'Growth' vs 'yield' jobs - which should you take?
Posted: Mon Sep 30, 2019 10:53 pm
On my recent job search efforts, I've been increasingly seeing the opportunities falling into one of two buckets, from the perspective of the employee.
These two buckets are:
1. Growth
2. Yield
I wanted to flesh out what I mean by these terms and see if anyone else agrees and/or has encountered a similar phenomenon.
And then think about how to choose between one or the other, as an extreme saver.
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First, here's what I mean by these buckets:
Growth
These are businesses that pay a smaller amount per employee and have a small number of people working for them.
This is due to some combination of the business being inherently "small-time", i.e., low revenue, low profit, etc and/or the business being set up in such a way that the owner or investors don't see it in their interests to invest more in paying their employees higher salaries.
PRO: There's less competition between talent to secure those roles and then progress within the company. This mean that, in theory, if you join one of these businesses at the 'ground level', it's possible to become a 'big fish in a small pond'. If there is growth potential in the business and you can engineer that growth to benefit yourself in terms of salary, then you might make much more money than your starting wage.
CON: Obviously you're taking a risk. Maybe the business can't grow much further. Or maybe that growth wouldn't be shared with you, no matter how much you contributed to it.
Yield
These are businesses that pay a larger amount per employee, whatever number are working for them.
This is due to some combination of the business having a lot of capital, it being in their interests to pay employees well, the supply of the needed skills being rare and the demand high enough to support high salaries for those skills.
PRO: you get paid a lot. If you're saving most of your income, this is great, because then you can pump that money directly into growth investments.
CON: you'll probably be stuck on the same (or close to the same) salary.
---------
Second, how does one choose between the two?
Generally I've almost always gone with the 'Yield' companies. My reasoning for this has changed over the years, but it basically boils down to the following:
1. With 'Growth', the risk is unacceptable high that I would stay on the same low wage I came in at. There are too many factors against the wage going up. The business might not grow. Or, even if it does, the owners might not want to share that growth. Or even if they do, I might not be in line to partake. Or even if I am, something might go wrong and I might screw it up by some action or inaction on my part that I failed to predict and act on.
2. 'Yield' companies pay me earlier, therefore I can invest earlier, therefore I stand a better chance of making more money overall. $100 today is worth more than $200 in 20 years from now.
3. 'Yield' companies are in a part of the economy in which it pays to pay employees well. It seems, intuitively, that I am better off also being in that part of the economy. Even if one or another yield company goes bust, at least I'm in the right 'zone' to be generally making a good wage. It may not work this way for everyone in the business - a business owner or CEO might make much more money in a different zone of the economy. But as long as I'm not a business owner or CEO, I shouldn't pretend that I can benefit in the same way that I can.
However, giving it some further thought, I can imagine reasons to go more down the growth curve.
As I get older, and my investing time-horizon narrows, it seems that I may be better served by switching to 'Growth'. My investments will have less time to grow at 40 years old than they did at 20 years old. So as I get into my 40s/50s, perhaps I need to find sources of growth that are faster and risker. Assuming I have a solid foundation of savings and investments by then, I'm not necessarily in desperate need of cash. I could stand to gain more by foregoing some capital in order to take risks that have a higher upside.
---------
I'm curious to see what extreme savers think of this way of thinking. Any critiques would be most welcome!
These two buckets are:
1. Growth
2. Yield
I wanted to flesh out what I mean by these terms and see if anyone else agrees and/or has encountered a similar phenomenon.
And then think about how to choose between one or the other, as an extreme saver.
---------
First, here's what I mean by these buckets:
Growth
These are businesses that pay a smaller amount per employee and have a small number of people working for them.
This is due to some combination of the business being inherently "small-time", i.e., low revenue, low profit, etc and/or the business being set up in such a way that the owner or investors don't see it in their interests to invest more in paying their employees higher salaries.
PRO: There's less competition between talent to secure those roles and then progress within the company. This mean that, in theory, if you join one of these businesses at the 'ground level', it's possible to become a 'big fish in a small pond'. If there is growth potential in the business and you can engineer that growth to benefit yourself in terms of salary, then you might make much more money than your starting wage.
CON: Obviously you're taking a risk. Maybe the business can't grow much further. Or maybe that growth wouldn't be shared with you, no matter how much you contributed to it.
Yield
These are businesses that pay a larger amount per employee, whatever number are working for them.
This is due to some combination of the business having a lot of capital, it being in their interests to pay employees well, the supply of the needed skills being rare and the demand high enough to support high salaries for those skills.
PRO: you get paid a lot. If you're saving most of your income, this is great, because then you can pump that money directly into growth investments.
CON: you'll probably be stuck on the same (or close to the same) salary.
---------
Second, how does one choose between the two?
Generally I've almost always gone with the 'Yield' companies. My reasoning for this has changed over the years, but it basically boils down to the following:
1. With 'Growth', the risk is unacceptable high that I would stay on the same low wage I came in at. There are too many factors against the wage going up. The business might not grow. Or, even if it does, the owners might not want to share that growth. Or even if they do, I might not be in line to partake. Or even if I am, something might go wrong and I might screw it up by some action or inaction on my part that I failed to predict and act on.
2. 'Yield' companies pay me earlier, therefore I can invest earlier, therefore I stand a better chance of making more money overall. $100 today is worth more than $200 in 20 years from now.
3. 'Yield' companies are in a part of the economy in which it pays to pay employees well. It seems, intuitively, that I am better off also being in that part of the economy. Even if one or another yield company goes bust, at least I'm in the right 'zone' to be generally making a good wage. It may not work this way for everyone in the business - a business owner or CEO might make much more money in a different zone of the economy. But as long as I'm not a business owner or CEO, I shouldn't pretend that I can benefit in the same way that I can.
However, giving it some further thought, I can imagine reasons to go more down the growth curve.
As I get older, and my investing time-horizon narrows, it seems that I may be better served by switching to 'Growth'. My investments will have less time to grow at 40 years old than they did at 20 years old. So as I get into my 40s/50s, perhaps I need to find sources of growth that are faster and risker. Assuming I have a solid foundation of savings and investments by then, I'm not necessarily in desperate need of cash. I could stand to gain more by foregoing some capital in order to take risks that have a higher upside.
---------
I'm curious to see what extreme savers think of this way of thinking. Any critiques would be most welcome!