The New "Unemployable" Class

0:00 You've all heard the jokes.

0:01 A company is looking to fill an entry-level role that requires 10 years

0:05 of experience on a niche program that was only launched 20 months ago.

0:09 A master's degree isn't necessary, but it's highly preferred.

0:12 Oh, and the salary is $15 an hour with the expectation of reasonable overtime.

0:18 Now, good satire always has an element of truth.

0:21 And the reality is that these kind of job listings are becoming much

0:24 more common as people are getting increasingly

0:26 desperate to find any kind of work.

0:28 The simple business calculation is that there

0:30 is no real risk or cost to advertising

0:32 these jobs and huge hidden upsides even if they never end up hiring anybody.

0:37 Now, this by itself would be a truly annoying

0:39 hurdle in the already stressful search for a new job.

0:43 But there is another side to all of this as well.

0:45 The narrowing margin between underqualified and overqualified has

0:49 made huge sections of the workforce almost unemployable.

0:52 And it's doing it in a way that has been very hard to pick up in the data.

0:56 Now, scummy tactics in the job market probably aren't

0:59 that shocking to any of you watching the Extended Cuts channel,

1:02 but this unique blend of factors and new trends are now all getting thrown

1:06 into the mix alongside the rush towards

1:08 AI redundancies and an already highly uncertain economy.

1:12 22-year-old [music] Michael Maluso just earned his degree

1:15 in mechanical engineering from the University of Connecticut.

1:18 Feel good?

1:19 But this summer, he's back helping manage his hometown pool.

1:22 In August, businesses added just 22,000 new jobs.

1:26 That's actually quite a weak number.

1:28 Looking at that in isolation, that would actually be a lot more

1:31 consistent with [music] the start of a recession.

1:34 Lots of big tech companies have announced massive layoffs.

1:37 [music] On Wednesday,

1:38 Mark Zuckerberg apologized to workers for 11,000 planned job cuts at Meta.

1:45 Stop me if you've heard this one before.

1:47 An entry- level job paying $8 an hour

1:49 with no benefits at an unremarkable company.

1:52 Oh, and they want you to have at least 3

1:54 years experience in a similar role and preferably a master's degree.

1:57 Why the are entry- level jobs not entry level anymore?

2:01 Searching for a job is a difficult and time-conuming task.

2:04 Most Americans do not have enough savings to survive

2:07 for more than 2 weeks without going into debt, which means it is also stressful.

2:11 No matter how efficient the hiring process is made,

2:13 you are never going to have fun looking for a job.

2:15 And nothing can change that.

2:17 But the corporate world has introduced a lot of obstacles

2:19 that make the job of finding a job as painful as possible.

2:23 Filling out online forms for information already on your resume.

2:26 Going through multiple rounds of interviews and getting ghosted by hiring

2:29 managers for hundreds of positions is enough to drive anybody mad.

2:32 Responded to me.

2:33 Four of those went on to a phone call after

2:35 an email exchange and then one of those turned into an interview.

2:38 Uh zero of them turned into a job that was actually uh desperate for help.

2:43 It's also simply bad business.

2:44 Attracting the right talent is vital for business success.

2:48 If businesses make their application process too difficult,

2:50 they are going to filter out everybody but the most desperate candidates,

2:54 which are rarely the best candidates.

2:56 Companies that ask for multiple years of experience from applicants

2:58 applying for entry-level jobs also expose themselves to a similar risk.

3:02 It might sound advantageous for the business to get an employee

3:05 with years of experience that they can pay like a fresh graduate.

3:08 But company management frequently overlooks

3:10 the reason that these applicants are looking

3:11 for entry-level jobs in a field they have been working in for years.

3:14 And it's that they are not that good at their job and they

3:17 need to keep moving companies before

3:18 their poor performance catches up with them.

3:20 A recent study conducted by Portland State University and published

3:23 by the Harvard Business Review found that overqualified candidates did

3:27 not outperform the control group and that paying significantly undermarket

3:30 rates for talent will cost most businesses more in other areas.

3:34 Bloated hiring processes are also expensive.

3:36 Sponsored job postings on sites like Indeed, LinkedIn,

3:39 and Glass Door can cost hundreds of dollars per day,

3:42 easily more than the successful applicant will be

3:44 paid once they are on board and working.

3:46 Multiple rounds of interviews also take paid hours from HR,

3:49 hiring managers, and thirdparty recruiters.

3:51 Recruiters work on a commission basis for successfully placed candidates.

3:55 But if a company makes candidates go through multiple rounds of interviews,

3:58 the recruiters can ask for a higher fee,

3:59 or they will be incentivized to send their best recruits to companies

4:02 that have a simple hiring process so they can get paid quickly and reliably.

4:06 It's bad business, and good company managers know it,

4:09 but there are three reasons why they still do it anyway.

4:12 The first reason is that it's become too easy to apply for a job.

4:16 Indeed has 60 million monthly users and LinkedIn has over 200 million.

4:21 Online job boards make it easy for applicants to apply for hundreds of jobs

4:24 every day based on convenient filters that let them search results by industry,

4:28 seniority, experience, and salary range.

4:30 Companies can get several thousand applications for a single

4:33 position because the optimal job search strategy has become

4:36 spamming your resume into as many positions that vaguely

4:38 fit the description of the job you are looking for.

4:40 Companies have attempted to adapt

4:42 to this by having landing pages where users can

4:44 fill in their details into the company's

4:46 own database by manually completing an online form.

4:48 These forms typically ask for information

4:50 that should be included on any good resume,

4:52 but it enters it in a way that can be read

4:54 by a computer instead of being read by a hiring manager,

4:57 saving them the time of manually going through thousands of applications

5:00 by hand to find the attributes they are looking for in a candidate.

5:03 The back end of these forms will enable

5:04 the hiring manager to search through the candidates

5:06 by a similar set of filters that the candidates

5:08 themselves use to find the job posting, evening the arms race between the volume

5:11 of applications and the people that check those applications.

5:14 You're quantifying human behavior, human expressions,

5:18 [music] human voices, turning that into data.

5:21 We're now using artificial intelligence to help

5:24 companies find the very best talent.

5:26 Some companies have started using application tracking systems or ATS,

5:30 which use AI to scrape resumes for keywords

5:32 to populate databases that can be filtered

5:34 in the same way without requiring candidates

5:36 to fill in a data entry form themselves.

5:38 And most likely, you were being analyzed by an algorithm.

5:41 How does that make you feel?

5:43 I feel like that would blindside [music] me entirely.

5:45 This practice has become so common that there

5:47 are now AI tools like Zetti, Job Scan,

5:50 and Resi that check resumes against job posts and make sure that they

5:53 are appealing to the AI system

5:54 that check resumes before the hiring manager does.

5:57 So, an AI will write a resume to satisfy another AI to stand

6:01 out against thousands of other applications also written and checked by AI.

6:05 Applying for a job has become easier than when you had

6:07 to search the classifides and call companies one at a time.

6:10 But this means people can apply for more jobs.

6:12 More applications means that the acceptance rate at each job is much lower.

6:16 And the best way to deal with this low

6:17 acceptance rate is to apply for more jobs,

6:19 which means that applying for a job has become harder all over again.

6:22 Nobody is to blame for this new paradigm.

6:25 I love making fun of dumb corporate decisions on this channel, but in this case,

6:28 they are just reacting to new technology

6:30 that has made finding applicants easier than ever,

6:32 and everybody else is reacting to the same thing.

6:35 The competitive meta of job searching has shifted from a firm

6:38 handshake to mass spamming resumes

6:40 to get past increasingly difficult spam filters.

