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29 September 2015
You're Just the Mayonnaise in a Bad Sandwich
That's what a character played by actor Bruce Willis said to Robert DeNiro's movie producer character in Barry Levinson's brilliant film What Just Happened. I second that. Producers, recruiters, managers, real estate agents, sales agents, lawyers, and outstaffers—what do they all have in common? They are middlemen standing between money and the proletariat, taking a huge percentage for themselves but adding no value. Their very existence is our mutual misfortune. We are too weak to get rid of them now, but sooner or later every supply chain will be mayonnaise-free. Look at Uber—taxi companies are dead already, and we now have only drivers and passengers with a computer system in between. The same will happen everywhere else.
Seriously, look at IT recruiters, for example. To find a programmer, one has to pay about $30K (in Silicon Valley, if a programmer's salary is, say, $120K a year) to a recruiter. $30,000! What will this money be spent on? Or let me put it this way: How much software will I get for this money? Let me put it even better: Why don't I give this money to the programmer directly as a bonus for switching companies? Why do we need this recruiter between us—me and the programmer I'm going to hire? Can't we use this $30,000 more effectively?
Because software systems are not powerful enough yet? Because I can't find a programmer with a few clicks and I have to delegate this search function to someone for $30K?
Well, yes and no.
On one hand, there are plenty of job sites and rather powerful technologies for finding the right person. There is StackOverflow Careers, which not only allows me to find a programmer but also see what he or she talks about and the quality of his or her questions and answers. There is GitHub that demonstrates the code written by a programmer, helping me easily understand its quality. There are professional certifications that show how strong a candidate's skills are. And there are plenty of other avenues.
On the other hand, these tools are not actively used by the majority of programmers and software companies—mostly because IT recruiters stay between us, stealing our money and protecting that position for themselves. Just like taxi companies remain between passengers and drivers, or real estate agents get in between house owners and house buyers, or outstaffing companies squeeze in the middle of project sponsors and engineers.
Imagine if there was no Google and you had to hire a "researcher" every time you needed to find some information. That's how it worked 50 years ago. Not anymore. Google solved the problem of information discovery. It is fast, it is accurate, and it is free. The researchers are out of business. Are we sorry about it? Well, maybe, but that's the way it should be. The same will happen with IT recruiters and all those "agents." They will eventually be out of business and will start doing something that actually adds some value for all of us.
At the moment, they are simply taking away our money, exploiting the fact that we're lazy, or stupid, or shy, or you name it. For example, it was not obvious in the beginning how to use Google. I know a few people who still don't know how to do it. I'm sure you know a few, too. They would rather call a friend when they need information than pull up Google.
Say I'm a good friend and Jeff calls me to ask what the weather will be like tomorrow in California. I'll advise him to Google it, now and every time in the future. I will teach him how to do it. But if I was a lousy friend and wanted Jeff to depend on me forever, I would just browse over to Google, check the weather, and tell Jeff it'll be cloudy.
That's exactly what recruiters are doing. Their entire business is based on the fact that we're not smart enough to use existing software systems, publicly available and in most cases very cheap or simply free. Or we're too shy to apply for a new job ourselves. Or we just don't know how to write a good resume and emphasize our skills properly. They are exploiting our weaknesses to make money.
A friend of mine was looking for a house in San Francisco a few months ago. He actually found the house on Zillow but paid $70,000 to two real estate agents to help him close the deal (the price of the house was close to $1.4 million, with 2.5 percent to each agent). What did these "hard-working" people do to earn his $70,000? They prepared the necessary paperwork and, of course, talked to him for a few weeks.
Can't we get rid of these two good-for-nothings and delegate their operations to a computer system? Well, we have Zillow, but how much of my friend's $70,000 found its way to Zillow? Almost nothing (I assume one of the agents paid a few pennies to publish an ad there). Is that fair? Let's instead give $5,000 out of every real estate transaction to Zillow and let it handle everything, automatically. Without any "agents" involved. Can we? I'm sure we can, and that's the future.
What will the army of real estate agents do? Well, maybe something useful, like cleaning streets.
The very existence of this mayonnaise in our modern business environment is a very negative thing. Money is simply not working the way it should. Also, since this mayonnaise is rather expensive, its existence creates a very de-motivating effect on those who are actually delivering value while making a much smaller income. It obviously demonstrates that the entire system is defective and simply not fair.
The same is true about outstaffing companies, which we contract with to gain access to programmers sitting somewhere overseas or much closer. They find developers, hire them full-time, and resell their skills with a 150 percent or greater margin on a part-time or short-term basis. I've been getting a few offers from such companies every day.
They want me to pay, say, $40 for each hour while a developer sitting in their office gets like $2,500 per month. This means $25 out of my $40 will be spent not writing code but rather on something else. Also, a programmer will be motivated for the $2,500, not for $7,000. So I will be paying $7K per month and getting software worth $2,500 a month.
I will be paying for a Mercedes-Benz S-Class but getting a Ford Focus. I'm not greedy; I just want my every dollar to be converted into some value. In this scenario, $4,500 will be simply wasted.
The same is true about every single middleman in the market. They make business processes less effective, take away significant amounts of money, and slow down optimizations and innovations. A truly modern and innovative way of doing business is by directly connecting money and people who add value. There should be no one in between except computer systems.
Sometimes I hear the comment that people love to work with people, not computers. That's why we need all that mayonnaise—to make our life happier? It's true that people love to deal with people—people we really need, people who speak the same language, and people who deliver real value. Not with producers, recruiters, real estate agents, sales agents, outstaffers, lawyers, travel agents, investment brokers, executive officers, or taxi dispatchers.
The point of Bruce Willis's character is that when the sandwich is bad you don't fix it with a mayonnaise. It won't help, but only make things worse.