August 2005Thirty years ago, one was supposed to work one's way up the corporateladder. That's less the rule now. Our generation wants to getpaid up front. Instead of developing a product for some big companyin the expectation of getting job security in return, we developthe product ourselves, in a startup, and sell it to the big company.At the very least we want options.Among other things, this shift has created the appearance of a rapidincrease in economic inequality. But really the two cases are notas different as they look in economic statistics.Economic statistics are misleading because they ignore the valueof safe jobs. An easy job from which one can't be fired is worthmoney; exchanging the two is one of the commonest forms ofcorruption. A sinecure is, in effect, an annuity. Except sinecuresdon't appear in economic statistics. If they did, it would be clearthat in practice socialist countries have nontrivial disparitiesof wealth, because they usually have a class of powerful bureaucratswho are paid mostly by seniority and can never be fired.While not a sinecure, a position on the corporate ladder was genuinelyvaluable, because big companies tried not to fire people, andpromoted from within based largely on seniority. A position on thecorporate ladder had a value analogous to the "goodwill" that is avery real element in the valuation of companies. It meant one couldexpect future high paying jobs.One of main causes of the decay of the corporate ladder is the trendfor takeovers that began in the 1980s. Why waste your time climbinga ladder that might disappear before you reach the top?And, by no coincidence, the corporate ladder was one of the reasonsthe early corporate raiders were so successful. It's not onlyeconomic statistics that ignore the value of safe jobs. Corporatebalance sheets do too. One reason it was profitable to carve up 1980scompanies and sell them for parts was that they hadn't formallyacknowledged their implicit debt to employees who had done goodwork and expected to be rewarded with high-paying executive jobswhen their time came.In the movie Wall Street, Gordon Gekkoridicules a company overloaded with vice presidents. But the companymay not be as corrupt as it seems; those VPs' cushy jobs wereprobably payment for work done earlier.I like the new model better. For one thing, it seems a bad planto treat jobs as rewards. Plenty of good engineers got made intobad managers that way. And the old system meant people had to dealwith a lot more corporate politics, in order to protect the workthey'd invested in a position on the ladder.The big disadvantage of the new system is that it involves more risk. If you develop ideas in a startup insteadof within a big company, any number of random factors could sinkyou before you can finish. But maybe the older generation wouldlaugh at me for saying that the way we do things is riskier. Afterall, projects within big companies were always getting cancelledas a result of arbitrary decisions from higher up. My father'sentire industry (breeder reactors) disappeared that way.For better or worse, the idea of the corporate ladder is probablygone for good. The new model seems more liquid, and more efficient.But it is less of a change, financially, than one might think. Ourfathers weren't that stupid.
