Maximizing Prestige; The Wrong Bet #103
Most of us are (knowingly or unknowingly) chasing prestige; reasons why SaaS may not perform as well as it did in the 2010s
This essay is an interesting read on the sad realities behind how people get jobs at 'prestigious organizations.' While I'd like to believe that this mindset is changing, there is still a long way to go.
"They only recruit at the most elite colleges, and they want recruits to be attractive, energetic, articulate, socially smooth, and have had elite personal connections, jobs, and extracurriculars. They don’t that much care about your grades, what you’ve learned, or what you did in your jobs or extracurriculars, as long as they were prestigious."
Maximizing for prestige has been a foolproof way to build a successful career in many industries - especially in professional services. Reflecting back on business school and the process of getting my first full-time job, there is no doubt that everyone was gunning to build as much 'prestige' as possible. Meritocracy only got you so far.
During interviews, there is more of an emphasis on telling your story ('tell me about yourself') vs. actually working on your skills. It's best described below:
"An interesting criteria is that you must tell a mesmerizing story about your life, a story told almost entirely in terms of choices that you made to pursue your internal goals, without external constraints having much influence. And even though you have been chosen for your very consistent lifetime pursuit of prestige, that is very much not allowed to be one of your main goals. You were instead pursuing other goals, and prestige just happened as a side effect. Lucky you."
This need to have an interesting story vs. working on your craft helped for an entire system that emphasized prestige vs. skill. It started as a pattern that recruiters looked for among job applicants and quickly trickled down to university and even secondary schools.
Unfortunately, this punishes people who may come from adverse socio-economic backgrounds.
"Across the board, [evaluators] privileged [extracurricular] activities that were motivated by “personal” rather than “professional” interest, even when activities were directly related to work within their industry. This was because evaluators believed that the later types of activities served the instrumental purpose of “looking good” to recruiters, and they viewed them as “resume filler” or “padding” rather than evidence of genuine “passion,” “commitment” and “well-roundedness.” … Evaluators also preferred activities driven by desire and personal passion rather than necessity, such as paid employment or care for family members."
There is an argument to be made that the internet changes this. People have been able to get rewarded by being hyper-focused on their craft. While I think the internet has certainly opened up the number of opportunities available, many of us still fall into the trap of chasing prestige.
The Wrong Bet
This is a great post from Buck On Software as to why SaaS may not be as great of an investment as it has been in the past. Here's the summary:
While I still believe that software can be a great investment, there is no doubt that 'The Sharp Elbows' era has made it harder to make great investments for the reasons above. However, as pointed out in the post referenced above, multiples continue to go up on the basis that the growth will continue.
On a side note, I’d also check out this post on explaining the growth stock selloff - essentially going into how an increase in the risk-free rate can create a double-whammy effect of both a lower terminal multiple and higher cost of capital.
If you have a few hours to spare, I'd highly recommend checking out this Starbase Tour by Elon Musk (in 3 parts). It is inspiring on many levels.