In 1926, Henry Ford introduced the concept of the 40-hour work week. This schedule was optimized for assembly line workers in Ford's automobile plants.
Since Ford's era, thanks to technology, the nature of our work has shifted from repetitive manual labor to creative problem-solving. But there has been no associated recalibration of our work schedules. A computer programmer at Google in 2012 has roughly the same schedule as a Model T assembler at Ford Motor Company in 1926.
The difference is, an individual programmer has far more ability to create value for society than an individual assembly line worker. Instagram was worth $1 billion after less than two years. Youtube was worth $1.6 billion after 18 months. Each was built by a handful of people.
If one programmer is potentially so valuable to society, why is a full-time job still the default work scenario? It's in society's best interests to free up the hackers to hack. We are forcing brilliant, technology-empowered people to limit their creativity to nights and weekends, simply because the 40-hour workweek made sense for assembly line workers in 1926. Decisions made in the early 20th century are stifling innovation in the 21st century.
It's time to rethink the whole notion of work.
We've considered the 40-hour workweek, and the 4-hour workweek, but there's a lot of unexplored ground in between. Let's explore it.
Currently, as a software developer, your employment options are:
Option 1: Work full-time for a big company
The status quo. Sucks for all the obvious reasons. See Paul Graham.
Option 2: Work full-time for a startup
In most cases, this is simply a bad deal.
Let's do some math. Say you're working at a startup, and they're paying you a $100k salary, and have given you 0.1% of the company, which vests over four years. So you give them four years of your life, and now let's say the company exits. If they sell for $10 million, you've made (4 years x $100k) + (0.001 x $10M) = $410k. If they sell for $100M, you get (4 x $100k) + (0.001 x $100M) = $500k. If they sell for $1 billion, you end up with (4 x $100k) + (0.001 x $1B) = $1.4M.
Most likely, your equity will be worthless, and you'll have made $400k in exchange for four grueling years of your life.
This assumes you have 0.1% of the company at liquidity, which is unlikely, given dilution. And it's also unlikely that you get a $100k salary.
A $100k salary puts your effective hourly rate at around $50/hr. Hold on... that's assuming a 40-hour workweek. Consider startup hours -- 60-80 hrs/week -- and you're looking at an effective rate of maybe $30/hr.
Option 3: Freelance
Compare these numbers to freelancing. $100/hr is a not-unreasonable rate for a good freelance programmer. If you're working 40 hours per week -- that's 40 billable hours, not 60+ startup hours -- at $100/hr, over the course of four years you gross $800k.
And, with the right skills and ability, you can probably command $150+/hr or more. That's $1.2M over four years! (Note that this is the same amount you'd take home in the billion-dollar-exit example, above.)
What's even more interesting is that, when you're freelancing, the quantum of work is one hour, not 40 hours. You can choose to work only three days a week; at $100/hr, you'd still gross $120k annually.
Unfortunately, freelancing sucks, too. You spend your free time finding your next gig, and dealing with non-technical annoyances like billing, collection, insurance, taxes, etc. You can't bill for those hours, so they lower your effective hourly rate. You have to negotiate your value constantly, which is always a difficult conversation. Freelancing is lonely. And you have no lottery ticket.
At least the startup route provides some chance (however small) of complete financial freedom down the line.
Option 4: Start a company
We strongly believe that anyone who is at all inclined to start a startup should do so. But, though it's easier than ever to start a company, it's still not trivial. Though it's cheaper than ever, you still need to cover your cost of living. What are your current options for funding?
The first option is bootstrapping. Bootstrapping is a sugar-coated word for “burning through your savings.” Hopefully you'll have enough runway for your idea to take off, but you very well may not. Either way, your quality of life will take a serious hit -- better maximize that runway! -- and you'll be coding with a ticking time bomb in the room. That sucks.
You could also raise money. This sucks for other reasons.
First, raising money is a serious distraction from your real goal: creating value. Anyone who's been through this process knows that product development grinds to a halt while you're out chasing investors.
Second, you don't want to raise until you're ready to raise. Ideally, you raise money to grow, not to keep from dying. The time to grow is when you're on to something, after you've found product/market fit. Before you're on to something, you have no leverage with investors, which means you probably won't get funded or, at best, you'll be forced to agree to onerous terms.
Third, as soon as you take outside money, you've changed the definition of success. You're promising your investors that you'll work in earnest to maximize their return. Suddenly, achieving success means that your business needs to grow by an order of magnitude. Before you took on outside investors, achieving success meant covering your rent and ramen, a much more modest and achievable goal.
And remember, even if you do raise money... there's that ticking timebomb again. Sure, the timer lasts longer, but the explosion is bigger.
So, first decision when you want to start a company: do you bootstrap, or do you raise money? Just as with the 40-hour- and 4-hour-workweek, this is a false dichotomy.
There must be some middle ground between bootstrapping and outside investment.
There seem to be two kinds of people who start companies. The first kind of founder wants to take over the world. His overarching goal is to start and grow a billion-dollar company.
The second kind of founder just wants the freedom to hack. His overarching goal is a comfortable lifestyle, where he has the ability to work on whatever he wants to work on -- be it the next Facebook, a new dialect of Lisp, a screenplay, or raising his kids -- without that ticking timebomb.
Paul Graham illuminated one path to this lifestyle: compress your working years into as short a period as possible, by starting and selling a company.
That's a valid path, for sure, but there's no reason to believe it's the only path to freedom.
