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Risk

Risk and reward are always proportionate. For example, stocks are riskier than bonds, and over time always have greater returns. So why does anyone invest in bonds? The catch is that phrase "over time." Stocks will generate greater returns over thirty years, but they might lose value from year to year. So what you should invest in depends on how soon you need the money. If you're young, you should take the riskiest investments you can find.

All this talk about investing may seem very theoretical. Most undergrads probably have more debts than assets. They may feel they have nothing to invest. But that's not true: they have their time to invest, and the same rule about risk applies there. Your early twenties are exactly the time to take insane career risks.

The reason risk is always proportionate to reward is that market forces make it so. People will pay extra for stability. So if you choose stability-- by buying bonds, or by going to work for a big company-- it's going to cost you.

Riskier career moves pay better on average, because there is less demand for them. Extreme choices like starting a startup are so frightening that most people won't even try. So you don't end up having as much competition as you might expect, considering the prizes at stake.

The math is brutal. While perhaps 9 out of 10 startups fail, the one that succeeds will pay the founders more than 10 times what they would have made in an ordinary job. [3] That's the sense in which startups pay better "on average."

Remember that. If you start a startup, you'll probably fail. Most startups fail. It's the nature of the business. But it's not necessarily a mistake to try something that has a 90% chance of failing, if you can afford the risk. Failing at 40, when you have a family to support, could be serious. But if you fail at 22, so what? If you try to start a startup right out of college and it tanks, you'll end up at 23 broke and a lot smarter. Which, if you think about it, is roughly what you hope to get from a graduate program.

Even if your startup does tank, you won't harm your prospects with employers. To make sure I asked some friends who work for big companies. I asked managers at Yahoo, Google, Amazon, Cisco and Microsoft how they'd feel about two candidates, both 24, with equal ability, one who'd tried to start a startup that tanked, and another who'd spent the two years since college working as a developer at a big company. Every one responded that they'd prefer the guy who'd tried to start his own company. Zod Nazem, who's in charge of engineering at Yahoo, said:

I actually put more value on the guy with the failed startup. And you can quote me!

So there you have it. Want to get hired by Yahoo? Start your own company.


The Open Cage | Essays | The Man is the Customer