Finished: 08/2015, 03/2017
Related Books: Choose Yourself, The 4th Economy, The 4-Hour Workweek, The Millionaire Fastlane
The Short Summary of “The End of Jobs”
Risky is the new safe, and safe is the new risky in the job market. The value of university degrees and credentials is diminishing, and the notion of a “secure job” has become an oxymoron. Yet we crave more credentials, cling to unfulfilling jobs and refuse to see the writing on the wall. This book explains why the labour market our parents grew up with is dead, which, perhaps surprisingly, is great news. Entrepreneurship has never been a more viable path, and Taylor’s book explains why. I’ve recommended this book countless times – it’s a great read.
“It’s only when the tide goes out that you learn who’s been swimming naked.” –Warren Buffett
“If you do things that are safe but feel risky, you gain a significant advantage in the marketplace.” –Seth Godin
Multi-millionaire investor Peter Thiel begins every interview with companies he’s considering investing in with the same three questions:
- What’s your secret?
- What important truth do very few people agree with you on?
- What do you believe that is both contrarian and correct?
Globalization is not just continuing—it’s accelerating. In 2020 there will be 40% more 25–34 year olds with higher education degrees from Argentina, Brazil, China, India, Indonesia, Russia, Saudi Arabia, and South Africa than in all 34 OECD countries combined.
The opportunity to align your fundamental drives for freedom and meaning with profitable work is greater than you may believe.
“Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use. Once you learn that, you’ll never be the same again.” –Steve Jobs
The ability individuals have right now to deliberately design their lives and realities is greater than at any time in history.
Entrepreneurship is connecting, creating, and inventing systems—be they businesses, people, ideas, or processes.
A job is the act of following the operating system someone else created.
As a society, we’ve hit peak jobs. The era of largely abundant, high-paying jobs that characterized the second half of the twentieth century is gone.
From 1948–2000, jobs grew 1.7× faster than population. Since 2000, the population has grown 2.4× faster than jobs.
We’re asking the wrong question: “How do I get a job doing that?” What if the better question is: “How do I create a job doing that?”
Traditional university degrees—bachelor’s, master’s, and PhDs—have become abundant, making them less valuable than ever.
I’ve worked with computer programmers and designers based in the Philippines. They were all highly capable at both frontend and backend web development, and were talented in design and fluent in English. Starting salaries for this position would be in the $82,000 per year range in the U.S. A typical starting salary for someone with her qualifications in the Philippines is often around just $700–$1,400 per month, with exceptionally talented developers earning around double or triple that.
India is now producing almost one million new IT graduates a year, and more than a million engineering graduates.
The UK struggles to release fifty thousand engineering graduates each year.
Opportunities available only to larger, 500+ person companies just a decade ago in 2005 are as of this writing available to businesses with less than a dozen full-time employees scattered across continents—the rise of a company structure known as “micro-multinational.”
Andreessen-Horowitz, a Venture capital firm started by Marc Andreessen and Ben Horowitz, that manages $4 billion as of March 2014, operates on an investment thesis of five words: Software Is Eating the World.
There are three basic questions to ask when applying Goldratt’s framework for progress:
- What’s the system?
- What’s the current limit?
- What’s the obvious way to improve the limit?
“Give me a lever long enough…and I shall move the world.” Addressing the limit is like having a longer lever. Instead of just pushing harder, we’re figuring out where to push to create the greatest impact.
Our rapid improvements have only been possible because at three distinct points in our recent history, we have, as a society, figured out the limit to economic progress and shifted to re-address it. The most recent was when the limit shifted to require more complicated work. The Baby Boomer generation went to school and got the expertise and credentials to address that limit. It’s for that reason we enjoy the level of affluence we have today.
In his book, The Fourth Economy, author and systems thinker Ron Davison organizes the last seven hundred years of Western History into three distinct economic periods:
- Agricultural (1300–1700),
- Industrial (1700–1900),
- Knowledge (1900–2000).
At each economic transition, we’ve seen diminishing returns from investing in the previous limit. The popular response has been to label our current economic woes a painful global recession. The popular point of view is wrong. We aren’t going through a global recession—we’re transitioning between two distinct economic periods.
When the limit of an economy shifts through the four different stages, investing more heavily in what has always worked won’t improve the output—just as spending more time in the gym is counter-productive if you aren’t sleeping enough or eating healthy.
In the current transition (the Fourth Economy), the limit is shifting from knowledge to entrepreneurship.