Frankly, if you're someone who is passionate about building things but not about building companies, this path sounds a lot like forcing yourself to eat your vegetables before you can have your dessert. Freedom is on the other side of a mountain of spinach.
Sure, the eat-your-vegetables strategy works out for some people. But many -- no, most -- hacker founders eat spinach for years, only to give up and take that job at Google. At Google, at least they can get a massage while eating their spinach.
If starting a company is simply a path to a desired lifestyle, maybe we can work backwards from the ultimate goal -- the lifestyle -- to find another path.
What does the ideal lifestyle look like? You have financial security, and the temporal/spatial freedom to work on your own projects. You don't have to choose.
In 2011, after years of eating startup spinach, Altay stumbled into this lifestyle. He worked roughly 2-3 days per week, recorded two albums with two bands -- including frequent trips to the east coast to record and tour -- and learned how to play the cello.
Until your own side projects are paying your bills, you'll still need to have a job. So let's imagine the optimal work life:
You're not forced to work 40 hours per week. You can work as much or as little as you want. One day a week? Fine. Monday, Wednesday, Friday? Fine. Full-time cause you wanna save up for Disneyland? Fine.
You can do all of this from anywhere -- your home, a coffee shop, a beach in Thailand -- and at any time. 9a-5p? Fine. 10p-6a? Fine. 2p-4p, 7p-9p, and 11p-1a? Fine.
This sounds a lot like freelancing. Here's what's missing:
Someone else takes care of finding work, negotiating, billing... all the unpleasantries that normally fill up a freelancer's non-coding schedule. In your work life, you get to solely focus on doing what you are good at and what you enjoy, and every hour spent working on other people's projects is billable.
If demand for your skills far outstrips the supply, and you're awesome at what you do, you have all the leverage. You can set the terms of your employment.
Now let's picture the optimal situation when you're working on your projects. What does freedom to hack look like? First of all, you have infinite runway: you can create and iterate as much as you want, without burning through your savings. No ticking timebomb.
Second, you have just as much structure as you need. No more, no less. There are a number of components to this structure; your ideal might include some or all of the following:
A community of like-minded peers
Mentors / advisors
Office / coworking space
On-demand domain-specific help (technical, legal, administrative, etc.)
Education
Tech talks (keep you up to date on new technologies)
Business advice
Personal development
Googley perks (food, laundry, massages)
If your hack project reaches product/market fit, and you want to take it to the next level, this structure should also provide:
Co-founders and employees
This is why we've started 10x Management. Our job is to help you figure out what your lifestyle goals are, and to help you get there. Our first step is to optimize your work time, by taking the pain out of freelancing. As we grow, we'll help you optimize your hack time, too, by providing access to the other resources listed above.
10x Management's overarching mission is to provide a support structure for optimizing your happiness, and for realizing your potential.
The other side of the marketplace
Sounds good, but will employers tolerate this arrangement? As long as you're meeting their expectations, building maintainable software, and are communicative and accessible throughout the process, we suspect they will.
Moreover, we suspect companies will increasingly be forced to accept this arrangement.
There is a ridiculous talent shortage in the tech industry, and the problem is only going to get worse. Not only is there plenty of existing software that needs to be maintained and updated, but there's an ever-increasing demand for new software that needs to be built. The number of people on the internet has roughly doubled in the past five years. Mobile computing is in its infancy. Many industries have yet to be disrupted. Software has only just begun to eat the world.
There are only two prerequisites to needing software: an idea, and money. Ideas are everywhere, and it's easier than ever to raise money. Angel investing is en vogue, and Facebook just created another 1000 millionaires running around the valley with money to throw at startups. Dozens of high-quality companies come out of Y Combinator every six months.
The next step for each of these companies is to accelerate its product development, by scaling its workforce. But the hiring process, from resume-sifting to interviewing, is completely broken. And, like fundraising, hiring is a huge timesink, and it's a distraction from the company's real goals.
Fundamentally, when a company hires a programmer, they are trading money for software. Period. This process can be streamlined.
What if hiring were reduced to a simple transaction, where a company could hire kickass, proven, entrepreneurial people, pre-vetted by a trusted brand? What if it could scale its workforce up and down as needed, like an Amazon EC2 of talent?
This company would have easy, on-demand access to specialized skills: today it might need a product manager to get a demo ready for investors, tomorrow it might need a designer, the next day it might need a MongoDB expert. And what if it could compensate this workforce on its preferred payment terms -- market-rate cash today, deferred payment with interest (like startup lawyer compensation), equity, or some combination of the above?
No resumes, no interviews, no overhead. Companies trade money for software.
Y Combinator solved the previous bottleneck in innovation, which was funding. The new bottleneck is talent.
10x Management exists to solve this problem. We think we can create a better market for labor, by handpicking the best people, optimizing for their happiness and productivity, and protecting them from the default state of full-time employment.
And we think this new labor market will raise the overall productivity of society. If we switch the default mode of employment from full-time to freelance, we free up the hackers to hack on their side projects, de-risking entrepreneurship. As side projects grow into new companies, these new companies hire productive, part-time hackers in a similar fashion, who then build the next generation of companies in their free time. It's a recursive cycle of company-creation.
In 1926, Henry Ford reduced the workweek from 48 hours to 40 hours, because he believed that people who work -- and therefore, have money -- needed more leisure time to consume goods and services. (Why would you bother buying a Model T if you didn't have any free time to drive it?)
Today, we don't need more time away from work to consume goods and services. We need more time to produce them.
- Michael and Rishon
10x Management
June, 2012
