article connects well with few principles of game theory such as the "Market for Lemons," "Information Asymmetry," and the "MinMax" theorem. In the "Market for Lemons," the core issue is information asymmetry. As a manager, you may lack the information or experience needed to fully assess how hiring talent from non-traditional domains will play out, making it difficult to determine the right value. To mitigate risk, managers often assume a worst-case scenario, pegging such hires as mediocre at best. This valuation approach leads to offering lower compensation, which may not make financial sense for the candidate, further reducing the pool of diverse talent.
The "MinMax" theorem, which revolves around minimizing maximum losses or maximizing minimum gains, also explains the hiring behavior described in the article. Managers often prioritize safe bets by hiring candidates from reputed colleges, with strong grades, or from similar organizations. This approach minimizes the risk to their own reputation, as underperformance by such hires is less likely to be blamed on poor judgment. On the other hand, hiring someone with a non-linear, illiquid career path poses greater perceived risk. If the hire fails to deliver, the hiring manager’s judgment could be questioned, especially in organizations lacking a codified approach to embrace experimentation. In these cases, the burden of failure often falls disproportionately on the manager, while the failure of a "liquid" career hire is absorbed more readily by the organization.
This dynamic underscores a critical tension in hiring: while liquid career paths offer legibility and psychological comfort, organizations risk missing out on the potential "alpha" that non-traditional, illiquid hires can bring. this requires deliberate organizational efforts to reduce the downside around illiquid paths and create frameworks that balance risk with opportunity. One of the ways to do it to have skip managers, or someone higher up making hiring decision where the risk appetite is higher and vantage point is more wider and forward looking
Thank you for letting me know :) Feel free to subscribe to my other newsletter too - Optima and Outliers - where I try to focus on career/human capital related topics exclusively. At some point, i'd like to showcase illiquid careers in which i'll reach out and ask if you'd want to share your story.
Liked this article to the peak and I can relate to a few of these being slightly illiquid. Never thought broader like how this article bough multiple factors to weight points together.
Excellent post. Came here via TheDiff which mentioned this. Superb framing.
My takeaway: Liquidity = demand for role + legibility of the role. You can use legibility signals (blog, github repo, someone burning social capital to intro you) to help others parse your career better. Appearance on lists like https://www.mercatus.org/emergent-ventures programs / fellows could be legibility signal boosters, and perhaps there could be a site which hosts such legibility signals and boosts them as an alternate linkedin.
Thank you. We're in almost perfect agreement, though I'd respectfully quibble with the 'burning' social capital metaphor. When I make introductions, I actually see it as building social capital, since it validates my role as a valuable connector. It's an honest signal of my existing social capital that tends to reinforce and grow it further. This assumes, of course, that the introduction is positive-sum and beneficial for both parties.
There are certainly cases where the 'burning social capital' metaphor fits better - like when I call in a favor for someone close to me who needs specific advice. However, in most instances, even those with significant wealth/influence differentials between the parties being introduced, both sides should derive value from the connection. The benefits don't need to be equal, but they should exceed the opportunity costs for everyone involved.
PS: Your comment reminded me I should add Emergent Ventures to my linkedin/substack etc. Leaving a lot of credibility on tha table haha :)
article connects well with few principles of game theory such as the "Market for Lemons," "Information Asymmetry," and the "MinMax" theorem. In the "Market for Lemons," the core issue is information asymmetry. As a manager, you may lack the information or experience needed to fully assess how hiring talent from non-traditional domains will play out, making it difficult to determine the right value. To mitigate risk, managers often assume a worst-case scenario, pegging such hires as mediocre at best. This valuation approach leads to offering lower compensation, which may not make financial sense for the candidate, further reducing the pool of diverse talent.
The "MinMax" theorem, which revolves around minimizing maximum losses or maximizing minimum gains, also explains the hiring behavior described in the article. Managers often prioritize safe bets by hiring candidates from reputed colleges, with strong grades, or from similar organizations. This approach minimizes the risk to their own reputation, as underperformance by such hires is less likely to be blamed on poor judgment. On the other hand, hiring someone with a non-linear, illiquid career path poses greater perceived risk. If the hire fails to deliver, the hiring manager’s judgment could be questioned, especially in organizations lacking a codified approach to embrace experimentation. In these cases, the burden of failure often falls disproportionately on the manager, while the failure of a "liquid" career hire is absorbed more readily by the organization.
This dynamic underscores a critical tension in hiring: while liquid career paths offer legibility and psychological comfort, organizations risk missing out on the potential "alpha" that non-traditional, illiquid hires can bring. this requires deliberate organizational efforts to reduce the downside around illiquid paths and create frameworks that balance risk with opportunity. One of the ways to do it to have skip managers, or someone higher up making hiring decision where the risk appetite is higher and vantage point is more wider and forward looking
As someone whose career path is academia -> policing -> journalism -> media start-up -> consultancy I really enjoyed this
Thank you for letting me know :) Feel free to subscribe to my other newsletter too - Optima and Outliers - where I try to focus on career/human capital related topics exclusively. At some point, i'd like to showcase illiquid careers in which i'll reach out and ask if you'd want to share your story.
Please do and yes, will certainly sub
Liked this article to the peak and I can relate to a few of these being slightly illiquid. Never thought broader like how this article bough multiple factors to weight points together.
Excellent post. Came here via TheDiff which mentioned this. Superb framing.
My takeaway: Liquidity = demand for role + legibility of the role. You can use legibility signals (blog, github repo, someone burning social capital to intro you) to help others parse your career better. Appearance on lists like https://www.mercatus.org/emergent-ventures programs / fellows could be legibility signal boosters, and perhaps there could be a site which hosts such legibility signals and boosts them as an alternate linkedin.
Thank you. We're in almost perfect agreement, though I'd respectfully quibble with the 'burning' social capital metaphor. When I make introductions, I actually see it as building social capital, since it validates my role as a valuable connector. It's an honest signal of my existing social capital that tends to reinforce and grow it further. This assumes, of course, that the introduction is positive-sum and beneficial for both parties.
There are certainly cases where the 'burning social capital' metaphor fits better - like when I call in a favor for someone close to me who needs specific advice. However, in most instances, even those with significant wealth/influence differentials between the parties being introduced, both sides should derive value from the connection. The benefits don't need to be equal, but they should exceed the opportunity costs for everyone involved.
PS: Your comment reminded me I should add Emergent Ventures to my linkedin/substack etc. Leaving a lot of credibility on tha table haha :)
here’s the sequel to the post: https://www.optimaloutliers.com/p/volatility-laundering-how-to-tell
would be interested in your feedback if you end up reading it.
There seems to be no way to read it without subscribing to the paid plan?
happy to give you a comp'd susbcription. What's your email?
sp@sajithpai.com // thanks!
Done
Nice. Seems to be a productive angle to look at things
Thank you!