6:42 But that's just one reason.

6:44 And there are plenty of things that companies are doing which are just dumb.

6:48 So, it's time to learn how money works

6:49 to find out why entry-level jobs all of the sudden

6:52 require 3 years experience and how you can

6:54 take advantage of this benefit for your own career.

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8:15 The second reason that companies have made it so difficult

8:17 to apply for jobs is because they want to cover their ass.

8:20 There are lots of reasons why a hiring manager

8:22 might want to pick one job applicant over another,

8:25 but not all of them are legal.

8:26 And even if they don't violate any equal opportunity laws,

8:29 some might be a bad look for the company.

8:31 By listing lots of unreasonable job requirements,

8:34 the company increases the likelihood that no applicant will tick every box,

8:37 which means they can hire whomever they want and cover themselves by saying

8:40 all of the other candidates were missing one or more of the roles prerequisites.

8:44 It's rare that companies get much

8:45 push back over rejecting an external candidate.

8:48 Most people have just become accustomed to never hearing

8:50 back from a majority of jobs they apply for.

8:52 If you have ever applied for a job recently,

8:54 you will know that no response is the new rejection letter.

8:59 First time.

9:00 If companies do respond, they try to keep it as generic as possible so that they

9:05 do not expose themselves to any potential unfair hiring practice lawsuits,

9:08 which makes the long list of job requirements redundant.

9:11 Where these do help companies though is in rejecting internal hires.

9:15 According to a study by Cornell University,

9:17 internal hires outperformed outside hires,

9:19 but only because they are more familiar with the business from day one,

9:22 requiring less training to get into a new role and because they

9:25 were more likely to stay in a job longer than the outside hire.

9:28 A similar study by McKenzie Consulting found

9:30 that a strong culture of internal promotions helped with staff

9:33 retention and encouraged staff to work harder to qualify

9:36 because they could see it paying off for them.

9:38 the pandemic, a lot of companies are are not flush financially,

9:42 so they can't afford to hire a new person.

9:45 Internal promotions are effective,

9:46 but they are also more difficult than outside hires.

9:49 If you get promoted or moved around within your company,

9:52 then someone else needs to be hired to fill your role.

9:54 And if someone gets promoted to fill your role,

9:56 then HR has to fill three positions instead of just one,

9:59 which is expensive, difficult,

10:00 and triples the chance that someone won't be able to perform their new job.

10:03 People hired internally also don't have probationary periods.

10:06 So if they do underperform in their new role, they are harder to let go.

10:10 Internal hires have advantages,

10:12 but external hires are easier and present less risk.

10:15 If a company has no strong internal candidates for a new role,

10:18 but it doesn't want to lose the benefits

10:19 that come from occasionally promoting people from within,

10:22 then the most effective strategy for them

10:23 is to increase the job requirements so they

10:25 can tell their existing staff that unfortunately

10:28 they don't qualify based on the job's criteria.

10:30 I know I say it a lot,

10:32 but this is another reason why the best thing

10:33 you can do in your career in your early

10:35 years is to consistently apply for new jobs

10:37 that are better than the one you currently have.

10:39 Workers that change their jobs every 2 years earn on average

10:42 50% more than their colleagues who show loyalty to a company.

10:46 Sticking around might get you a promotion,

10:48 but there's no way to know how long it will

10:49 take for other people to move out of their positions.

10:52 Having experience at different companies is also more valuable

10:54 to new employers than long-term tenure at a single employer.

10:57 When employers ask for 3 years experience,

11:00 they are often satisfied with candidates that talk

11:02 about dealing with similar challenges in different industries.

11:04 So, you should apply anyway and just have some kind of experience to talk about,

11:08 even if it's not doing the same job or even a job at all.

11:11 And that's a third reason why employers make job requirements

11:14 that are so out of touch with the job they are offering.

11:16 They want to see how applicants deal with the challenge.

11:19 There is an old saying in business that even

11:21 if you are not in sales, you are in sales.

11:24 Most people do not have jobs that require

11:25 cold calling a list of leads to generate revenue.

11:28 But those soft skills are still important in every job.

11:31 Dealing with difficult customers, difficult co-workers,

11:34 being able to present a strong argument,

11:35 or simply showing empathy for a client's

11:37 needs are all skills that could be demonstrated

11:39 by an applicant when they are questioned about

11:41 a shortcoming of their qualifications against the job requirements.

11:44 If you're in a job interview and can provide a strong response

11:47 to a question like this that eases

11:48 the interviewer's concerns without disregarding them,

11:51 you will probably end up doing better than

11:53 someone who didn't even have that experience gap.

11:55 If you can deal with an interviewer's concerns,

11:57 then you have clearly demonstrated that you can deal

11:59 with the other challenges as they are presented to you.

12:01 A skill that is worth more than anything you can write down on a resume.

12:04 And that's the fourth reason.

12:06 Some managers do know what makes a good hire, but most don't.

12:10 People are promoted into management positions based

12:12 off having experience in a subordinate role.

12:14 Managers are therefore naturally inclined to believe

12:17 that when it comes to hiring someone, more experience is more better.

12:20 It's a reasonable assumption that someone that has practice

12:23 in a role should be better than someone with no practice.

12:25 In fact, I said it at the beginning

12:26 of this video and you probably just accepted it.

12:29 But corporate roles in nontechnical fields change

12:31 so rapidly today that the benefit is negligible.

12:34 A 30-year-old study conducted by the Internal Congress of Applied Psychology

12:37 in Madrid found no strong correlation between experience and job performance.

12:41 Since this study was published, follow-up studies,

12:43 including a publication from the Harvard Business Review in 2019,

12:46 found the same thing.

12:48 Most corporate managers do not read journal articles

12:50 about statistical correlations between hiring parameters and job performance.

12:54 Most go off their own experience, which is the value of experience.

12:57 They do the same for other job requirements because the safest move

13:00 for them is to find a candidate that ticks the most boxes.

13:04 Experience can help a business, but so can new ideas.

13:07 And neither is more valuable than the other.

13:09 In fact, if it wasn't for an enthusiastically inexperienced employee,

13:12 Nintendo might still be a taxi company and proprietor of a love hotel.

13:16 I'm not kidding.

13:17 Far from being too inexperienced to meaningfully

13:20 contribute to their employer's bottom line,

13:22 most people are too good for the jobs they currently have.

13:25 But companies are still gaslighting them into thinking they suck.

13:28 There are 8.2 million job openings in America right now

13:32 and around 7 million people actively looking for a job.

13:36 There are also millions of Americans who have simply

13:38 given up on even trying to look for a job.

13:41 But still, companies are complaining that they can't get the people they need.

13:45 There is one reason that has been used time

13:46 and time again to [music] explain all of this.

13:49 A range of companies are looking at how to close the skills gap.

13:52 Skills gap.

13:53 Just a skill gap.

13:54 A skills [music] gap.

13:54 A skills gap.

13:55 Yep.

13:56 The skills gap.

13:57 There are people looking for work and jobs on offer,

14:00 but the skills of those people [music]

14:01 and the requirements of the jobs just don't line up.

14:04 It's a simple, elegant explanation to a major problem,

14:07 but it's also almost entirely made up.

14:10 The skills gap, also known as the skill

14:12 shortage or just good old structural unemployment,

14:15 is a convenient excuse for a lot of major issues in today's

14:18 job market that are often swept under the rug by businesses,

14:21 politicians, and even economic statistics.

