The More Success You Have, The More You Can (and Should) Hire Appropriately-Rated People

Talent markets tend to be efficient. In a given industry, great people are in high demand and command high salaries commensurate with their value, and bad people are in low demand and receive low salaries.

Of course, there are plenty of inefficiencies. We all know amazing people overlooked by employers for whatever reason. I’ve written about some of the “tells” of underrated people — for example, people who are especially bad at self-promotion, physically unattractive, socially awkward, etc. Auren Hoffman has a great list too of traits that signal underratedness.

Early in one’s entrepreneurial career — as you start companies, recruit people, corral support for your various projects — your only talent strategy option involves “talent arbitrage”: finding underrated people. You don’t have much money or status, so you bargain shop to find deals: people who provide outsize value for their cost.

I believe an important evolution to go through as a talent manager is to recognize when it makes sense to not default to prioritizing underrated people. When you have money and status, you can actually pay what it takes to get people who are “appropriately rated” on the open talent market.

Two reasons why you seek appropriately rated people:

1. Lower variance. Talent markets generally rate people accurately. High priced people are more reliably of the quality you expect. “Underrated” people can work out spectacularly from an ROI perspective but in my experience they can backfire more often, too.

2. Speed. The more successful you are, the higher your opportunity cost of time. So speed of process becomes relevant. It’s usually faster to partner with or hire people who are appropriately priced vs. scouring the earth for the hidden gem. This is especially the case if you’re hiring within a team and need to convince others of a given candidate’s abilities. Underrated people are by definition not obvious, which includes not obvious to your teammates whose buy-in you seek.

The recruiting strategies of startups vs. big companies illustrate this point. When a startup is looking for an ML engineer, and can only afford to pay the person scraps, they might find the college dropout who’s mostly self-taught but wicked smart and, of course, cheap, because Google doesn’t know he exists. When Google is looking for an ML engineer, they might make offers to all the PhDs coming out of Stanford’s CS department. The Google approach is more expensive, but more likely a reliable (not perfect!) filter for high talent, and certainly a lot faster. This is an imperfect example because what a company like Google needs in terms of talent make-up differs from what a start-up needs (e.g. hustle). But the overall point holds nonetheless, I think.

Now, the amount of success necessary to switch from “hire underrated people” to “hire appropriately rated people” can vary based on industry, functional area, etc. To take an extreme: If you’re a tech startup recruiting software engineers, even if you’ve raised a Series C and have breakout success — you might still need to employ a talent arbitrage strategy and hunt for underrated gems, because you’re still competing against enormous Google salaries.

Admittedly, this overall idea may not be earth shatteringly novel: it’s consistent with how humans generally approach consumption as their wealth increases. But it has special importance when you’re on a team or building an organization. The normal “life” pattern is that the broke college kid shops when things are on sale and the rich middle aged adult ignores discounts and shops when convenient. Some billionaires never kick their frugality habit in their personal lives. It can be irrational at times, even amusing, but it’s a personal decision. However, when talent managers fail to kick their “underrated” talent strategy even as their company or team obtains greater and greater power, it can be detrimental to the success of their overall organization. They’re missing out on reliably high quality people and they’re likely moving too slowly.

Bottom Line: “Talent arbitrage” of targeting underrated people is a necessary strategy in the early days as a talent manager. As you get more and more successful though, it makes sense to relax into the wisdom of the market, and cultivate a habit of hiring appropriately rated people.

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A somewhat related, somewhat unrelated idea: I remember in my youth thinking I’d never spend more than X dollars on a piece of clothing or a meal or whatever. I simply could not understand why someone would spend $120 on a pair of jeans or $300 on a dinner. Now that I’ve had some outrageously expensive meals and few other expensive goods or experiences, I can see the appeal. I’m not just talking about the signaling benefits of conspicuous consumption. I’m talking about genuine appreciation for a product or service or experience that’s absolutely world class in quality.

Sometimes the attributes that makes a product, service, or experience world-class are subtle. The marker of a luxury hotel is usually not a flashy lobby; instead, it might show up in how the cleaning staff cleans and organizes your toiletries during housekeeping, and in a hundred other ways like that.

Is there a similarity here with “high end” talent? Do really expensive talent sometimes possess characteristics that are harder to appreciate from afar, but once you’ve worked with “the best” you realize just why these sorts of people are paid so much? In the same way that high end food and drink tend to stand out in subtle ways, the traits of high end talent may also be more subtle than something as blunt as years of experience. I’m thinking of traits like poise, emotional stability, genuine humility, a hard-to-describe “it” factor that causes other people to want to follow him/her, etc…

(Thanks to Auren Hoffman for reading a draft of this post.)

Leap When You’re Almost Ready

“Jump out of the plane on my count, at 5. Ready?” the sky diver instructor says to you, a nervous first-time customer, crouched in a tiny Cessna plane flying 10,000 feet above the air. You are pulsing with adrenaline. Wide eye fear.

“Ok,” you say, unconvincingly. “Ready.”

The instructor kicks open the door to the plane. Air rushes through the open door and the aircraft rattles a bit in the sky. Fear turns to panic, as every fiber of your body — everything evolution has taught you — says to not jump out of an open aircraft.

“1, 2, 3…”

Then, on the count of 4, the instructor jumps the gun. You think you have one more precious second to change your mind. But he’s already pushed you out the airplane. And away you go.  This way, there’s no time for you to change your mind at the last minute.

