Why the new employer of choice is no employer at all
How companies can compete for talent when everyone wants to work for the internet
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Where do the world’s most talented people aspire to work?
A decade ago, the answer might have been McKinsey, Google, or Goldman Sachs. But increasingly, the employer of choice for top talent is no employer at all. From creators to independent consultants, professionals of every stripe are abandoning traditional employment to work for the internet.
As of 2021, 70 million Americans consider themselves freelancers. By 2028, that number is expected to be 90 million, which will make America a majority freelance nation.
This trend presents yet another challenge to the talent models of traditional employers. Companies are already reeling from a wave of resignations catalyzed by burnout and exacerbated by mandates to return to the office. Meanwhile, America is in the middle of a serious labor shortage that is only getting worse due to shifting demographic trends. The viability of independent work will only make this situation harder.
It is risky for a company to lose or miss out on top performers. In most companies, value creation follows a power law where a small number of employees are responsible for a disproportionate amount of organizational output. This is one of the most replicated findings in management research, and is truer today than at any other point in history. As the Wall Street Journal reported:
One top-notch engineer is worth “300 times or more than the average," explains Alan Eustace, a Google vice president of engineering. He says he would rather lose an entire incoming class of engineering graduates than one exceptional technologist. Many Google services, such as Gmail and Google News, were started by a single person, he says.
Traditional employers need to confront the reality that the internet is and will be their biggest competitor for top talent. Regardless of whether a company is fully remote or hybrid, every organization is at risk of having its top people poached by the seductive draw of independent work. To adapt to this new reality, companies will need to understand the benefits and drawbacks of going independent so they can build an employee experience that allows them to remain competitive in the war for talent.
Why the internet has an edge in the war for talent
The internet dissolves the barriers that prevent top performers from capturing the value they create. Whether it’s uncapping the amount of money they can earn, the status they can achieve, or the autonomy they have over their work, the internet removes limitations. It does this by, as Dror Poleg writes, “matching us with the exact people — fans, customers, employers — who value our unique combination of skills and characteristics. It enables each of us to become a superstar.”
If the internet could post “help wanted” ads, here are a few of the core value propositions it might use to poach top talent.
At traditional companies, an employee’s compensation is only loosely correlated with the value he or she creates. Compensation decisions are typically made during the hiring process, based on factors like pedegree, geography, and seniority and only revised incrementally.
Compare that to a newsletter that increases your income with each new subscriber or a game that pays you to play. On the internet, the more value you create, the more money you can make.
This promise is particularly enticing to high performers who recognize that no matter how much they are being paid by their traditional employer, they are likely being under-compensated compared to what they could make on their own.
Earning status on commission
The internet also removes the barriers that prevent employees from gaining status.
To illustrate, picture a typical high-performing tech employee. He might earn status through a shoutout at all-hands, a high-profile project assignment, or the occasional title bump. In the very best scenario, his status might increase once or twice per quarter.
Compare that to employees of the internet who can spend as much time as they please gaining status on social platforms. There is no manager limiting how quickly they can rise. The only bottleneck is their own ingenuity and effort.
Much like commission-based sales reps who watch their income grow with every dollar of revenue they bring in, the internet motivates its employees by allowing them to earn status on commission.
Online status also tends to be more valuable than the prestige that employees can earn at work. For example, while getting promoted to Director might be impressive to co-workers, it won’t mean much to people who haven’t heard of your company. On the other hand, one hundred thousand followers on Twitter just might.
Choose your own adventure
Of all the features that internet employment offers, its killer app is freedom.
Each of us has a fixed amount of time on this earth. Time is our scarcest resource; it is that precious thing we cannot purchase or hoard. The internet gives its employees absolute autonomy over how to spend their time by letting them decide:
When to work
What projects to pursue
Who to collaborate with
Which tools to use
Where to spend their working hours
Those who choose wisely can exchange the money they earn for even more freedom to design their ideal way to work.
The downsides of working for the internet
Of course, working for the internet has its drawbacks.
For starters, social media (the internet’s great water cooler) is designed to inflame our anxieties. It does this by exposing each of us to the winners of whatever professional game we are playing. This can leave even the most successful people in a state of lingering insecurity about their place in the pecking order. Dror sums up this sentiment nicely:
“There is a certain percentage of people every year who are going to make more money than ever before, but whoever belongs to that little pool of people is going to change constantly. It’s going to be a very cruel and anxiety-ridden world even for the most successful people.”
This isn’t simply status anxiety. Independent workers also lack the protection of employer benefits and the predictability of a steady paycheck. Without this safety net, workers are partiuclarly suceptable to unexpected shocks like unexpected illness or a negative change in financial circumstances.
These concerns are reinforced by the power large tech companies possess over users’ ability to communicate with their audiences. Platforms like YouTube, Twitter, and TikTok can (and do) ban users with little to no explanation or formal appeals process. In fact, they don’t even need to kick a user off to limit their reach. With shadow banning, platforms can make any user’s content virtually undiscoverable. For employees of the internet—whose very livelihoods depend on reaching potential fans and clients—these opaque punishments can have material consequences.
This precarious way of working has a way of burning people out. Unlike a traditional workplace, where employees can take a paid vacation or mental health leave, many independent workers feel they have no way to take a break from the treadmill. This can transform an activity that was once a passion into a grind. As YouTuber Olga Kaytold Fast Company in 2014, “If you slow down, you might disappear.”