14:24 If a hospital is hiring a doctor,

14:26 but the only person in town looking for a job has a degree in computer science,

14:29 then obviously that role is not going to be filled regardless

14:32 of how much time and effort the applicant has put into their education.

14:36 The argument that you would have seen is

14:37 that the same problem is playing out everywhere across the world.

14:41 Which is why even if companies claim to be desperate to hire people,

14:44 you might struggle to find a job.

14:46 The whole argument conveniently shifts the blame

14:48 of any labor market problems onto the workers

14:51 because they are the ones that haven't trained

14:52 the right skills or developed the right experience.

14:55 The first problem with this idea, though,

14:57 is how the problem of the skills gap quietly slips away during the good times.

15:01 Research published by economists from Harvard, Northern University,

15:05 and the Federal Reserve found a striking relationship between unemployment

15:08 and the experience that employers look for in their candidates.

15:11 The team collected data on over 36 million job postings over 3 years.

15:15 And what they found was that the skills and experience

15:18 required was almost directly proportional to the unemployment rate.

15:21 In plain English, what this meant was that when

15:23 there were lots of people looking for a job,

15:25 all of a sudden the skills requirement for roles became a lot higher.

15:29 And this is when people will start complaining about a skills gap.

15:32 But when unemployment is lower and there

15:34 aren't that many people applying for jobs,

15:36 suddenly the skills gap isn't such a big problem

15:38 and companies are happy to hire whoever they can get.

15:41 Now, as long as they aren't discriminating based on protected classes,

15:44 companies can basically hire whoever they want

15:46 and ask for whatever skills they can.

15:48 If unemployment is high and they can be greedy with their job requirements,

15:52 that's just business.

15:53 But the problem is the myth of the skills

15:56 gap is used to justify a lot of bad stuff.

16:00 The first is simply lower wages.

16:02 If companies post a position with high skill requirements and they

16:05 don't get any applicants that meet their unreasonably high bar,

16:08 they can go back to the best applicant

16:09 with a lower salary and benefit offer than advertised,

16:12 pointing out the gaps in their skills as a reason for the lower offer.

16:16 This is just basic salary negotiation tactics.

16:19 But the myth of the skills gap makes

16:21 it easier for companies to get away with this.

16:23 A report by MIT found that most jobs advertised in America asked

16:26 for skills like programming that were actually not required to perform the job.

16:30 They looked specifically at IT help desk technicians that deal with computers.

16:34 So most companies ask for programming skills.

16:37 The thing is though,

16:38 most IT help desk techs don't actually use programming for anything,

16:42 but a lot of companies just assume that computers

16:44 equal code and so make it a job requirement.

16:47 The report actually found that programming was just as useful

16:50 in manufacturing plants as it was in IT help desk work.

16:53 But factory machine operators were far more likely

16:55 to get on the job training on how to program their machines than IT workers who

16:59 are just assumed to know how to code.

17:01 But lower wages are far from the worst thing that the myth

17:04 of the skills gap has been used to push for.

17:06 It's also been an incredible tool for lobbying on migration policy,

17:10 education funding, and workplace protections.

17:12 These are worth looking at one by one because you are

17:15 probably going to start hearing a lot of familiar sound bites.

17:18 If there was actually a supply of good paying jobs available

17:21 to people that were going unfilled because of the skills gap,

17:23 then the traditional market assumption would be that people would retrain

17:26 to fill those roles to increase their income and job security.

17:30 But that isn't happening because there are

17:32 problems with every part of this assumption.

17:34 The first problem is that a lot of the jobs we have

17:36 a skills gap for here in America don't actually pay that well.

17:39 According to a report by the Society of Resource Management,

17:42 the hardest roles to fill currently include jobs like nursing,

17:45 teaching, the trades, and social service work.

17:48 Most jobs in these roles do not pay enough

17:50 to support a comfortable life in a major city,

17:52 especially for entry-level employees into the roles.

17:55 The trades can be great, but apprentice tradesmen are not going to earn

17:59 much until they are fully qualified, and even then,

18:01 they need to work significant overtime or own their own business

18:04 to make a comfortable salary in most parts of the country.

18:07 Even still, they are going to be better off than teachers and nurses

18:10 who not only need a college degree where they won't be paid anything.

18:13 They also need on the job training before they are earning anything at all.

18:17 That's on top of reports about extreme job stress,

18:19 brutal work schedules, and the general lack of respect these roles receive.

18:23 [music] Putting your career on hold,

18:25 spending tens of thousands of dollars on a college degree,

18:28 and dealing with difficult patients or often dangerous patients

18:30 or children is not that enticing to Americans who

18:34 would consider a career switch because the income

18:36 for these rules hasn't risen in line with the demand gap.

18:39 There is not a skill shortage.

18:41 There is just a shortage of people who want to do difficult jobs for bad pay.

18:44 People in these roles who already have the skills

18:47 to perform the job at a high level are leaving because

18:50 it's just not worth making the sacrifices necessary when there

18:53 are easier jobs that pay just as much or more.

18:56 A counterex example to this trend was the rush to train computer science.

19:00 The tech industry in the 2000s was expanding rapidly and we

19:03 didn't have enough coders to perform

19:05 roles that actually needed programming skills.

19:07 The allure of high-paying, respected jobs with [music] a good work life

19:11 balance meant a lot of very smart people moved

19:13 into that career path to fill the skills gap

19:15 because there was a real reward for doing so.

19:17 Now there are actually too many qualified programmers.

19:21 And as the tech industry has cooled down,

19:23 hundreds of thousands of people have been laid off.

19:25 Just 5 years ago though,

19:26 they would have been told that there isn't enough programmers

19:29 and companies are hiring whoever they can as fast as they can.

19:32 So, the assumption that empty jobs are just waiting to be filled and the only

19:36 thing standing in the way is the skills gap can be a bit dangerous.

19:39 But the final piece of the puzzle is how profitable fixing this myth can be.

19:43 Politicians can win some easy political points

19:45 by talking about retraining programs and companies

19:47 can push the responsibility of staff training

19:50 onto their workers or those government programs.

19:52 The market research firm Allied Market Research

19:55 values the corporate training market at over

19:57 $361 billion with it projected to grow to over $800 billion by 2035.

20:04 That's a major industry just by itself and it

20:07 relies heavily on people believing that they are

20:09 just one qualification away from landing a job

20:11 that is just desperate to find the right worker.

20:14 This industry is separate from traditional colleges and trade schools,

20:17 but you already know what a mess that whole thing is.

20:20 The skills gap has been a major lobbying tool

20:22 by companies to push for this kind of training.

20:24 Seammens, an industrial equipment manufacturer,

20:27 paid for an article in the Atlantic talking directly to policymakers

20:30 that the apprenticeships were the secret to closing the skills gap.

20:33 Apprenticeships are actually great.

20:35 But the reason that Seammens was paying to publish

20:38 this article is that it would give them a new

20:39 pool of skilled workers to pick from, not because

20:42 they wanted to help out with labor force policies.

20:44 And this is where you get to the most controversial part of the skills gap.

20:48 It's used to justify immigration.

20:50 Now, this is obviously a heated topic that everybody

20:53 has their own set of opinions on, but it

20:55 is possible to advocate for more careful and deliberate

20:58 immigration policies without going full they took our jobs.

21:01 The skills gap has been used to push for a lot of skilled migration,

21:05 which has arguably gone too far in America,

21:07 but has been even more obvious in places like Canada,

21:10 the UK, Australia, Germany, and New Zealand.

21:13 The reason companies like this is because

21:15 it lets them fill roles without putting

21:16 upward pressure on salaries and more people

21:18 means more customers to sell products to.

