Six years ago I left a lucrative engineering job at Google to work for a startup, despite getting a few quick promotions there and a level of compensation that I have yet to reach again. At the time I didn’t have a framework to explain this decision to myself, let alone to anyone else. All I had was a feeling that something important was rotting.
There’s a movement called FIRE (financial independence, retire early) that presents this simple analysis of what you need to survive in the world. Take your yearly financial burn rate X and your present net worth Y. If you can generate more than X every year by investing Y, you have achieved Financial Independence. You can withdraw from the working world, safely insulated from the vicissitudes of fate.
This always seemed brittle to me. A job is also a source of interesting problems to work on and colleagues to collaborate with, a way to stay sharp and a call option on future work. What if a parent has an unexpectedly large medical expense, or some crisis forced us to flee the country and start over? If I had a lump of money and nothing else, would I have the flexibility to respond?
A great illustration of the money-only failure mode is this scene in The Dark Knight Returns. CEO Daggett has paid Bane a small fortune and demands to know why Bane hasn’t delivered Bruce Wayne’s company into his hands as agreed. He wants to remind Bane that Daggett is in charge.
Bane towers over him, calmly laying an open palm on his shoulder. “Do you feel in charge?” Bane asks. Daggett is shortly relieved of his misunderstanding (and his life).
If you think this only happens in the movies, take a look at Arm China going rogue.
Money is shorthand for your tradable resources. It’s the most flexible, the easiest to measure and to redeploy. Real estate, Pokemon cards, cryptocurrency, dollars stuffed in your mattress: with a bit of effort, any of these can be turned into another, or traded to someone else.
Besides money, there are two other resources to be aware of: your human capital, and personal network. Coming up short in either of these can be just as crippling as running out of money.
Human capital is your skills, your reputation and status, and your judgment. If you’re just starting your career, most of your net worth is in this bucket. This tends to be the most specialized and idiosyncratic of the three. People are “T-shaped” – very good in a few areas, adequate in a few more, often hopeless in others. That’s why you need the third resource, your network.
Personal network is the people you know and the people they know. There are two related concepts here. Friends and family are your community; they have reciprocal personal bonds with you. You help each other and cheer for each other to succeed. Along with this is a “web of trust”: people who don’t owe each other anything, but are known by each other to be reliable counterparties.
So what went wrong for Daggett? He did not have the personal judgment to know which hired gun to choose, and ended up backing a man who wanted more than money. He also didn’t have reliable connections among mercenaries that could give him referrals and assurances. In short, Daggett wasn’t a mercenary and didn’t know mercenaries, so he couldn’t hire them effectively.
Paul Graham calls this the design paradox. “You might think that you could make your products beautiful just by hiring a great designer to design them. But if you yourself don’t have good taste, how are you going to recognize a good designer?”
Still, the US Dollar is the ultimate tradable asset. We can convert it into the other two resources, if we are a bit more careful.
Converting money into human capital is relatively easy. Money buys you an education and hobbies; you can enroll in a class or hire tutors. The problem still exists – how do you recognize a good teacher if you’re unfamiliar with the field – but slowly you can bootstrap your way up. As you improve your skills, you can recognize better teachers. Money also gives you a safety net to experiment and fail while you learn.
Money can also buy you status, which is another part of your human capital. You can sponsor a social space for your community, or hire someone to take great pictures of you to post on Instagram. I think of wearing branded clothing as hiring an advertising firm to work for you part-time – after all, that’s what the brand association is doing for you. One friend suggests that “the ability to seem unquestionably upper middle class” is the most valuable form of status to have when interacting with bureaucracies or authority figures. All of this might seem a bit gross, but it’s worth being aware of the option.
Converting money directly into a personal network is a famously hard problem because of adverse selection. You don’t really want to be friends with people who only like you for your money. I’d recommend increasing your human capital first and then parlaying that into a better network.
Converting human capital into money is straightforward: get a job deploying your most valuable skill. The more interesting point is that these resources interact in a multiplicative way. If you have great skills but no one knows it, it’s harder to get a high-paying job. So the best path here is to grow out your network in parallel, so for the next job you have more options.
Nerdy intellectual types are often bitter when they learn the importance of a personal network. “It’s not what you know, it’s who you know” is the common complaint – especially when trying to leverage either of those into more money. But really it’s both. You mostly meet high-quality people by increasing your own value first, and a large network won’t help you if no one in it thinks much of you.
Money is (as always) a self-multiplier as well. If you have a financial buffer to take more time to job search, you have a better chance of finding something great. I recommend taking a few months off to dedicate to searching if you can afford it. The difference between a good job and a bad one is quite large. This is especially true in power-law dominated fields like startups.
Looking back, it’s clear to me that it was my subconscious accounting of my deteriorating network and skills that drove me out of Google. This isn’t true for everyone; certainly I have friends who have gotten a lot of personal growth and valuable connections during their time there. But it was true for me. I wasn’t working very hard, especially near the end, and my knowledge was heavily Google-centric. My professional network was weak outside of Google because no one ever left, because the money was too good.
I struggled for a while after leaving. I was missing important skills, both in technology and also in personal time management. I didn’t know how to find a good startup because I didn’t know yet who to talk to or what questions to ask. (Too long to get into here, but in short: team, unit economics, and customer acquisition costs.) This is brutal in startups because almost all of the value is created by the top 1%, so if you don’t have a way of improving your targeting you are overwhelmingly likely to be wasting your time.
What I did have was a lot of financial runway and a lot of “brand recognition” to trade on from my background and time at Google. Slowly I was able to figure out what was going wrong and patch up some broken mental models and habits.
One particularly useful form of shock therapy was starting my own startup. Needing to find customers forced me to reach out to other people and understand what they needed – the basis of any network. On the technical side, I had to do everything that I would’ve passed off to a more knowledgeable coworker in the past, from API documentation to standing up servers and setting up monitoring. Although the startup didn’t work out, a VC we worked with was able to connect me to the very promising healthtech startup that I’m at today.
Google has done very well since I left and it’s hard not to think about the opportunity cost of the salary and RSUs that I left behind. But I feel much better balanced with resources that I can count on besides just money.
The world is very weird of late and I expect it to keep getting weirder. When thrown into a new situation I try to take stock of all three of these resources and work out how to bring them all to bear. Any one alone can come up short, but together they are very powerful.