Liquidity of skill

16 June 2021
16 Jun 2021
New York, NY
4 mins

Here is a mental model I share often with friends looking for job opportunities: your ability to get a job is the product of two quantities, the value of your skill and the liquidity of your skill.

The value of a skill is the fundamental value you add by applying your skill to a task. It is the difference between a task done with your skill, and a task done without. If I need to build an app to solve a problem, and I can use my programming skill to pull it off quickly and produce a good product, I’ve added some value to this task by being good at programming. That difference that I made is the value of my skill.

The liquidity of a skill is how easily and readily you can convert your skill into some other kind of useful resource, like money, social capital, or influence. If I’m only a mediocre programmer, but there are 10,000 people who know exactly how good I am, I’m going to be able to make more money and get hired quicker than a world-class programmer who anyone barely knows.

Some skills are inherently more liquid than others, but there are ways for everyone to make their skill more easily convertible to money or influence or whatever else you desire.

The ability to write software is of good (though not exceptional) value, but it is so unbelievably liquid right now. There’s a huge, growing, market with insatiable demand for good programmers, and the output of your skill can be scaled up so quickly and easily with just a good computer. This is why software engineers make lots of money. The ability to make great Korean food, by comparison, is not as liquid. Your work depends on real, physical ingredients that grow out of the ground, some well-equipped workspace, and real people visiting you to take the fruits of your labor from your hands. I don’t think this skill is any less valuable than my ability to write decent software. This skill is valuable, but illiquid. It’s like having a check for a million bucks that you can’t cash all at once.

It’s easy to make the mistake of conflating how much money you can make with how valuable your skill is. People think that being a doctor or a lawyer or an engineer is of fundamentally more value to society than being a chef or a musician, because they tend to make much more money. But the reality is that if one job makes more money than another, it’s generally not because that labor or skill is fundamentally more valuable, it’s just more liquid, more easily converted to money, or simply less replaceable.

Your ability to have a good career is the product of two things: the fundamental value and liquidity of the skills you have. So, when applied to job hunting, this means that there are really only two things that matter.

All of the games people play to get an edge in hiring, like polishing resumes, practicing interviews, or going to networking events, are simply the popular ways of maximizing one of these two quantities. These small tactical pieces of advice can be useful, but I find it helpful to know what the ultimate goals are: to be good, and to have as many people know that as possible.

Most people focus too much on being good, and not enough on how liquid their skill is – how many people know how good they are. Many of my friends are better programmers than I am, no doubt. But I think I have a much less stressful time finding interesting opportunities because I sort of talk about it constantly online to tens of thousands of people and share what I make. Does this mean you should work off-hours or grind away on making a hundred side projects? No, obviously not, I’m just a pathological outlier. But think about how much time you spend improving your skill, going through school and honing your craft. Now think about how much time and energy you spend letting people know about what you do and why you do it. If that distribution of effort were more balanced, where would you be? What could you do?

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