In Megan McArdle’s most recent post, on the gap between the jobs that millennials want and those that are available, she nibbles around the edges of an important insight without apparently realizing it:
Millennials don’t want to work in sales, reports the Wall Street Journal. They think it’s exploitative. They also hate the idea of variable compensation; they want a nice, steady job where the company takes the risk, not the worker.
The insight is not that millennials don’t want to work in sales. It’s that they are risk averse. That explains a long list of issues including the very low rate of new business formation.
Who bears the risk? That’s a question that underpins a lot of the pressing questions before us from healthcare to education to foreign policy to the nature of work. Companies aren’t training their employees because they want to offload that risk onto their employees; people aren’t moving for jobs they way they used to because they don’t want to bear the risk. The UAE has stopped participating in the bombing runs against DAESH because they think the risks to their pilots are too great. That’s also the issue behind President Obama’s plan for funding higher education: he wants to offload the risk from the millennials to somebody else.
Before you ask me to bear your risks, the very first question you should ask is what’s in it for me? I already know what’s in it for you.
Everyone sells in one way or another.
I can only speak from personal experience but I’d say companies still do a tremendous amount of training. It obviously varies by degree or craft but very few are productive straight out of school.
Risk? Oh boy. Everyone wants the glory and benefits. Few are willing to take the risk. That’s why so many re-frame the issue into “fairness.” That’s code for I want the benefits of your risk, work and talent………
Although it will never happen, this topic seems like the right place to launch discussions of public policy. At what points currently does policy separate risk from reward, and when does that result in a net positive public good? And the converse, in what ways is government not taking on risk where it could do so without incurring excessive moral hazard?
I could get the ball rolling by pointing out that the ultra-rich, among which I’d place large, established companies—the GEs and GMs of the world—aren’t in the risk-taking business but the risk-avoiding business. I see little reason to subsidize that other than that Germany will protect Bayer or Siemens, France will protect Sanofi, and so on. Think of all of those jobs!
What that misses was once characterized as “the seen and the unseen”. We can see GE but we can’t see the businesses that GE is crowding out. If I were king, I’d look much more critically at government-bestowed franchises and monopolies than we do now. I’m astonished that the brave anarcho-capitalists are rallying to the defense of the cable companies of all people in the name of free enterprise. Forsooth!
A very good start. Wouldn’t it be refreshing if politicians started talking this way (or being forced to do so?) people would still try to obscure the debate but it would be a lot harder to do if issues were framed this way (“Who benefits?”)
That is quite an original insight. I never thought of it in those terms. I will need to consider it and the implications, but it will take some time.
My thought process requires me to evaluate new concepts or implementations for their validity, and if I agree with them, I will need to determine what needs to be modified or discarded. This is the type of thing that can become an inflection point in my philosophy.
In the cable arena, Cox has numerous commercials about how much better it is than DSL or satellite. Getting the government involved in electrical transmission and distribution has not caused the electric companies to upgrade the grid, and I suspect the cable companies will take the same route.
Competition for land based transmission will be wireless transmission. Cell phone technology is quickly becoming a viable alternative, or cell phone companies could partner with satellite. Local WiFi technology will eventually get worked out, and that will provide an additional option.
If cable companies are forced to keep rates low, they will never develop better technology, and these alternative technologies will never have any incentives to be developed.
Cell phones originally tried the “walled garden” approach to internet access. You were limited to using internet sites that they had chosen. They were all doing it, and there were few alternatives. Microsoft had a smartphone long before Apple, but few people used it. It was Google’s Android that changed everything.
At the time it was claimed that there was no competition and that this could never happen. Now that it has happened, everybody forgets those claims.
Let the cables companies charge as much as they want, they will invite competition from areas they have not considered. Google is trying to capture the dissatisfied customers.
The obstacles are IP laws and airwave bandwidth restrictions. If the US government has developed Android, there would have been no way Apple, Microsoft, or any other tech company could derail it.
I think Dave’s comment is correct, at least in my experience, even though the risk avoidance is somewhat overstated. This is why I rail against larger regulatory authority. Dodd Frank is a tool to protect the mega-finance companies, at the expense of boutiques like mine. That wasn’t the intention, but is the reality. Ag subsidies are about the family farm and not ADM? I don’t think so.