Although I’ve never sky dived, I’m told this is not an uncommon technique to use with first-timers who sometimes experience last minute panic cop-outs.

And it reminded me of a great insight from an acquaintance, delivered on summer day a couple years ago in Berlin.

I asked him if he felt ready to have kids when his wife gave birth. He replied, “I wasn’t ready. But we were almost ready to have kids. Almost ready. You’ll never feel fully ready.”

This is a truth in so many things, isn’t it?

Don’t start a company when you feel ready to, because you’ll never feel ready. Start a company when you feel almost ready.

Don’t marry your boyfriend or girlfriend when you feel ready, because you’ll never quite be sure. Marry him when you feel almost ready — when you’re almost sure he’s the one.

Don’t take the job that you feel fully prepared for. Stretch yourself. Push yourself. Take the job you feel almost ready for.

“Almost ready” is similar to The 80% Rule persuasion hack. Ronald Reagan argued that you don’t need someone to agree with you 100% for them to be “with you” — you just need them to be with you on 80% of the issues. That’s usually enough for them to pledge their support.

The 80% Rule applied to yourself would mean you don’t need to be 100% sure of a decision for it to be the right decision. You need to be 80% sure — or, almost ready.

Otherwise, if you’re lucky, a coach or mentor will be around to interrupt your deliberating and doubt and procrastination — and push you out the airplane before you realize what’s happening!

How Much Does Passion Matter When Founding vs. Joining Something?

When you’re starting a company you have to be passionate about the problem you’re solving. That’s a truism of entrepreneurship. You’ve got no customers, no employees, no activity: You better hope that the vision you hold in your heart is one that keeps you excited through all the days (and years?) of little progress.

When you’re joining a company as an employee, by contrast, passion for the problem the company is solving is less important — assuming the company already has some traction, which is a fair assumption given the company has the cash to hire you. Why? Because anything at scale is interesting. You can take the most boring, back office piece of enterprise software and if you tell me, “Millions of people use this every day” or “50 companies are paying millions a year to use this” etc. then I’ll become interested. Heck, if you pitched me on joining a trash pickup business like 1-800 Got Junk and you said they’ve got 200 different locations and are doing tens of millions a year in revenue — I’m potentially interested. Ideally, the business mission also aligns with something you’re personally passionate about, but it’s not necessary.

Bottom Line: When you’re founding a company (or joining a super early stage company), passion for the problem the company is solving is critical. When joining ventures that already have velocity, other factors — like the quality of your co-workers and the culture of work that’s been established — matter more, because anything at scale becomes interesting.

How One of Twitter’s Largest Shareholders Launched His Career

With Twitter’s IPO, the press is publishing glowing profiles of the company’s executives and early investors. The praise is well deserved. But it can be easy to forget, amidst the write-ups of all the wealth that’s been generated, that the bright minds behind Twitter were not born geniuses or born successful. They had to hustle to get where they are.

After all, co-founder Ev Williams was born a Nebraska farm boy. Co-founder Biz Stone was raised on food stamps. Co-founder Jack Dorsey battled a childhood speech impediment and grew up in middle class St. Louis.

Or consider my friend Chris Sacca. Today he is one of Twitter’s biggest shareholders and has served as a longtime advisor to the company. He’s an active angel investor. Previously he worked as head of special projects at Google.

But not so long ago, Chris was an out-of-work attorney in desperate need of income to help him pay off his student loans from law school.

Chris began sneaking in through the back door of networking and tech industry events, utilizing his Spanish-language skills to smooth-talk the workers in the kitchen to let him in. Once he was at the event, he realized that handing his new acquaintances a business card that listed only his name — and no employer — wasn’t impressing anyone.

So he hatched a clever plan to boost his credibility at the events he attended: create a consulting firm and employ himself there. He made new business cards, hired a developer to build a website, and enlisted his fiancée to draw a corporate logo. Then he returned to the same networking events with new business cards that read, “Chris Sacca, Principal, Salinger Group.” Suddenly, the people he met were interested in talking more. Through these connections he eventually landed an executive job at a wireless company, and his career took flight.

Sneaking in the back door of networking events toting business cards with a made-up company name to seem marginally more impressive so people will talk to you? Yup. Every great entrepreneur — or investor — displays extraordinary hustle and resourcefulness and ingenuity. One of my favorite examples in Silicon Valley is Pandora founder Tim Westergren, who pitched the company to over 300 VC’s before receiving any funding. We profile him in The Start-Up of You.

Hustle is hard to deconstruct; it’s not something you “learn” like you would accounting or public speaking. It’s more a state-of-mind that develops — or doesn’t develop. I’ve found the best way to develop a readiness and enthusiasm to hustle is to read stories of people like Sacca and Westergren and be inspired by all the little things they did to get to where they are. Especially when they’re in the headlines and it all seems preordained. It wasn’t. And that’s inspiring.

LinkedIn’s Series B Pitch Deck to Greylock

Reid recently published the pitch deck he used to raise money for LinkedIn in 2004, when it didn’t have a dime in revenue, from Greylock Partners. Alongside the original slides, he includes historical context and relevant pitch advice for entrepreneurs. It’s a treasure trove of information. Mandatory reading for anyone raising money from VCs, or anyone looking for context on the amazing company Reid co-founded. In a separate post, he also summarizes more briefly his top overall lessons on pitching VCs.

Special thanks to Ian Alas on our team who spent several months working on this. It will go down as a piece of Silicon Valley history.