How companies can compete for talent
Few companies can match the autonomy and opportunity that accompanies independence. But that doesn't mean employers can’t create equally compelling experiences for their people.
For example, creator monetization platform, Gumroad has architected an employee experience that prioritizes “freedom at all costs.” As a result, the company has no meetings, no deadlines, and no full-time employees. This gives Gumroad employees the freedom to work in ways that meet their lifestyle preferences.
More freedom is just one strategy companies are using to adapt. Here are three other ways traditional employers can adapt their employee value proposition to compete with the internet.
Create community among your people
On the internet everyone is replaceable; that doesn’t need to be the case at your company. While the meme of employees-as-family has fallen out of favor, the workplace can be more than a collection of transactional relationships.
What makes a workplace special are all the informal roles employees play outside of their job. There’s the analyst on your team who’s great at planning social events or the designer who always makes sure birthdays get celebrated. These roles create community and give employees a sense of belonging. This feature of work is worth doubling down on, particularly as many companies go fully remote.
To do this companies should take community building as seriously for employees as they do for their customers. That means taking cues from revenue-generating communities that manage to get their members to renew and refer others. When architected right, community initaitives like these can make a workplace irreplaceable.
Give your employees leverage
Most employees spend too much time doing work that is below their pay grade. From booking meetings to filling out expense reports, these activities add up and eat away hours that could be spent on high leverage work or at home with family.
While few employees will waste their social capital complaining about these things, companies ought to look for ways to eliminate menial tasks so every employee can spend more time in his or her zone of genius.
Unlike at a traditional company, independent workers have a hard time gaining enough leverage to multiply their output. This is a weakness employers should exploit. While Google’s corporate concierge program may be an example of the excesses of Silicon Valley, it is nevertheless a great way to clear low leverage work off the plates of top performers. Companies could also invest in building teams that are fully dedicated to automating the routine tasks of top performers’ jobs.
While these perks may seem lavish, they are a small price to pay for winning the hearts and minds of outlier employees.
Benefits that matter
Beyond perks that provide on-the-job leverage, companies should also invest in offering the type of benefits that independent workers cannot access. These should include benefits that both create lasting economic mobility and increase the quality of employees’ lives.
Last September, I wrote a post that laid out eighteen elements that are necessary for people to build satisfying and prosperous lives, what I called “The Minimum Viable Good Life.”
Forward-thinking companies will increasingly build or buy solutions to help employees take care of these essential challenges.
For example, Guild Education, the company where I work, created its own early childhood education center, called The Beehive, which has been key for attracting and retaining employees with young children. Meanwhile, investment firm Stone Ridge has a policy to support employees who suffer the loss of a family member:
If a family member of any employee passes, our team of administrative assistants collectively spring into action to help with the travel logistics, if any, for the employee, and anyone in their immediate family, to attend the funeral. The firm also insists on paying for all travel and lodging expenses for all family attendees. Consider a non-executive Stone Ridge employee that grew up in a faraway war-torn country with a large immediate family, raised solely by his grandmother, who had just passed. Our policy could be (and has been) the difference between he and his entire family being able to pay their final respects in person, or having to pick and choose who gets to go. While, of course, not the reason for the policy, the private letters I’ve received from impacted family members afterwards are among my most treasured possessions.
Benefits like these not only retain talent but also serve to reinforce the communal aspect of working for a company.
If you can’t beat them…
As work has gone virtual, many people have gotten the chance to try working for the internet. People started side projects, tried out freelancing, and built audiences on social platforms. These activities gave many a taste of independence that they are still craving.
Employers that disregard this preference will spend the coming decade fighting an uphill battle as they lose or miss out on top talent.
That doesn’t mean every employee will or should go independent. While working for the internet can be rewarding, it can also be an isolating experience, with little room for error.
To win tomorrow’s war for talent, companies will need to construct new types of employee experiences. The best ones will blend the freedom and opportunity of working for the internet with the scale and community of traditional employment. While this may mean making big changes to the way we work, it will ultimately serve to benefit us all.
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Until next time,
Thanks to: Ashley deWilde, Charlene Wang, Crystal Camarao, Fadeke Adegbuyi, Rhishi Pethe, Sean MacMannis, and Tom White for providing feedback on early drafts.
I am obsessed with the Gumroad model. I know that when I leave my job, it will be for a part-time, contract one. Unfortunately there aren’t many of those on the market yet. Though there is some desire on the part of employees for things to go in that direction, I wonder if the Microsoft report (and others) will be proved wrong by employees who may want to quit for a fully remote contract position, but won’t be able to find those kind of jobs on the market.
There still seems to be a disconnect between what the employees want and the employers want. Barring waiting for a Gumroad position to come up, right now our only options are to try to negotiate a full-time job into a contract one or to start something on our own, which that one unicorn engineer might be able to do, but the rest might have some difficulty doing.
The case for using hourly contract workers over full-time ones is a good one, but I wonder whether it will be adopted into the mainstream?
Thank God I could afford to retire early. I've had my fill of months long hiring processes that go nowhere, HR fads like "structured interviews." No, I can't tell you about a time when, because your question is a bullshit fad question. That's even if someone calls you back. I DON'T BOTHER APPLYING FOR W-2 JOBS ANYMORE BECAUSE THE HIRING PROCESS IS SO BADLY BROKEN AND SO MANY COMPANIES HAVE SHIT MANAGEMENT.