1. India and China have massive rural populations still festering in abject poverty. The situation in these places is like the petroleum industry a century ago: we’ve exhausted the oil that bubbled right to the surface, but there’s plenty more if we drill for it. Plus there are quite a few countries which have just begun to be tapped, like most of the former Soviet Union. Around here in Boston we have a sizable Armenian diaspora and they are starting to outsource work back there, for less than you’d pay in Bangalore.

2. There is *always* a trade-off between capital and labor. If the US totally cut off illegal immigration and the going rate for kitchen help rose to $30/hour, restaraunts would start buying dishwashing machines and other automation tools. There is more here than just machines and software, too. Systems like Six Sigma or Lean Manufacturing also represent technological investments that take time but ultimately yield operations which require fewer people per unit of value generated.

3. Most economists will tell you that there is no such thing as a “shortage” in a free market, only “shortages at a certain price.” If you want an AJAX UI developer for $40k in Boston, good luck. Go to some rehab clinics and halfway houses and maybe you will find one sober enough to see the keyboard. Conversely if you offer $150k with 3 weeks paid vacay and matching 401K, you’ll have plenty to pick from.

Inflation in the labor market happens when you have too much money chasing too few skills. In short, it’s when people get paid more than they’re worth. The problem I have is that I still feel quite strongly that very few companies really have a good handle on what individual employees contribute. It is widely felt, for instance, that a great developer can be ten times as productive as an average one. And yet the only places where this productivity delta carries into income is at start-ups where a couple of initial geeks get early sizable equity stakes. Conversely, part of the reason salespeople get paid so much is that it’s very easy for them to put numbers on their “contribution.” I use quote marks there because very often the difference between Mr. President’s Club and Mr. Barely Made Quota is often territory or other exogenous factors. Michael Lewis’ book “Moneyball” is a great illustration of how baseball teams, which are statistically measured more comprehensively than perhaps any other human activity, have placed disproportionate emphasis on superstar performance which ultimately did not win games.

I think we are agreed on more than one thing but in particular here: we cannot simplify something as complex as this especially when outcomes, supply and demand are affected – impacted rather – by so many factors: time, political, social, economic, legislative, technological and what have you. My only concern with your rationale is that wage inflation for certain skill sets would eventually stump your proposed solution of paying people “what they are worth” - skilled labor and qualified talent being a commodity in high-demand. We see that now in India where not so long ago everyone was rushing there to outsource their IT jobs because they had “plantiful” resources, “priced right.” Here we are in not three years after the rush to outsource/offshore with salaries in India inflating annually at a rate 15% among IT professionals with near wage parity negating the original value proposition. So, what’s next?

On the subject of companies offering better jobs – like truck driving and nursing – all things are relative. Being able to better source, screen, select and retain talent are – I agree – sources of significant competitive advantage and perhaps the answer is as simple as that: manage talent better than everyone else and let the rest go to hell. I guess the problem with that approach is, who will then have the need or money to purchase what the well-managed talent machine produces?

Yes, Colin, you’re right – nothin’ is that simple.

Amitai

One ace whatever to another, you dance pretty well yourself. Hey, you ask hard questions, I give hard answers

The issue I have with the discussion that has been going on is that it is simply too… simplistic. We are told that the population is shrinking, but it is not. We are told that the workforce is shrinking, but it will only do so for a while, and that doesn’t seem to take into account changes in retirement. We are told that we face permanent shortages that require us to fundamentally change our whole way of thinking, based on current patterns of resource utilization which will change substantially over the next 5, 10, and 20 years.

You say you are worried about whether we can overcome the present talent crunch. On a macro scale, I couldn’t care less. The financial sector did great in the 1980s despite a severe shortage of financial professionals. The shortage of IT folks in the 90s did not prevent or stop the dot-com boom. In any case, in the short term there is no “overcoming” the hot market on the macro scale for most occupations. Clever recruiting (such as the trucking company you highlighted that’s going after RV-driving retirees) can help some sectors, but it’s a lot easier to make truck drivers than nurses or software engineers.

At the company level, it’s pretty simple, isn’t it? You pay people more money and offer better jobs. You have to get better than your competitors at (i) sussing out who is high-potential and who isn’t and (ii) knowing the real value of a great performer so you can pay accordingly.

First, and foremost: When I described you as an “ace” I meant it sincerely. I don’t know where you got “bullshit” from but you are misreading the post. If you are equating the word “salesman” with “bullshit” that’s your stereotyping problem, not mine.