21:21 If the skills gap is front and center around these sensitive issues,

21:24 it makes it easier for policy to be handwaved

21:26 through as an essential measure to keep the country functioning.

21:29 Here in America, H1B and EB3 skilled working visas are the most common way

21:34 to get in workers who fill skilled roles that can't be filled by an American.

21:38 They come with a strict set of rules to make

21:40 sure that American workers are not disadvantaged by new foreign hires.

21:44 But if job requirements are kept unreasonably

21:46 high to make an artificial skills gap,

21:48 it becomes easier to hire workers from overseas who will

21:51 be dependent on that company's sponsorship to stay in America.

21:54 Who do you think is more likely to be a loyal employee?

21:57 But depressing wages with visa shenanigans might also be

22:00 an easy cover to deflect attention away from the fact

22:03 that for some time now young people just

22:05 don't know how to be a reliable professional anymore.

22:08 According to a survey of young job seekers,

22:10 a quarter of applicants admitted to bringing their parents to a job interview.

22:14 70% asked them for help for applying for jobs and almost all successful

22:18 applicants credited their parents with helping them land a job in some capacity.

22:22 Another report found that 75% of companies could not

22:24 rely on some or all of the college graduates they

22:27 hired last year to perform their role to a satisfactory

22:30 level mainly because of a lack attitude towards their responsibilities.

22:34 90% of hiring managers surveyed are now suggesting that basic professional

22:38 etiquette training should be taught in schools [music] to reverse this trend.

22:41 It's not painting a pretty picture, but in defense of generation brain rot,

22:45 the companies themselves have not been doing any better.

22:48 The rate of reported abuse, both physical and mental,

22:51 overstepping of responsibilities, and good old-fashioned bad management,

22:55 were all higher in 2024 than they were any

22:57 other year since we started comprehensively collecting this data.

23:00 In an era where major employers spend hundreds of millions of dollars to blur

23:04 the line between work life and make

23:06 their laid-back office attitude part of their brain image,

23:08 maybe this shouldn't be surprising.

23:10 But no matter who eventually gets blamed,

23:12 there is now a lot of money on the line to reverse course.

23:15 Some reports now estimate the univil behavior in the workplace

23:18 is now costing the American economy $2 billion every day.

23:23 So, have we really forgotten how to be professional?

23:25 And is that actually a problem?

23:28 One national [music] workplace survey found

23:30 that 48 million people are bullied at work.

23:33 So, how does it stop?

23:34 Bullies and psychopaths.

23:35 I had a bit of a mental breakdown.

23:37 The post-pandemic fashion [music] rules in the workplace

23:39 are apparently shifting to be even more relaxed.

23:42 I'm always shocked by how people are so unprofessional.

23:45 It's a nice house for a $5 tip.

23:47 Tipping culture is tilting me, especially in America.

23:50 They put a mandatory tip and I said, "This is BS.

23:53 I'm not tipping."

23:54 There is a big difference between professionalism and competence.

23:58 Sometimes the most unprofessional people are the most competent and often

24:02 the most professional people suck at actually getting the job done.

24:05 This is because professionalism is a word that has slowly lost all meaning.

24:09 Before the first world war,

24:11 professionals were people who specialized in very specific fields that normally

24:14 required a lot of trust between themselves and the people they served.

24:18 These were people like doctors, lawyers, accountants,

24:20 and bankers who on top of being bound

24:22 by the law had their own industry bodies which laid out

24:25 a code of ethics to make sure that people were

24:27 comfortable putting their financial or actual lives in their hands.

24:31 These professional industry groups still exist today.

24:34 Accountants, lawyers, doctors, and even financial analysts all have

24:37 their own industry associations who are very selective

24:40 about who they let in and are equally very liberal with who they throw out.

24:44 However, the word professional was co-opted by corporations,

24:48 particularly after the end of the Second World War,

24:50 as a way to informally mandate certain behaviors like

24:53 a dress code and even a way of speaking.

24:55 Office workers were no longer just clerical administrators.

24:58 They were professionals and instead of taking an oath to their association,

25:02 they would take an oath to their corporation, sometimes literally.

25:10 Rob Huffetler, a corporate executive himself,

25:13 wrote a fantastic article about the erosion

25:15 of the meaning of the word professionalism,

25:16 where he basically just concluded that today it means people

25:19 who are well- behaved and don't question authority too much.

25:22 That is clearly something that has benefited companies

25:24 as they grow larger and had more people to coordinate.

25:27 but it doesn't explain why it started to go backwards.

25:31 With trends like these, you need to remember that anecdotal

25:33 evidence without data is usually just a sign of biases.

25:36 It's easy to hate on the young college graduates just entering the workforce

25:40 with their mornings full of energy and their heads full of broccoli.

25:43 But that doesn't mean that they are less professional than previous cohorts.

25:46 On the other hand, data without anecdotal evidence

25:49 is usually just a sign of poor information collecting.

25:52 However, the declining lack of professionalism in the workplace

25:55 seems to be one of those occurrences

25:57 with both a lot of anecdotal evidence and a lot of data to back it up.

26:01 There have now been multiple reliable studies

26:03 conducted on various aspects of normal workplace behaviors.

26:06 And I'm sure you have all had the iPad

26:08 tip screen thrown at you by some disinterested barista.

26:11 So, what's causing this?

26:14 Well, there are some obvious culprits.

26:16 The people who have entered the workforce for the first time in recent

26:18 years probably spent a majority of their college years locked up at home.

26:22 Now, college isn't exactly the bastion of professional behavior,

26:26 but it does give students a taste of independence and responsibility.

26:29 You are welcome to be blackout drunk at 5:00 a.m.

26:32 as long as you make it to your 9:00 a.m.

26:33 class for your end term presentation.

26:35 That's the kind of professionalism that America runs on.

26:39 Anyway, since this mostly impacted people who went to college,

26:42 this is mostly focused on office jobs where the typical

26:45 white collar style of professionalism is most sought after.

26:48 Another survey of managers conducted in 2024 found

26:50 that almost 40% of them were now avoiding recent

26:53 graduates in their hiring process and typically that would

26:55 not be something that companies would want to admit.

26:58 Nearly half of them had to fire a recent graduate

27:00 with the primary reason being that they couldn't keep up with their workload.

27:04 One of the biggest reasons why that started happening recently is because

27:07 a lot of work in schools and colleges is now getting done by AI.

27:11 I know it's not exactly shocking news,

27:13 but the scale of AI cheating has now become so severe that schools are

27:17 switching their curriculums back to standard pen

27:19 and paper testing over self-directed research projects.

27:22 Now, the actual problem this causes for graduates just

27:25 entering the workplace is that for most entry-level office jobs,

27:28 it's not as easy to use AI to get work done as it is for college assignments.

27:33 If it was that easy,

27:34 there's a pretty good chance that they wouldn't have a job in the first place.

27:37 All right, so if AI brain rot and everybody

27:40 going stir crazy during lockdowns was the whole story,

27:42 that would be very convenient.

27:44 But there is a lot more going on here,

27:45 which unfortunately makes it a lot harder to blame it exclusively on the youth.

27:50 The ideal version of what a professional is has changed more than once.

27:54 100 years ago, you were a professional if you had a specific profession.

27:58 And then you were a professional if you put on business attire in the morning,

28:01 went above and beyond for that promotion, and used words like synergy.

28:05 Today, that's changing yet again.

28:08 After 2008, there was a public push back

28:10 against the men in suits running the world,

28:12 which coincided with the growth of post.com tech companies.

28:15 In 2010, Apple became the most valuable company in the world.

