Skill-Based Economy Vs. Startup Economy

While there has been a lot of interest in startups, we still see more and more of the IT Tech workforce focus on what I describe as a skill-based economy.

This means that most jobs now revolve around a particular application skill or specialized knowledge, a programming language knowledge or hardware knowledge.  This is different than a startup based economy, where workers learn a variety of business skills. There is also a management economy, where broad knowledge is paid for and engineers and graduates are expected to be able to handle any language or system under any situation and skills are softer running corporations.

The US is about to undergo a major shift towards a startup economy and I think that it will never look back.  A major factor is crowd-funding, but out-sourcing is also a factor.  There are just not going to be that many jobs in the future, because it is so much cheaper to outsource work and things will eventually get very automated to the point where programming is needed less or is worth less!

Most funded startups are in Silicon Valley and NYC. But startups are coming to every town in America if they are not there already.  The 99% of America that is not in Silicon Valley and NYC has to rely on starting up by bootstrapping with our own hands and own funds most of the time.  In fact, from my perspective most startups never get funding till the deal is so good that you don’t need the capital.

There is a big difference preparing for a career in a startup economy vs. a skills based economy.  For one, you need broad knowledge to be a startup vs. you need specialized knowledge to be skilled.  You need to open up your mind to the possibilities to be a startup.

In the traditional skills based economy you need to focus in even deeper and study even harder to be niche and more specialized at what you do.  The problem is skills based training, while amazingly pays the bills, does not lead you ultimately to leading or being in a startup, if that is your personal goal!  This is the lament of many tech people who ask me how to transition from tech guy to startup guy.  Trust me it is not easy and very painful and it is a doorway you can not often go back through.  Though some of you reading this have gone back and forth like me.  That is even more painful. Either way you need to start one day if that is your passion and quite often today is that day…  Sometimes when you get severance and are laid-off you get the chance.  But you needed to have trained your mind years prior!

About a year ago I noticed that a very focused MySQL expert, highly skilled at just this area was able to command as much as $200,000 in yearly salary in South Florida.  That sounds great for an MySQL expert if that is your background, because that is a ton of pay for MySQL, as high or higher than some CIOs and CEOs. We have seen this happen with a dozen other IT areas from SAP to Cold Fusion to Oracle to Java at one time.  I remember a developer who worked at $400 an hour 25 years ago at the phone company.  These high salaries are based on supply and demand.

So, what does this mean?

The emphasis on becoming an expert at these specific skill sets has caused a ton of code schools and DevOp training schools to crop up to train people.  Still doesn’t seem like a bad thing, right?  It creates a new crop of IT pros who just know one specialized area. And that is great and they get jobs. The problem is what happens when that specific tech skill is not needed anymore or once again the engineer wants to be an entrepreneur!

So What’s The Problem With Skill-Based Economies?

Well, if 90% of these people entering these skill areas are just trained in the one discipline, they are facing certain obsolescence and can’t really change their career within the current job.  They need to constantly go for training.  And what happens on the next tech era/iteration is they are often in the pool of applicants who just got trained on the new skill-set.

So what I am saying is in a skill-set driven economy eventually as you get older, you end up retraining over and over and are right along side of people with only 5 years experience when you have 25. You are starting your career from scratch every couple years!

And often the newly skilled professionals jumped into the skill without finishing their undergrad degrees.

At some point, as more and more outsourcing occurs, the job market could become a dog-eat-dog world driving salaries down, not up! While you have created this amazingly specialized skill set, you realize, that you have not developed the startup skills that you will need to create a business in your near future.  We met a bunch of tech people like this at our StartupPOP tech startup pitch event yesterday, Feb 2nd, 2016 at 6pm at The Greenhouse in Boca Raton, Florida: http://www.meetup.com/Boca-Raton-Tech-Start-ups-Meetup/events/227700750/

Tons of people and experts are telling interested techies to just quit school which is expensive and get a job programming.  In fact, they often find themselves making good money early and later on find out that they probably should have finished their degree or started their own tech firm or startup early on.

I hear people in Silicon Valley complaining that they don’t have enough of these highly skilled people.  What they are really saying is we prefer more and more single skill, highly focused people, not people who can run a business or manage people.

Businesses more and more just need specialized workers. Why? Because they don’t need people who can migrate to management, product or other areas of the business.  And they don’t need people who are skilled at Startups… Actually I think they do. but that is another blog post.  Businesses say they need programmers who can deliver exactly what they want today.  Once again that is ok and a great entry point for people. Employers want workers they can plug and play, and they don’t care how they got the skill as well.  They just want that skill.  This is how I got my first job, plugging together PCs and writing C programs to download telecom switch data.  So good entry point for us all.

And more than ever, they don’t want or need these skill based workers on a permanent basis. Eventually you move on or employers let you go when they need new skills.

They are calling this the part-time economy, where every job is a  part-time job and skill-sets that are bought and sold literally on a part-time contract basis.

Not all IT professionals want to be an expert at one thing or can handle being a one language developer for years and years.  I have done it.  You can do it for a couple years, even a decade or two, but eventually you wind up having to completely relearn an entire programming skill set or new tech paradigm and at least I had to move on to other areas like marketing, business dev (sales), architecture, project management, e-commerce and of course executive management.  Besides everything gets old and boring and humans need variety in what we do for a living or we go insane!

And most important, these skill set driven jobs often hit a financial ceiling.  I have had many programmers tell me that they can’t seem to make over a certain amount without some type of career change, whether its management or product.  So that is where you end up, stuck in a rut, not being able to climb up the ladder and not having enough broad skill knowledge to change.  So having an undergrad, MS, MBA or PHD at that point is great!  You can do other jobs!

I use the words Startup Economy or Management skills loosely.  They are two different directions.  Managers are quite skilled at project management, meetings and working with and managing large teams and organizations.  Startups tend to require all kinds of skills from low level tech skills and high level thinking and everything in between.

Building up a skill-set in one discipline does not require skills like being a serial entrepreneur/tech startup person or being able to write a pitch deck or business plan.  Those skills are not part of working in a skills-based economy. To be a startup guy or gal it requires studying everything you can get your hands on about startups, going back to school, working a startup as their second job, reading 100 startup books by Guy Kawasaki or learning the hard way or on the job.

Either way, it is a tough road.  There never seems to be enough to know in order to make a startup work, so you are often winging it.  But to leave the skill based economy and join the startup economy you need to start today!

Please join our email list on http://startuppop.com and identify if you are an entrepreneur, investors or other type in this new startup economy. Also, by joining our email list, you will find out about my next two books when they are published.  They are called “Names” and “Roadmap”… Both will be published as print and ebooks/Kindle in 2016.  Have a great day and keep on thinking of your own startup… Never give that up.

Finally, we are looking for startup entrepreneurs, mentors and event planners who want to run our pitch event in your city.  You would be part of a global group of people running pitch events under one single company.  We are open-minded to running this pitch event in Europe, Asia, South America and Australia in addition to 120 US and Canadian cities.  (Think like Avon!) StartupPOP is recruiting people to run local startup pitch events and we supply the tech, promotion tools. You secure the venue and run the event. Please contact me at dan@startuppop.com if you would like more information about running this event!

Have a great day!