Second: In my Rub-A-Dub-Dub post I said – explicitly – “I cannot argue that Colin Kingsbury’s point of view is not compelling. It is. I cannot argue that he is wrong. I don’t know. What I can say is this: his hypothesis cannot be tested against alternate points of view or current trends because he offers no data or research to support it. Maybe there isn’t data out there. Who knows?” I didn’t accuse you of anything, here, or – on a second reading of this and previous posts – anywhere else. If I’m missing something, please let me know so that I can retract it.

Third: Where did I dismiss your subsequent evidence/validation as nothing more than census data? I certainly asked a number of questions which you dismissed as peripheral and where your answer would have required something more than census data – as in your suggestion that we make it as easy for professionals to immigrate here as we currently do for day laborers who are in the U.S., many undocumented, here illegally. That begs the question: “What are you suggesting?” I stated clearly relative to John Sumser’s posts: “John Sumser has concluded that in establishing “name, rank and serial number” he has uncovered the identity of an enemy within when in reality all it is is census data withstanding the electric cattle prod of John Sumser’s analysis.” Where is the reference to any concern relative to the data that you provided and laid out?

Fourth: In answer to your question regarding citing of sources – you can cite whatever sources support your argument, I never had any contention with any of it. I even lent weight to your argument by providing data that you did not reference but could have. My only issue with John Sumser’s analysis was that – in the final analysis – he couldn’t make up his mind whether you are right or whether “conventional wisdom” prevails. I’m sorry if you didn’t see the humour in a thought leader being in two minds. I thought it was funny. My comments had nothing to do with your assertions on the matter, nor on the data you provided.

Last: I never contradicted you or pooh-poohed your argument. Not once. I remain convinced that your assertions for what the world will look like ten (or six) years out are irrelevant if we cannot overcome the talent crunch we are dealing with today and look like having to contend with for the foreseeable future. It’s the same as saying we have enough nursing candidates but not enough teachers to train them. OK – so, your point is?

Now, Colin, I will admit I have a tendency to contextualize these things in a style that might not be to everyone’s liking. If I caused you any offense that was not my intention. I’m sorry. Ticking off the occasional reader and/or blogger is a price that I am prepared to pay for a) writing posts that I hope are different from the prevailing blah and interesting enough for readers to comeback to – thank you Maureen for your comment and useful data, case in point; and b) present the debate in a manner that stimulates thought, discussion and further analysis. If that is a price you feel is too high for this airing of views, data, positions and opinions, then I owe you. However, I take it from your lengthy reply and restatement of your position that this is a subject that your are – indeed – prepared to continue to invest in. Hence my comment “Colin Kingsbury is an ace” – a comment which, like the rest of my post, I stand by.

Amitai

“The Bureau of Labor Statistics projects that we will have
167,754,000 jobs in the employment market in 2010, just seven short
years away. At the same time, we will only have 157,721,000 people
in the labor market—a shortage of 10,033,000 workers! These figures
don’t even take skill needs into consideration, just raw numbers of
workers. This decade will make the tight labor market of the late
1990s look like a practice session.” Quote used by permission of
Roger Herman.”

I suggest you get your orders in early.

Maureen Sharib
Telephone Names Sourcer
513 899 9628

I’m flattered that you think I’m an ace bullshit artist. First you accuse me of not backing my arguments up with facts, then when I put in statistics, you wave it away saying “all it is is census data.” Am I only allowed to cite sources which agree with your conclusions?

I am not now nor have I ever debated that we are presently in a hiring hot zone. That is not my point. The question is not what we should be doing for the next 6 months, but the next 6 years.

If we look back to the mid-late 90s, the market for web developers was hotter than it is today. However, hindsight suggests that the biggest mistake companies made in this period was to invest too much in people–payroll expenses were far and away the number one cause of death for Web 1.0 startups in 2000-2002. The companies that made out the best were arguably those who were in a strong financial position circa 2002-2004 and able to exploit the opportunities to hire the good and great people that were on the active market at a bad time. Sometimes long-term thinking means not buying in now.

In the larger picture, my feeling is that the most successful companies will be those that figure out how to get more out of a smaller number of very good people, and compensate them proportionally. It is easier in most companies to get $500k to pay for five software engineers than it is to get $450k to pay for two. However, it is not the least bit exceptional to find two truly awesome hackers who can outperform five respectable ones.

This sort of disparity in pay and performance has long been the rule in sales, because results there are more immediately tangible. But any manager knows that there are people who generate two to three times the value of the average but get paid perhaps 10 or 25 percent more. This ends up getting justified as “it isn’t money that motivates the best programmers.”

Granted this model is not perfectly transferable to every space–but right now it’s definitely under-utilized.