The entrepreneurial Complex and Chaotic domains are the ones increasingly in demand.
Most institutions and individuals don’t have a good track record of adapting effectively to these shifts. They continue working to address the wrong limit decades or even centuries later. We’re seeing that now. Individuals are investing in more knowledge, they’re going back to school to get more credentials. Even as the returns on credentials are declining, still students continue to pay more and more for them.
Simple supply and demand shows us that investing more in abundant resources isn’t a very good strategy. It won’t improve the outcome of a system.
The number of college graduates globally went from 90,000,000 to 130,000,000 between 2000 and 2010. It took us all of human history to get to ninety million and then only ten years to add another forty million.
More than half of America’s recent college graduates are either unemployed or working in a job that doesn’t require a bachelor’s degree. In 2014, the overall employment rate for law school graduates fell for the sixth consecutive year. It would appear that knowledge is no longer the scarce resource it was one hundred years ago.
Over the course of the 20th century, we’ve developed credentialism as a way to define how much knowledge there is. There are a lot of letters we can put after our name and plaques that we can put on our wall to show how much knowledge we have as a resource. Credentialism made it clear what the next step was and how much progress we’d made thus far.
This is a story I’ve heard dozens of times over. As they invest in entrepreneurship and become more entrepreneurial, many entrepreneurs that used to have good jobs end up financially more successful than previous peers. They aren’t pushing any harder. They’re using a longer lever.
The software that’s “eating jobs” is decreasing startup costs, making it easier to start a business. Entrepreneurs can outsource the non-core elements of their business and build much of their infrastructure “in the cloud” so they don’t have to take out debt.
When parents, CEOs, and college administrators make projections of safety, it’s not done out of deception. It’s an honest belief based on their life experiences. Many of our parents did spend their entire careers at one company, living in one house. That was a reality for much of the 20th century.
From the day a Thanksgiving turkey is born, everything about its life indicates that things are only going to get better. It’s hatched in a safe, sterile environment. It’s cared for and fed daily. Every single day, this pattern happens again. It wakes up to find plenty of food and a place to live. It is at the moment when the turkey has the most historical data to show that its life is likely to keep improving, on the 4th Wednesday of November, that it realizes—it’s not so good to be a turkey.
[Note: This brilliant parable is borrowed from Nassim Nicholas Taleb’s book Antifragile]
Max stayed at the current company and continued to work as an accountant because he felt it was the smart, responsible, and safe thing to do. Everything in his life, the lives of his parents, and the lives of his friends up to that point indicated that this choice was smart. Max continues putting in his hours, forty per week in the slow months and eighty plus leading up to tax season. He’s arranging spreadsheets and getting paid. The $2,876 check hits his bank account every two weeks, just like a butcher filling the turkey’s trough.
Steady income creates an illusion of steady value creation. This is dangerous. Fatally dangerous. It’s allowing us to accumulate silent risk.
The longer the market goes without having a correction, the larger the correction will be when it happens. The longer we go in our careers and businesses without variation or randomness, the larger the amount of underlying risk we accumulate.
Moderate amounts of volatility are healthy. Lying on the ground and having a trainer drop a ten pound medicine ball on you, you catching it, and throwing it back to them will make you stronger. Large amounts of volatility, like having a car dropped on you, will kill you. Likewise, moderate amounts of volatility in our careers and businesses are healthy. It’s the large events, the butcher’s hatchet, that kill us. If you put yourself in a position which creates very little value in the market for ten years, and it gets replaced by machines or Marissa from the Phillipines when you’re 40 years old, at peak earning potential, with a family and mortgage, you’re a Turkey on Thanksgiving.
Entrepreneurial risk is more visible than the silent risk accumulated by people in most jobs. If an entrepreneur’s sales decline this month, he knows right away and starts to adjust. If employee Max’s company starts to do poorly or his role is about to be outsourced, the CEO will send out a comforting memo that everything is just about to turn around and will be fine. There’s no feedback until Max gets the final letter from human resources.
If you do an accounting role which creates no value, but keep getting a paycheck for ten years, and then the HR department sends you a letter and Marissa from the Philippines takes your job, you have very few options. Your professional network is based around an industry that is being moved overseas. Your skillset is based around operating in a predefined system rather than one you can define for yourself.
The rules and the leverage points have changed in ways that were never made clear to us growing up. Many people are entering Thanksgiving week.
In Extremistan, risk doesn’t live in the past; it lives in the future. It’s the one event that comes once in a lifetime and defines Extremistan, so saying it hasn’t happened in our lifetimes is exactly the point. It’s coming.