28:19 Facebook crossed half a billion users and Google was

28:21 consistently winning awards for being the best place to work.

28:24 All of these companies embraced a counterculture image to some extent

28:28 which replaced office cubicles and suits with ping pong tables and flip-flops.

28:32 The idea was that making the office feel more like home,

28:34 talented people would be happy to spend a little bit longer at work,

28:37 resulting in more output.

28:39 It also aligned well with the brand

28:40 image that they wanted to project that sometimes

28:43 the most competent people were not the ones in suits and in corporate huddles.

28:47 Now, this is sort of true.

28:49 An overfocus on professional appearance has been

28:51 found to statistically be a way for people

28:53 to cover up for the fact that they really don't know what they are doing.

28:56 A study by Columbia Business School found that corporate jargon was often used

29:00 as a coping mechanism by people who weren't keeping up on office tasks.

29:03 And another study found that the overuse

29:05 of professional sounding jargon correlated

29:07 with poorer decision-making because nobody knew

29:09 what they were actually talking about.

29:11 Getting rid of the pomp and ceremony that surrounded

29:13 the idea of professionalism sounded like a good idea,

29:16 especially for technology companies who were changing

29:18 the way that people did their jobs anyway.

29:20 But fast forward another decade and it's gone too far in the other direction.

29:24 In certain businesses, there is now the not so subtle idea

29:28 that the person wearing the sweatshirt and board shorts

29:30 in the office must be the most competent person

29:32 on the floor because they are ironically so unprofessional looking.

29:36 You've almost inevitably seen or heard some variation of an anecdote

29:40 like in a room full of people with suits,

29:42 the one man wearing jeans and a t-shirt is the most important.

29:46 Now, I hate to burst that power fantasy bubble here,

29:48 but in my experience working on large corporate deals,

29:51 including in San Francisco, this doesn't really happen all that often.

29:55 Most successful business people know how

29:57 to dress appropriately for a given occasion.

29:59 But that hasn't stopped the idea from gaining popularity.

30:02 The ultimate incarnation of this was someone like Sam Bankman Freed who

30:06 was assumed to be a genius

30:07 largely because of his unkempt unprofessional demeanor.

30:11 That's my quant what?

30:14 My quantitative my math specialist.

30:16 Look at him.

30:18 You notice anything different about him?

30:19 Look at his face.

30:21 That's pretty racist.

30:22 Look at his eyes.

30:23 Now, the commercial irony of this is that a lot

30:25 of mainstream companies are only now just catching up

30:28 with this idea because they have convinced themselves that the world's

30:31 most successful companies have offices that look like this.

30:34 So, if they want to be successful, they need to as well.

30:36 The only businesses that have been left behind are

30:39 primarily those with rigid organizational standards like well doctors,

30:43 lawyers, accountants, and engineers.

30:45 The actual professions from a century ago.

30:47 There have been more gradual changes in this time as well.

30:50 The average professional behavior in a 1950s

30:53 madman style corporate setting obviously wouldn't fly today.

30:56 The scale of the professional workforce has also grown significantly as well.

31:00 Blue collar workers have their own brand of professionalism,

31:03 but it's mainly focused on keeping themselves and their colleagues

31:06 out of harm's way while delivering good work.

31:08 It's focused a lot less on using the correct corporate approved lingo.

31:12 But the share of people working in the service industry

31:14 has grown as a lot of these jobs were outsourced.

31:17 This means that working in an office is

31:19 no longer really an elite status symbol anymore.

31:21 And so the expectation of how these people act has changed with it.

31:25 [music] Now, no matter the particular examples,

31:27 the end goal is almost always the same.

31:30 Being a professional is just good marketing

31:32 for putting the business ahead of other priorities.

31:34 Whether it was General Electric pushing the idea

31:37 of being a professional so that even their entry-level staff

31:39 would dress and act like senior executives or Google

31:42 making an office that people felt like home in.

31:44 It is all just a way to get a little bit more out of their staff.

31:48 Now, sometimes that is absolutely necessary.

31:50 Hot take alert.

31:51 A work environment where people want to go

31:53 above and beyond is actually a good thing.

31:55 A workplace where nobody knows how to behave themselves

31:58 is just as miserable as an overly authoritarian workplace.

32:02 But people are just caring less and less.

32:05 The line between consumate professional and corporate cuck is getting blurriier.

32:10 A recent survey conducted by the Bureau of Labor Statistics found

32:13 that the average person is now working just over 8 hours a day.

32:17 That doesn't sound so bad until you realize that data includes weekends,

32:20 which means that the average full-time employee is doing

32:23 slightly more than a full workday every single day.

32:26 That also doesn't include lunch breaks or commute time.

32:29 And most of these additional hours are unpaid.

32:32 According to the report, the average full-time employee is now doing more

32:35 than 10 hours of unpaid overtime every single week.

32:38 This would have been unthinkable before the 1980s,

32:41 but now it's just part of being a responsible professional.

32:44 But people are not as willing to put

32:46 in that extra effort anymore for three reasons.

32:49 The first is that a lot of the jobs that are

32:51 seeing the sharpest drops in professionalism are really easy to get.

32:54 A customer experience survey conducted by the research

32:57 firm Forester found that customer experience was

33:00 now at its lowest level ever primarily because

33:02 of a lack of professionalism from service staff.

33:05 Service staff on close to minimum wage

33:07 really don't care about things like customer obsession.

33:09 I know shocking right now.

33:11 In the past there was always the motivation that they could lose their jobs.

33:15 But now in a lot of cities across America

33:17 that's not the same threat it used to be.

33:20 Minimum wage jobs in a high cost of living center are surprisingly hard to fill.

33:24 Turnover is already high and if people do lose their jobs,

33:27 there are now gig services like Door Dash or Uber to fall back on.

33:30 For the second reason, we need to go slightly higher up the corporate ladder.

33:34 Middle managers and general office staff used to see the benefits

33:37 of going above and beyond in the name of professionalism,

33:40 but now it's not so clear.

33:41 The average time that people spend at a single company is dropping rapidly.

33:45 So, there is less opportunity for internal promotions anyway.

33:48 And on top of that, with average businesses now trying to roleplay as Google,

33:52 it can be hard to determine what

33:54 brand of professionalism these companies even want.

33:57 This is all happening at the same time that people are

33:59 told they are right on the precipice of being replaced by AI.

34:02 So maybe being a good little corporate drone just makes them easier to replace.

34:06 Finally, at the very top of the pile,

34:08 the third reason is because people are seeing how their business leaders act.

34:12 In the age of social media and LinkedIn dril,

34:15 it's become clear that the same people who will endlessly

34:17 lecture their staff about professionalism

34:19 are often not that professional themselves.

34:22 We can probably all think of one particular HR department that's going

34:25 to have the adventure of a lifetime

34:27 explaining workplace etiquette in the future.

34:30 Anyway, perhaps the most important question is, does this matter?

34:34 If the pretense of performative professionalism is dropped,

34:37 it will probably make it a lot easier

34:39 for you to stand out by doing good, honest work.

34:42 our actual productivity has actually grown faster

34:44 over the supposedly worst years of professionalism ever.

34:48 So maybe there is something behind ditching

34:50 the mask and just getting the job done.

34:52 Despite this and somewhat ironically,

34:54 we might have shot ourselves in the collective foot by spending far too much

34:58 time getting ready for a good job and not enough time just doing it.

35:02 Peter Turkin is a complexity scientist who

35:04 mathematically models statistical dynamics of historical societies.

35:08 He coined the theory of elite over production.

