, so the cushy VP jobs Gekko mocked were really payment for past work.
I like the new model better.
For one thing, it seems a bad plan to treat jobs as rewards.
Plenty of good engineers got made into bad managers that way.
And the old system meant people had to deal with a lot more corporate politics, in order to protect the work they'd invested in a position on the ladder.
The big disadvantage of the new system is that it involves more risk [blocked].
If you develop ideas in a startup instead of within a big company, any number of random factors could sink you before you can finish.
But maybe the older generation would laugh at me for saying that the way we do things is riskier.
After all, projects within big companies were always getting cancelled as a result of arbitrary decisions from higher up.
My father's entire industry (breeder reactors) disappeared that way.
I like the new model better. Treating jobs as rewards made good engineers into bad managers, and bred far more politics to protect your position.
Its disadvantage is more risk [blocked]: random factors could sink a startup before you finish. But big-company projects were always cancelled from above too — my father's whole industry, breeder reactors, vanished that way.
PG likes the new model: treating jobs as rewards turned good engineers into bad managers and bred politics. Its disadvantage is risk — but big-company projects got cancelled too, like his father's whole industry.
For better or worse, the idea of the corporate ladder is probably gone for good.
The new model seems more liquid, and more efficient.
But it is less of a change, financially, than one might think.
Our fathers weren't that stupid.
The ladder is probably gone for good, and the new model seems more liquid and efficient. But financially it's less of a change than one might think. Our fathers weren't that stupid.
The ladder is probably gone for good, and the new model is more liquid and efficient. But financially it's less of a change than it looks — our fathers weren't that stupid.