I noticed a trend of smart friends work for companies like Uber, Shopify, and Airbnb. This migration gave rise to the thought that such tech companies might be throwing money at lower-quality assets. These tech companies buy and develop assets (i.e. people). The people build software and systems that allow the company to operate. That’s what most of their operating costs are for. 

It’s become apparent that their success tends to draw greater operating costs per unit. You see, my friends who choose to join these companies were people in prestigious jobs. They were in top consulting or finance firms or advertising giants (e.g. Google, Facebook). 

People from these companies are demanding. They’re smart so they will find ways to game the system, that’s how most succeeded throughout life. They’ll try to cut their works hours down to 10 hours a week. Yet they'll demand higher pay than their previous prestigious jobs.

Now, this brings to question this notion of quality. I’m not saying my friends aren’t smart or capable. They are. But the quality of employees is not correlated with intelligence or the ability to jump through society’s achievement hoops. It starts with intent—or simply the motivation.

A commonality in friends and acquaintances who work at “fast-growing tech” companies is that they work less and are paid a higher hourly rate than past jobs in banking, consulting, etc. But that’s at the crux of their decision. 

None are ‘passionate’ about the company itself. Sure, they are down to solve ”cool” problems. They get to be part of a company that has products used by all. But that’s no different from the same prestige factor, the fact that people around them will be jealous of and respect them for their place of employment. 

The overwhelming sentiment is that these companies are a great way to get paid a fat sum for all the hard work they put in during their past roles in consulting and banking years. It’s them realizing the dues they are owed. After all, that’s the promise that’s sold in such professional factories. 

Jobs like banking or consulting—or any other professional service or large company training program—are accepted as launching pads to “bigger and better” things. Most are there with the expectation to look for the next exit opportunity. So, when they exit, they will be looking for everything they thought they were promised: a chill 40hr work week, great pay, great benefits, etc. 

Yet, most will not be able to escape the treadmill mentality. That’s why they joined the hot fast-growing tech company all their parents and friends would know. The kind that isn’t truly fast-growing but only appears to do so in the realms of the public markets. They are companies that have no risk in terms of an employer brand perspective. 

That’s valuable because it will be one more launching pad for the next best thing for these exit-option hoarders. These jobs at Shopify, Spotify, and Somethingify become one more brand to leverage for bigger and better things in the future like a prestigious MBA or some other job they haven’t thought about.

They aren’t there to devote their lives to solving some cause. They would leave in a heartbeat if they got a higher offer from a more prestigious place. They are not sticky employees. That’s what I’m getting at. 

Forget how sticky the customers are for the company, think about how sticky the employees are to the company. Is the company capable of retaining top-notch employees? Or are they hiring a bunch of ambitious people who feel they are entitled to two-year promotion cycles that show “upward mobility” when the titles have no substantial value other than how the world outside will view them? 

These employees will leave as soon as the shiny things run out. That’s because their selection process didn’t include anything deeper. It was a shallow relationship. With apps aiding in the turnstile operation of shallow relationships, the same level of turnover is now an expectation for these companies. 

At the end of the day, this becomes a massive waste of time and money for the company. What’s the point of hiring people expecting them to move away in a few years? Nothing substantial can be built in such a short period of time, even if the company thinks they are agile and lean—that still requires a certain duration of time to implement over and over again for it to be effective. 

Turnover is a huge cost. It kills any depth to the company’s bench of people. Such a bench is crucial for the company to be able to weather the hard times. It’s also crucial in good times to really push down and attack. This employee turnover problem is a result of low-quality employees. 

As I said earlier, I’m not referring to the employee’s ability or competence when I say low quality. Most of my friends in such scenarios are smart, intelligent, ambitious, and hardworking. But it’s the attitude. 

It’s the attitude where they believe they are entitled to all the best things when they aren’t willing to give their life and soul. I’m not saying one should be willing to give their soul for a job. But this is a trade and if you aren’t willing to give it your all, why should a company give you its all? 

Low-quality employees are those who’ll think “You can’t talk to me this way because I’m worth XYZ” when in reality not a single one of them are worth anything to the company. They could be fired with a snap of a finger and another ambitious kid infatuated with brands could be hired to replace them. For the most part, they are non-essential and replaceable. 

The world is full of smart, ambitious, and hardworking people. The rare ones are those who are self-aware enough to know why they are working for a specific company in a specific role. Unpopular, smaller and niche companies have a better chance of identifying this truth.

That’s what I question when I look at the operating costs of these fast-growing companies. I look at their operating line and I know that includes the ~$200k paid to a friend who has a fancy title who works 10-20 hours a week and plays video games while pretending to be online. It’s my anecdotal observation that these scenarios are the norm, not the exception. 

Investors squabble over the quality of customers companies have and how not all retention numbers are equal. The same is true for employees and the operating costs in the financial statements. Not all these costs are equal. Just because they are investing more in operations and R&D, does not mean that each dollar has the same value as other companies. 

Looking at the intention of those who are attracted to successful and fast-growing tech companies, the success of the company appears to be inversely correlated to the quality of employees they attract. Therefore, each operating dollar will yield lower returns going forward for most. 

I think young companies with no prestige have a better chance of bringing in higher quality employees. Now, the lack of a brand and track record can bring in all kinds of unambitious lazy folks. But the scarcity in finances will make hiring matter and longevity of the asset will become a priority for these companies. 

That means the few who appear to be overqualified for the company may actually have high-quality intentions. That makes me believe the operating costs of these companies are better positioned to yield higher returns.

It’s my view that people who genuinely find a place that allows them to work on the work they love—I’m talking really love…not something that’s societally and socially acceptable as being cool—then they will stay for a long time. I’m talking about the kind of place where people can be entrepreneurs and have ownership within the organization because some people want the safety of an employer and that’s just how they are wired. 

So, when I hear some psychologists who never worked in a corporate environment blabber about some generational mentality that makes people of some generation quit jobs every two years, I think they are completely misguided. They’ve failed to look at the companies and the people they attract as the problem and chose to blame something else and make it fit their cause and effect formula. What do companies expect will happen when they hire low-quality employees? 

Now, maybe I have it wrong. Maybe the point of these already dominant companies is to not hire people who will shake things up. Maybe they want to hire people who will refine existing processes, maintain the status quo and not blow up the smooth sailing ship. 

If that’s the case, then they just might be acquiring the kind of quality assets they want. But I don’t see how this can be good for their longevity if they aren’t willing to reinvent themselves. Maybe they want hard workers who will demand more for their efforts and want to coast through their life at the company. 

I was once a low-quality employee. I still will be to some firms. I will try my best to stop myself from committing this error. But it’s all too alluring at times.