35:11 He argues in his books and papers

35:13 that societies make workers just like they make anything.

35:16 A car goes through a factory and a college

35:18 graduate goes through a few decades of schooling.

35:20 At the end, you get something that you can drive

35:22 around in and something that can make pivot tables and excel.

35:26 The only difference is that a lump of steel doesn't care if

35:28 it's turned into the engine block of a Bentley or a Buick.

35:31 But people given the option will naturally opt

35:34 for more prestigious careers if they are available.

35:37 Turin's work effectively argues that roles

35:39 in all societies form something of a hierarchy

35:42 with fewer actual people required to do the jobs further up the pyramid.

35:45 We need a lot more tradesmen, nurses, teachers,

35:48 and laborers than we need so-called elite roles like corporate executives.

35:52 By their nature, these roles only exist to watch

35:54 over the work of dozens of other people.

35:57 But for a variety of reasons,

35:58 too many people have been directed into getting qualified for these roles

36:01 up here and discouraged from doing these roles down here.

36:05 This is how you end up in a system

36:06 where everybody is qualified to deliver a stakeholder

36:09 engagement deck to synergistically blitzcale a business-to business

36:12 platform for ingesting marketing survey data from the cloud.

36:15 But you can't find anybody to fix your plumbing.

36:18 We have simply trained too many people to fill too many

36:20 elite roles and not enough people fill the everyday roles of society.

36:25 This has cost us a lot in more ways than you might realize.

36:28 And the first is just the cost.

36:31 I know that you are all well aware of the cost of attending college,

36:34 but there is more to it than just the student debt that you

36:36 are going to take on to land your first job in the cubicle farm.

36:39 If everyone gets a college degree, which qualifies them for a prestigious job,

36:43 then those qualifications aren't special anymore.

36:46 According to data from the US Census Bureau and compiled by Statista,

36:50 the number of Americans with a college degree has increased

36:53 from 7.7% of the population in 1960 to 37.7% today, an almost six-fold increase.

37:00 The remaining 62.3% of the population are

37:03 not all going to be bluecollar workers either.

37:06 According to the Bureau of Labor Statistics,

37:08 only 62.6% of Americans work at all.

37:11 So more than half of the workforce holds a degree.

37:14 A degree is not enough to stand out anymore.

37:17 It's barely enough to land a job at all.

37:19 So people are getting more degrees to prove they are worthy of an elite role.

37:23 The price of a college degree has gone up and its value has gone down.

37:27 But people are still willing to take on lifealtering amounts of student

37:30 debt to get them so they can access a job that is prestigious.

37:33 The ironic thing is that many bluecollar

37:35 trade jobs actually pay much better than

37:37 even mid-level corporate roles because there is

37:40 a shortage of these non- elite workers.

37:41 So they have much more negotiating power in the real

37:44 market than a history PhD applying for a research role.

37:47 Sorry Sam from how history works.

37:49 Despite this, most people still agree that someone sitting behind

37:52 a desk is more elite than someone working with their hands.

37:55 So given the choice, they would rather work in an office.

37:58 You knew all of this already.

38:00 Colleges have been pumping out graduates for decades now.

38:03 But what is interesting is what happens to the people that are left over.

38:07 Eventually, there are only so many roles that can be

38:09 done in a suit and tie in a nice office,

38:11 which means some of these elitequalified individuals will be left

38:14 behind to work jobs that they are completely overqualified for.

38:17 Underloyment is already a major issue in America.

38:20 Highly paperqualified people are working casual jobs with bad

38:24 pay and fewer benefits because they don't want

38:26 to get a blue collar job because that would

38:28 be admitting that their expensive degree was useless.

38:30 Church in his book End Times has likened the glut of people who

38:34 are too qualified for the job to the accumulation of deadwood in a forest.

38:38 It doesn't do anything by itself,

38:40 but if anything goes wrong, it will cause a cataclysmic fire.

38:43 I will leave a link to his book in the description below.

38:46 If you like depressing videos like this, it's definitely worth the read.

38:50 Turin has likened our current period

38:51 of elite overproduction with the late Roman Empire,

38:54 the French Wars of Religion, and various Chinese dynasties.

38:57 But America and the rest of the Western world has

39:00 had one sneaky advantage over these other low energy empires.

39:04 We have taken all of these non- elite jobs

39:06 that we didn't want to do and outsourced them overseas.

39:10 For a while, it let more of us work

39:12 in jobs that we could brag about on LinkedIn.

39:14 But that strategy may have come with some serious side effects.

39:17 So, it's time to learn how money works to find out what happens now

39:20 that we have too many people that are literally too good for their job.

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40:22 One of the less serious impacts of a system that has

40:24 too many people qualified for too few elite jobs is title inflation.

40:28 If you can't find a senior role for everybody

40:30 with an MBA from the University of Phoenix,

40:32 then you have to give them a fancy sounding title.

40:35 Salesmen are now account executives.

40:37 Receptionists are now directors of first impressions,

40:41 and marketers are brand presidents.

40:43 Job title inflation like this sounds extremely

40:45 dumb until you realize that it works.

40:48 [music] A UK study found that 70% of workers would give up

40:51 a pay raise to get a job with a better sounding title,

40:54 with some forgoing as much as $10,000 to take a role that sounds more senior.

40:59 This study is very old now, [music] but one look at LinkedIn will

41:03 show you that it hasn't gotten much better.

41:05 Now, while it's fun to laugh at goobers on LinkedIn,

41:08 the problems of elite overproduction as outlined by Turin,

41:11 manifests in other areas as well,

41:13 as more people become qualified and expect to fill glamorous corporate roles,

41:17 it creates a political pressure to make sure that people get those roles.

41:21 The anthropologist David [music] Greyber spoke about his role

41:23 of the box tickers in his infamous book, Jobs.

41:27 These were rules that only existed

41:28 to satisfy some arbitrary requirements overseen by other box tickers to give

41:32 the appearance that something useful was being done.

41:35 The best way to create these jobs

41:36 is through laws and programs that mandate them.

41:39 I made a video last year about the homelessness crisis

41:42 in America and why despite spending billions of dollars on it,

41:45 we are only making it worse.

41:47 One of the problems is that there were

41:48 thousands of jobs being created in various local,

41:51 state, and federal government departments alongside

41:53 nonprofits that paid workers very well.

41:56 With so many elite jobs on offer, there is no real incentive to fix the problem.

42:00 [music] Because for the individuals running the programs,

42:02 they would have to find a new job.

42:04 And for the politicians approving the budget,

42:06 they would have to explain why thousands

42:08 of professional jobs went missing under their administration.

42:11 Now, I just wanted to shamelessly mention my old video,

42:14 but it's by no means limited to this one problem.

42:18 Millions of people across America are employed in some

42:20 kind of compliance role with a private company.

42:22 Some of these roles are incredibly important, some less so.

42:26 But if compliance standards are dropped,

42:28 then the politician who passed that law would have a lot

42:31 of potential voters angry that they made their job irrelevant.

42:34 Now, so far, it all sounds like the blame

42:37 of elite overproduction ultimately falls on the people who thought they

42:40 were too good for a real job and felt entitled

42:42 to an elite position just because they got a communications degree.

42:46 That is not entirely unfair.

42:48 And there does need to be a level

42:49 of personal accountability for your own personal decisions.

42:52 But we have made it incredibly easy to follow

42:54 the path of least resistance into the pile of college graduates.

42:58 Striving for an elite job has also become

43:00 a necessity in many parts of the country.

43:02 If you want to live a comfortable version of the American

43:05 dream in most cities across the country these days,

43:07 you need to have an extremely good job.