The min wage is about a living wage for hard working heads of households and not union tie ins? I don’t think so. And who speaks for the guy who,loses his job?
Who really won in ObamaCare, the device and pharma guys. There was no other way to deal with a worthy goal – solving pre-existing condition issues? And let’s get real. The portability issue has it’s roots in government dictated wage policy from more than 60 years ago. More govtbto fix old govt created problems.
Cable? If you ever get down to Naples, FL take a ride down Gordon Drive. On the gulf sits a home that looks like two giant hotels. It’s owned by the guy who was awarded the monopoly, er, rights to cable in NYState. Sold the cable business awhile back for billions.
With big government, big regulation and big subsidy today comes big profits for the politically connected and contributors. Take a look at trial lawyer contributions. And yet, a few clicks up the dial at this place called OTB you will find 50-150 comment long threads with people decrying wealth, while at the same time advocating more government that can be bent, folded, spindled and mutilated by and for the very people they complain about. Some might say its insanity.
How can you talk about risk w/o mentioning reward? (And I’m not even the finance guy.) There are a number of things about my new hires that bug me. They all want to get off early, or at least on time, and still make lots of money. Too bad. Sometimes things go south and you end up staying till midnight. It won’t kill you. If you need to go to every dance recital, go get a 9-5 job. That, plus walking on my lawn, drives me crazy.
But on risk, while I think there is some truth to what Megan says, I think there is also the perception that there won’t be much reward for risks taken. I think they may be right to a large extent. Positions change and fold so quickly today that risking tons of effort is more likely to be wasted when the company just goes overseas or gets downsized when the PE vultures (dig) come in. Unless you come from the already privileged class your chances of winning the big prize aren’t that good. Look at the 2000s when the big money was in finance. You got there by going to Harvard and Princeton. You got there by having the right parents. So, if you want these folks to take risk, and we do, you need to make sure there are rewards.
Steve
I have a lot of experience with a subset of millennials – those who join the military reserve. I wouldn’t call them risk averse, but almost all are focused on school and I think that may be part of it. The dogma of education and a degree as the key to financial success in life is, I think, a factor as well. The key question is what will happen when this generation reaches a tipping point and realizes its been sold a lemon?
Additionally, I think this ties into the “opportunities” post. Ok, millennials don’t want jobs in sales, but who does? No one I knew growing up wanted to be in sales yet many ended up there and the reason was because that’s where the money was for them and they were good at it. Is there money is sales today? I doubt it.
Third, I’m not so sure the lack of business formation can be chalked up to risk avoidance. Before reaching that conclusion I’d like to know about other potential factors such:
– Is it easier or harder to create a new business today?
– Is the long-term success rate greater or smaller?
– Is it easier or harder to get a loan to start a business?
– What is, for the lack of a better term, the “market” for new business and what is the competition? 40 years ago we didn’t have the internet and Wal Mart and Amazon, to name two examples. I suspect it’s harder to create business with a geographical niche/advantage than it used to be.
Would you accept a contributing factor? Add up enough contributing factors (like less disposable income than the previous three generations had at their age) and you have the beginnings of an explanation.
I do think it’s a factor, but I think it’s important to understand why. Is it something inherent in the culture of the generation or is it the natural product of other factors. And as Steve pointed out, you have to look at risk-reward, not just risk. If the rewards are paltry then the effect is less risk-taking.
… I think there is also the perception that there won’t be much reward for risks taken. …
That is a risk as well.
Rarely are the upsides and downsides guaranteed. Usually, these are crap shoots as well. You may win, but the prize may be a bag of crap. It is a risk.
Unfortunately, no matter how risk-friendly and entrepeneurial you are, you still have to participate to the hilt in risk-averse gummint programs like Obamacare, Medicare and Social Security. I have calculated that the young man of 21 who forgoes Obamacare premiums and taxes as well as FICA payroll deductions and invests those expenditures instead in the S&P 500 will emerge at age 65 with over $7M in the bank, and that’s money that goes to his heirs when he dies.
Compare with Social Security, which evaporates when you die except that indolent, non-workers such as your housewife and minor or college kids get some benefit, as do long-ago and recently divorced wives.