A Brief Book Review of How to Win in a Winner-Take-All World by Neil Irwin
“If you take a sailboat out for a cruise, there are some things you can control, like how you position the sails and guide the rudder. There are others you cannot, like the winds and the currents. Still, to get where you’re looking to go, it’s essential to understand the winds and currents. Successful sailors adapt the things under their control to react intelligently to the winds and currents that are not. In our careers, we can control the jobs we apply for, the training and education we seek out, the assignments for which we raise our hands. But our fortunes are shaped significantly by huge economic and technological shifts that are remaking nearly every industry. This book is a guide to understanding those winds and currents.” - Neil Irwin
“The future is already here—it’s just not very evenly distributed.” - William Gibson
Quite often I have found myself in business meetings with veteran bores fluent in condescension and willful ignorance. I steel myself by imagining future memories of the moment 30 years hence. With all likelihood, in the final calculation, the moment, not to mention the entire existence of my slumberous interlocutor, won’t even be decimal dust in the tally of my joys and pains.
In this way, farsightedness and financial compensation can be quite consoling. Every professional who has worked a day in her life can probably relate. Such is the history of work. The stimulating book How to Win in a Winner-Take-All World: The Definitive Guide to Adapting and Succeeding in High-Performance Careers (2019) is concerned with the future of work. Its author is Neil Irwin, a senior economic correspondent at The New York Times. But you won’t find in the book any mention of businesses like The We Company, the organization behind the shared-office brand WeWork featured in headlines daily; in its government filings for its pending IPO it claims to “reinvent the future of work.” I think The We Company’s absence is for a good reason. To understand why let’s briefly go back in time before we go forward.
It’s 2010. I’m fresh off successes investing during the financial crisis. Being a man with a hammer seeing nails all around, I decided to investigate the commercial real estate industry for ideas. I learned of a little company named Regus. It is today known as IWG and is the only global competition at scale for The We Company. I was serious enough about Regus that I read its financial regulatory filings and toured some of its Manhattan locations. I looked at it not only as someone who might invest in it, but also someone who might use their services someday as an entrepreneur. As a potential business investment, I noticed that during the dot com recession, Regus had been decimated. But it seemed chastened by this experience and smarter about managing the maturities and magnitudes of its liabilities. It had also backed off the idea of top-line growth at all costs. While business slumped in 2007-2009, the company remained solvent. Looking at Regus from the perspective of a customer, its value proposition was appealing. The flexibility and breadth of services on-site were enticing, including shared meeting rooms, virtual office services, and dedicated video conferencing studios. Nevertheless, I passed on the opportunity. (I invested instead in WH Smith, a British newsstand business that had unique customer capture with its real estate footprint in high street and airport locations. That was a great investment.)
What does this have to do with The We Company and more generally the future of work? Well, what’s fascinating to me about WeWork is they aren’t doing anything different than Regus did then. Yes, you get colorful common spaces, upbeat music piped into bathrooms, fruit-flavored water, and free bourgeois coffee. But nothing else that Regus wasn’t offering in 2010 and can’t today. I think partly for this reason The We Company is a distraction on the road to ‘the future of work’. It seems a bad investment today given its incredibly high valuation versus Regus and how seemingly corrupt ownership is. But that’s not the same as saying it won’t survive for decades. There will always probably be some companies who aspire for access to real estate to house growing headcount to encourage face time between staff. But I think this will be less and less, especially after reading Irwin’s book.
What has changed since 2010 is the nature of work and the jobs-to-be-done in the employee and employer relationship. From this vantage, The We Company actually seems not to be that imaginative or inventive. What’s changing about work is that over time employers won’t be asking (1) “How do I scale this company and keep real estate costs low?” but rather (2) “How do I scale this company and have literally zero real estate costs?” Instead of (1) “Where do I house my growing workforce and employee base?” the question becomes (2) “How do I grow without taking on employees at all?” In each question pair, The We Company answers the first but not the second.
Many disruptions are emerging from the combination of the mass availability of Wi-Fi, powerful laptops, smartphones, abundant productivity apps, and the movement of group administration to the cloud. One of those disruptions is that remote “knowledge economy” workers and freelancers are capturing more share of mind and wallet in employment. Imagine “flexible real estate” as just a stepping stone toward the true corporate aspiration, “flexible workforce”. This will mean more business for companies that make this latter aspiration and its prerequisites possible; such as the easy facilitation of payments between corporations and independent contractors, the vetting of both sides to freelance relationships, the keeping of reputation records, etc.
Why does this matter to the investment analyst or manager? It matters because the companies that can successfully answer the second questions above will have a cost advantage on those that cannot or do not. And that cost advantage will likely translate into offering lower prices or being able to invest in other moat-expanding activities. This, in turn, increases their odds of surviving and thriving. Here’s a quote from Irwin about how this disruption is playing out:
“Meanwhile, in the commercial arena, GE has long been a huge customer of very expensive consulting firms like McKinsey and Bain—but sometimes the types of questions they have been hired to take on could be better answered with other approaches. If you’re trying to sell equipment to electrical utilities and need to analyze pricing strategies, maybe a short-term contract with a utility CFO who is between jobs could generate more useful recommendations than a dozen young MBAs slaving away for six weeks.
“Many companies aspire to be the dominant platform to match freelance workers with companies that might wish to engage them. Thanks to the internet, it is easier than ever to find someone with just the right technical expertise or history to provide temporary help.”
Why does this matter to employees? It matters because in the future there will probably be many more opportunities (and pressures) to be the sort of person with hybrid skills in areas such as management, branding, sales, strategy, and finance. The days are diminishing of being able to increase one’s compensation and stature by being a corporate bureaucrat or focused on one silo of activity and just managing more people. Acquiring various skills will probably mean taking lateral movements in your career to face new challenges and learn new skill languages. It will probably also mean learning the various skills necessary to freelance occasionally and perform independent consulting work. There are benefits and drawbacks to this, but it is a clear trend. It probably will require a stronger government social safety net for workers to withstand fluctuations in their income.
Such are some of the ideas presented in Irwin’s book. With examples of individuals from companies like Goldman Sachs, Procter & Gamble, Google, Netflix, and others, he makes a strong case for aspiring to be “Pareto-optimal”. This means, among many things, being someone who views their relationship with their employer as a contract rather than a marriage, who approaches each day hungry to acquire new skills, and who maintains a growth mindset through thick and thin. Highly recommended.