43:10 More than a third of Americans earning

43:11 $250,000 per year are still living paycheck

43:14 to paycheck because the places where they

43:16 can access these elite jobs are ludicrously expensive.

43:19 The study unsurprisingly found that budget stress was

43:22 far higher amongst younger earners because the only consistent

43:25 way for them to earn that much money was to get an elite job in an elite city.

43:30 Blue collar work can make a lot more than entry-level corporate roles,

43:33 but unless you can successfully start your own business,

43:36 the ceiling on how much you can earn in these roles is much lower.

43:39 In areas away from expensive cities, that's okay.

43:43 But if you grew up in a major city and you want to keep living there,

43:46 then you kind of have to play the game of fighting for an elite

43:49 job by working your way up the corporate

43:50 ladder or fighting through ultra competitive internships.

43:54 If you are successful, congratulations.

43:56 You can buy a Tesla Model 3 and rent a one-bedroom apartment in Seattle.

44:00 But if you are not, then you can contribute

44:02 to the biggest problem that Turin discusses in his writing.

44:05 People who have invested a significant amount of money,

44:07 not to mention years of their life into pursuing a role that they were

44:11 told they were entitled to breeds a lot

44:13 of discontent when they end up undermployed.

44:16 These people who fairly rightfully feel scammed out of what they

44:19 were told was a guarantee are now a significant voting block.

44:22 that's created political pressure to not only maintain

44:25 as many of these nonsense jobs as possible,

44:27 but also to pursue student debt relief,

44:29 advance education subsidies, and retraining initiatives.

44:32 It might fix a lot of problems,

44:34 but there is no getting around the fact that it's

44:36 not exactly fair to people who have already paid

44:38 off their debt or never took them on in the first

44:40 place because they didn't pursue an elite career path.

44:43 Now, this is not to say that these are good or bad ideas.

44:46 It's only to say that they wouldn't even be considered if there

44:49 weren't so many people that had become trapped as an overproduced elite.

44:52 Enough people to make this politically viable.

44:55 Unfortunately, as the great DJ Calli would say,

44:58 we have played ourselves to get here in the first place.

45:01 Beyond the expense and tensions caused by having so

45:03 many people qualified to do rules that are inherently rare,

45:06 we have forgotten how to do the foundational stuff.

45:09 America's housing crisis is in part being

45:11 accelerated by the cost to build new homes

45:13 because we don't have enough tradesmen to keep

45:15 up with the demand for new housing.

45:17 The fact that housing is so expensive only makes this problem

45:20 worse because people see that the only way they will

45:23 ever be able to afford a home of their own is

45:25 to compete for an elite role with every other hopeful graduate.

45:28 So why not just stick with a tech job building a future of AI

45:32 powered robotics that will automate home

45:33 building with 3D printers in eco houses?

45:36 Well, those tech jobs aren't exactly the model of stability either.

45:40 Google's parent company, Alphabet,

45:42 recently announced that they would be cutting 12,000 jobs globally.

45:45 Microsoft has already laid off 10,000 workers,

45:47 and Amazon is getting rid of 18,000 workers in the largest

45:50 job cut the company has ever had in its 29-year history.

45:53 And those are just the companies that are doing well.

45:55 Facebook is laying off 13% of its workforce because

45:58 their big play on the metaverse has failed to excite investors.

46:00 And then there is Twitter, which laid off half of its workforce and then

46:04 hired some of them back and then fired them again.

46:06 Times are tough for businesses and executives are being

46:09 pressured by investors to make cuts wherever they can.

46:11 The easiest and quickest way for businesses to save on expenses is

46:14 to cut out new projects and lay off the staff working on them.

46:18 I'm uh responsible for for the health of our our company um for our direction.

46:24 There are three reasons that tech companies in particular hire so many

46:26 people and three reasons why they fire so many people just as quickly.

46:30 The first reason that they had so many employees to begin with is

46:32 because the largest employers in the tech

46:34 space have been on a diversification spree.

46:36 The largest tech companies, with the exception of Amazon,

46:39 which employs a large amount of workers in its distribution centers,

46:42 can run with much smaller crews than they currently do.

46:45 Software is highly scalable.

46:46 A single developer can produce an application

46:48 that is downloadable by millions of people,

46:50 which is impossible for any other type of business.

46:53 Compare a company like Meta to a company like Walmart,

46:55 and the difference is clear.

46:57 Walmart has a similar market cap, but employs 25 times as many staff,

47:01 mostly in its stores and warehouses across the country.

47:03 The only other industry that comes close to this is the pharmaceutical industry,

47:07 with research and development teams that create medicines that can

47:09 be mass-produced once they get through the FDA approval process.

47:13 However, companies like Microsoft, Meta, Alphabet, Amazon,

47:16 and Apple have all hired a lot of extra

47:18 staff that they don't need to run their business.

47:20 Diversification has been the business motivation for this unorthodox

47:23 approach of paying for too many staff.

47:25 The biggest tech companies in the world are running into the problem of simply

47:28 not having enough people in the world left to offer their services to.

47:31 Meta's stock price is currently down more than

47:33 50% from its all-time high just 18 months ago.

47:36 The sell-off began when the company announced for the first time ever

47:39 that it had lost more users than it had gained in the trailing quarter.

47:42 Facebook is the most used social media network in the world

47:44 with 2.96 billion active users as of the fourth quarter of 2022.

47:49 But now, anybody that wants a Facebook account has one,

47:52 and anybody else either doesn't have access to the internet,

47:54 lives in a country where Facebook is not available,

47:56 or is simply not interested in joining Mark Zuckerberg's online social club.

48:00 The growth of any company depends on being able to achieve one of three things.

48:04 One, sell their products to more customers.

48:06 Two, charge their customers more for the same products,

48:08 or three, sell a wider variety of products to existing customers.

48:12 For the last 19 years,

48:13 Facebook's strategy was to supply their social media platform to more people.

48:16 But since that is no longer possible,

48:18 they are shifting their focus to the other two growth paths.

48:20 Facebook's customers are not actually its users.

48:23 Their customers are their advertisers.

48:25 The product they are selling is the attention of their users

48:28 and information on how to best market to them.

48:30 Facebook tried option two, charging their customers,

48:33 the advertisers, more for the same product,

48:36 a user base to advertise to by collecting more information about

48:39 their users so that companies could more effectively run ad campaigns.

48:42 This helped Facebook's advertising revenue grow steadily

48:45 since this information could be publicly tracked.

48:47 New consumer privacy protection, data storage laws,

48:50 and advertising standards have stopped Facebook from being

48:52 able to take this platform any further.

48:54 And the company is currently at the peak of what

48:55 it can charge companies to run ads on its platform.

48:58 So Meta has also pursued option three,

49:00 creating a wider variety of products to sell.

49:02 Meta has acquired other social media platforms like Instagram and the messaging

49:06 service WhatsApp to appeal to different audiences and to different advertisers.

49:10 Buying these companies involved effectively hiring more

49:12 staff that were working for these companies pre-acquisition.

49:15 Some were instantly made redundant

49:16 as the responsibilities overlapped with existing Facebook teams.

49:20 But having more products still requires more employees.

49:22 What do you think about that number?

49:24 11,000 people from Facebook.

49:27 Yeah, it's a it's a really large number.

49:29 That's tough to comprehend.

49:30 It's a lot of people.

49:31 Tech's tanking a little bit.

49:32 You know, it it's moving on.

49:34 Meta has also been trying to grow its range of product

49:36 offerings by developing new social

49:38 media platforms like the metaverse internally.