What was once safe is now risky. What was once risky is now safe.
In a world with the internet, where information is rapidly approaching free, it’s hard to rationalize spending money paying for access to general knowledge when you can get the same knowledge for free. Scott Young, a young entrepreneur who now teaches others about advanced learning strategies, put himself through the entire MIT course material in twelve months for two thousand dollars.
The gatekeepers are dying. You, sitting in your apartment, can communicate with everyone on Earth more effectively than any media company twenty years ago.
[About a marketer who solely works with dentists]: By working with a single type of client instead of a single geographical area, he gained a lot of efficiencies that he could pass on in value to the clients both in terms of reduced costs and improved results. Because he understands the industry, getting clients is easier; they have a smaller group to work with; and word of mouth is more effective. Marketing is easier because other dentists easily identify with existing client case studies.
There are now hundreds of thousands of opportunities like this. These are all opportunities where jobs are going to be replaced by software, and you don’t want to be the one with the job—you want to be the one who owns the software.
There was a 61-year tenure for an average firm in 1958 on the S&P 500; it narrowed to 25 years in 1980—to 18 years now. At the current churn rate, 75% of the S&P 500 will be replaced by 2027.
The moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way.
The premise is pretty straight forward: you find someone that is doing what you would like to be doing in five to ten years and cut them a deal: “I’ll come work for you for relatively cheap and I’ll create results you would normally have to pay a lot more for, in exchange I get to train at altitude. I get to see the inside of how your business works: how you launch products, what the industry looks like, and who I need to know.” Instead of playing with your own money (like what you would need from consulting, a job, or savings), you play with house money.
While credentialism was an effective system for teaching people to operate effectively in the complicated domain—one where good practices can be measured and cause and effect can be correlated—it hasn’t proved an effective system for teaching people to operate in the complex domain.
Instead of paying six figures to go to law school or get an MBA, you can get paid to learn skills and build relationships valued by the marketplace. Apprenticeships are also an astoundingly good value right now.
Many people think free work or unpaid internships are exploitative, but find the idea of someone taking out a quarter million in debt to get a college degree and an MBA a smart investment.
All the profit margins in business increasingly go to the individuals doing the innovative, creative, entrepreneurial work.
You are now sitting at a nexus where your cost basis is very low, but your profits are very high if you’re an entrepreneur.
Most self-funded startups, entrepreneurs, and businesses are disappointed by 20% annual growth in the business, while most people with jobs are grateful to get their 3% annual cost of living raise.
While these companies are certainly outliers, the phenomenon is true on a smaller scale as well. I’ve spoken with dozens of business brokers selling smaller companies in the five- to seven-figure range and none of them can keep up with the demand from buyers in small, growing companies.
The scarce resource is entrepreneurship, and individuals with money and capital have realized this, and are willing to invest far more in entrepreneurs and what they create, than in employees.
Instead of choosing from a set of available options, we can create our own. It’s the triumph of design over choice. Instead of ordering from the menu, we are more empowered than any prior generation to become the cooks.
When we treat work as jobs, as an obligation, a disutility, something that has to be balanced, the inherent tendency to grow breaks down.
We are naturally predisposed to be growing, goal-seeking, striving creatures. By following that impulse we can create more valuable work.
If you look at someone five years ahead of you professionally, like looking down the hallway at an office, is that someone whose life you want?
While the expansion in freedom and wealth that’s taken place over the last few centuries is remarkable, it pales in comparison to what we’re going through right now.
- Democracy expanded the power to choose our leader,
- Corporations expanded our power to choose our employers,
- Entrepreneurship expands your power to design your life.
We do not have the luxuries of their generations. No president will call you up to your destiny as they may have your great-grandparents or grandparents; no CEO will lay out the path for you. Fifty years from now, as you look back on your life, the story you have to tell will have been one you alone have written.
Marc Andreessen’s first rule of career planning: Do not plan your career. The world is an incredibly complex place and everything is changing all the time. You can’t plan your career because you have no idea what’s going to happen in the future. Trying to plan your career is an exercise in futility that will only serve to frustrate you, and to blind you to the really significant opportunities that life will throw your way.
The second rule of career planning: Instead of planning your career, focus on developing skills and pursuing opportunities.
Amara’s Law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. The same is true of ourselves. We dramatically underestimate how much we can get done in two or three years, but overestimate how much we can get done in a day or a week.