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Future of Work: Peak Talent

Today we hear an increasing number of people wondering aloud whether Silicon Valley is once again in a bubble. Whether economists, venture capitalists or investors on Wall Street believe the conditions that we currently see in technology are a bubble or not I do believe that a theory of mine that I call “Peak Talent” is what eventually pops most bubbles and especially those in the technology sector. And I also think that identifying when “Peak Talent” occurs is a good indicator of when an industry is in a bubble.

Stick with me on this for a moment.

Over the past 20 years I have come to believe that all industries, but especially those that require specialized and hard to gain skills like those found in industries like the technology sector, eventually run up against a wall when it comes to finding the people that a business needs to execute against its core goals. Once this point is reached in a sector,(i.e. tech), companies throughout the industry are no longer able to meet the milestones necessary to realize and/or increase revenue. In technology this means missed product deadlines, an inability to scale sales, lost revenues, etc. Peak Talent leads companies, and eventually an entire sector, down a death spiral that leads to investor frustration and eventually complete withdrawal. Or in other words, the bubble bursts.

I started developing this theory of “Peak Talent” during the last tech bubble in the late 1990’s and early 2000’s when I was working with a number of start-up executives and venture capital firms helping them find key executives and engineers.

At the beginning of the tech 1.0 boom venture firms would invest in companies with a core team and then would look to add to that team. Part of the plan, the expectation if you will, was the need to recruit additional people to help build, market and sell the product that would eventually be created. Towards the end of the boom most venture backed firms began to fail because, in my opinion, they could no longer recruit the talent they needed to get the job done. And it wasn’t only the inability to recruit talent. It was also an inability to keep talent. As companies became ever more desperate they were willing to pay ever higher salaries, signing bonuses and stock grants which increased turnover as employees jumped ship for greener pastures.

Today most executives, and venture capitalists, in the tech sector, will tell you that once again the lack of available talent is their number one impediment to success. And the reason that my theory of “Peak Talent” matters is that unlike financial capital, which in theory is unlimited, Human Capital is a constrained resource. This is especially true in industries that rely on highly trained workers to operate effectively. You cannot easily train a non-coder to be an exceptional coder. You cannot easily train a real estate agent to become an enterprise software salesperson. Highly experienced talent is a scarce resource.

Today talent is hard to find and turnover is high and if my theory continues to prove correct we will see it start impacting the ability of technology companies to meet, and exceed, their business and financial goals. The companies that will survive, and thrive, will be those with the best corporate culture and the most loyal and engaged workforce.

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