49:40 The metaverse has been a multi-billion dollar

49:42 investment that involved hiring thousands of talented developers

49:45 and engineers to build a unique but so

49:47 far unsuccessful alternative to living in the real world.

49:50 Meta is not the only company that is

49:52 constantly trying to diversify what they do.

49:54 Google has dozens of programs working at any

49:56 given time that take teams of thousands

49:58 of engineers to work on and a lot of them won't ever be brought to market.

50:02 It's an expensive strategy, but a company like Google that just started

50:05 out as a search engine now has Google Docs,

50:07 Google Mail, Google powered computers, and YouTube.

50:10 All which give the company alternative revenue streams and allow its continued

50:13 growth even after everybody in the world was already using Google search.

50:17 Other tech companies have similar side projects like AI,

50:19 which is an especially popular product right now

50:21 that a lot of companies are racing to commercialize,

50:24 but they all require more employees.

50:26 So, if reason number one why tech companies hire so

50:28 much is because they need the products to continue growing,

50:31 then reason number one why they fire so much is because they can.

50:34 During financial downturns,

50:36 their existing customers are not going to be spending as much

50:38 [music] with them and some might cut off their business entirely.

50:41 For companies that depend on running ads,

50:43 they will have less money coming in from advertisers

50:45 as marketing budgets get slashed to save costs.

50:48 Companies like Netflix that provide a subscription model will also have

50:51 reduced revenues as customers try to save money by canceling subscriptions.

50:55 If the companies grow by selling their products to more customers,

50:58 [music] charging more or selling more products,

51:00 but they are actually losing customers, there is no point of launching a new

51:04 product if they can't even sell the existing products.

51:06 So, they have to change strategies.

51:08 There is another way that companies can

51:10 provide more value to their shareholders without growing,

51:12 and that's by cutting costs.

51:13 If growth is not going to be possible in current market conditions,

51:16 then there is no point in investing so heavily into growth focused projects.

51:20 Instead, companies can cancel the least

51:22 hopeful of these projects and reduce costs.

51:25 Because of this, even though the growth is there,

51:27 the growth is not very much exponentially increasing.

51:30 It is almost stagnant and because

51:32 of that, more and more layoffs will basically happen.

51:35 Tech companies don't have as many employees as other companies,

51:38 but they are on average paid higher salaries and the projects

51:41 they are assigned to have additional overhead as well,

51:43 making cutting employees just as effective as a cost cutting tool.

51:47 Most of the layoffs are happening in project roles outside

51:49 of the day-to-day operations of these [music]

51:51 companies existing big ticket products.

51:53 Even though some of these projects

51:54 weren't promising to begin with, reason number

51:56 two why tech companies hire so much is why they kept them going.

52:00 The largest tech companies are in the monopoly business.

52:02 If you want to search the internet, you use Google.

52:05 If you want [music] to watch videos on the internet, you use YouTube.

52:08 Shopping online is dominated by Amazon.

52:10 And Netflix's future is uncertain because it failed

52:12 to monopolize the paid home video streaming market.

52:16 These companies make billions because they monopolize important services.

52:19 Unfortunately, monopolies are illegal and there are very clear rules around what

52:23 they are not allowed to do to prevent competitors from entering the market.

52:26 Antitrust laws have been leveled against most major tech companies in the past,

52:30 resulting in settlements that required them to pay [music] large

52:32 fines and sell off portions of their business to maintain competition.

52:35 One tool that companies still have to defend

52:37 themselves from competition is to hire up all

52:39 of the talent that can go and work for a startup in the [music] same industry.

52:42 Tech salaries and bonuses are very high

52:44 because existing companies need to keep their employees

52:47 from joining startups that could make

52:48 the employees [music] very rich through stock options,

52:50 which is a great outcome for the employee,

52:52 but a terrible outcome for the existing business

52:54 that can no longer profit off its monopoly position.

52:57 Most large tech companies also include non-compete

53:00 agreements into the employment contracts of their employees.

53:02 Non-competes are created to protect companies that invest in the research

53:05 and development of new technology from having any progress they

53:08 make taken by an employee that goes to work for a competing

53:11 company or a new company [music] that they start themselves.

53:14 Businesses argue that without being able to enforce non-compete agreements,

53:17 it wouldn't be feasible for them to invest into developing

53:19 new technologies because they could just be taken by competitors,

53:22 making them bear the R&D cost with no commercial advantage.

53:25 The Federal Trade Commission disagrees and has been

53:28 proposing laws to ban non-compete clauses in employee contracts.

53:31 The FTC argues that these clauses are

53:33 often applied to low-level employees like retail

53:36 staff and baristas that don't [music] work

53:37 with any commercially sensitive or proprietary information.

53:40 The FTC also argues that these clauses give unwarranted power to employers

53:44 because there are workers that won't be able to find work

53:46 if they leave their jobs and they also can't seek alternative

53:49 offers as leverage to ask for higher compensation in their current role.

53:53 In its proposal, the FDC estimates that banning non-competes

53:56 will [music] increase workers earnings by $300 billion annually,

53:59 save consumers $148 billion annually on health costs,

54:02 and the one that makes tech companies really

54:04 scared is that the FTC estimates that Batty

54:06 non-compete agreements would double the number of companies

54:08 in the same industries founded by former workers.

54:11 at the when you're talking about executives and engineers

54:15 and and tech workers for example or those in finance.

54:18 What we've seen is that these types of restrictions are basically depriving

54:22 the market of new ideas and of innovation um because people are locked in.

54:26 They can't go start even a competing business.

54:28 The best way to start a business in any industry is

54:30 to get experience in that industry by working for someone else first.

54:33 Non-competes make it hard for businesses to get started this way,

54:36 which is exactly why tech companies like to employ as many people as they can.

54:40 And while they have them, they may as well put them to work on projects

54:42 that may be the future of technology or may

54:44 be the first thing to get cut as soon

54:46 as investors complain about the stock price going down.

54:49 Reason number two that tech companies fire so many people is

54:51 that they know it's going to be much harder for new

54:53 companies to get established in bad market conditions because there

54:56 won't be as many investors putting money behind risky new projects.

55:00 Since there is no risk of new competition getting started,

55:02 they don't need to hoard talent and they can cut

55:04 expenses without fear of it coming back to hurt them.

55:07 Reason number three,

55:08 the final reason why tech companies fire so quickly is because everybody else

55:12 is doing it and getting new talent just became a lot cheaper and easier.

55:16 Hiring a developer 12 months ago was very expensive and difficult.

55:19 Skilled programmers were interviewing companies to see if

55:21 they would be a good fit for them, not the other way around.

55:24 When attracting talent was so difficult,

55:26 it made sense to hold on to the employees the company already held.

55:29 Since there are now 50,000 recently laid off workers in the job market,

55:32 tech companies know they can find new people so they

55:35 finally have the opportunity to get rid of their underperformers.

55:38 Reason number three that tech companies had so many

55:40 of these employees to begin with is just plain bad management.

55:43 As companies get bigger, more people are needed to maintain services,

55:46 more managers are needed to coordinate more teams,

55:48 and things like building management go from being passive

55:51 aggressive notes on the lunchroom fridge to entire departments.

55:54 I think a lot of these companies were not quick enough to act.

55:58 Now you're starting to see them rip the band-aid off.

56:00 Streamlining corporate structures is a difficult task.

56:02 And in any company with enough employees,

56:04 there's always going to be a job that is totally useless.

56:07 The only problem is the workers doing this pointless tasks are

56:10 normally the last ones to be fired during times like these.