Comment by hn_throwaway_99 | Hacker News Reader

Comment by hn_throwaway_99 | Hacker News Reader

hn_throwaway_99

I think the article is correct to point out remote work as a big culprit, but for the wrong reasons. The article says "Employers, the Fed argues, are wary of hiring inexperienced people into remote roles, where the on-the-job mentorship that turns a new grad into a productive worker is hard to deliver." And I agree that's a factor, but I really think that what changed in the late teens is that remote software and networks finally got good enough so that the hit you got to productivity from employing people in low cost of living areas really went away.

I lived through lots of "offshoring frenzies" that never went very far in the past, but things are different this time. Like in the fallout from the .com bust in the early 00s, there was all this talk about how we'd ship all software development to India, and a lot of companies did try to do that, and it was kind of a disaster. And top companies were still paying crazy high salaries for entry level top talent in the Bay Area because they knew it was worth it.

Now, though, I feel like companies are smarter. They know time zone overlap is key, so I've seen a lot more offshoring to Latin America, Canada and Europe where there is sufficient overlap with US time zones. Since even US folks spend so much of their time on Zoom etc. anyway, it doesn't really matter if your Zoom colleague is in your same city or thousands of miles away. I've worked with excellent colleagues from Argentina, Costa Rica, Poland etc. before, and the network speed was good enough so that videoconferencing quality was great. And this is a far cry from the early 00s when I was on choppy voice-only conference calls with a team in India.

So new grads are not only competing with other new grads, they're competing with highly competent, experienced grads from all over the world, most of whom have salary expectations much lower than US new grads.

So what are remaining high-paying white collar jobs which aren't exposed to this type of foreign competition?

I'm thinking lawyer, since legal skills aren't as portable across international borders?

AI’s coming for them. It’s impossible to predict what lawyering will look like in four years.

It’s impossible to predict what jobs in the trades would look like either if AI eats all the high salary white collar jobs.

Oh, but they already have that figured out.

You can't become a licensed electrician without doing x hours of apprenticeship under licensed electrician. And each licensed electrician doesn't need more than one or two helpers at a time, so...

Hollywood is the same. Want to join SAG? You need to get cast in 5 SAG productions. Oh, but SAG productions only cast SAG actors? Oh well...

Meanwhile, all us nerds were trying to teach anyone interested how to write software. Look where that got us.

I think they meant what will trade jobs look like when there are half as many highly paid knowledge workers able to fork out for their services?

Yeah that’s what I meant. White collar jobs are 45% of all jobs, and they are much more than 45% of all work income because they pay better on average.

If AI really does come in and destroy all that no job is safe. Blue collar households don’t hire tradesman at anywhere near the rate that white collar households do.

In a major economic downturn like that new construction dries up. The commercial work will dry up to as all those white collar companies close their offices.

The end result is that existing tradesman will be fighting over a much smaller pie. Plus they’ll be dealing with competition from all the unemployed knowledge workers trying to change careers. In some states and some trades new entrants will be less of an issue, but most trades in most states aren’t supply restricted like the above poster’s electrician example.

My point is getting to the trades isn’t going to protect you from AI taking your job unless AI takes over a small percent of jobs and stops. I don’t actually think AI is going to take all that many jobs myself, but if I’m wrong we’re going to have to completely rework our economy.

Forget white collar. Figure out a career that makes use of your hands.

Or make enough money to retire in the next couple years.

Unironically the most simple (note; not easy) way to become a multi-millionaire. Do a trade in your 20s, leverage that into running your own trades business in your 30s, and have a >10m valuation business by your 40s.

Really regret not doing that myself.

I know enough of trade business owners to know that a business worth $10 million is rare.

Just using some back of the envelope math from numbers I found. On the high end a plumbing company is valued at 5x EBITA. A very very good plumbing company has a 20% net profit margin (and no debt, no corporate taxes or anything so that net income and EBITA are essentially the same), and a good plumbing company makes $350k in revenue per truck.

So a $10 million plumbing company would need to have 30 trucks, all with high performing employees. They’d need to bring in $10 million in revenue at best in class profit margins.

That’s a huge operation. Very few plumbing businesses owners will ever get to that level. There are 3 times as many doctors in the US as there are business owners with business that do the kind of revenue in the above example. If you’re capable of running an operation like that you can probably succeed at plenty of other things.

I am not in the business of valuing small businesses, but one thing that seems off to me is that an EBITDA multiple is usually also dependent on the overall size of the business. That is, a business with only $1 million in EBITDA may only be worth 3-4x that, while a business with $10 million in EBITDA might be worth 8-10x EBITDA, on the theory that larger businesses will be more stable and less likely to have key person or large customer risk (some examples, https://raincatcher.com/ebitda-valuation-multiples-by-indust...)

That said, I agree with your overall assessment that $10 million single-owner plumbing businesses are rare, for the simple reason that $10 million single owner anything is rare. If it were not rare, by definition you'd have a lot more folks worth $10 million (and, in this case, a lot more people lining up to be plumbers), and then $10 million would probably not be worth very much.

I’m not a plumber but from spending 20 minutes looking into it, it looks like the primary thing that changes the value multiple is how involved the owner is in the business (your key person risk). 5x was also on the high side of the multiples I saw.

The thing to keep in mind though is we’re talking small business, once you get to $10 million EBITA, you’re probably talking $50-$200 million in revenue and 200-500 employees. Thats firmly into mid sized business territory and I think revenue growth would be the or primary driver of the multiple.

From your source a 10x multiple would require very high revenue growth. That makes sense because you can get 10% average return with index funds, so you need to significantly beat that ROI.

How is this different than telling people to do a PhD, then run your own research group as a professor, get tenure and get lifetime job security?

Or work in start up, get acquired, and chill after ?

Look, I'm not from the US, I'm guessing maybe the pay for tradesmen isn't as high as in Australia. But what you're suggesting as a comparison involves a pretty high degree of variance and odds are stacked against you. You need to get into a good PhD program, get funding, compete against everyone else doing those things and so on.

The path I outlined in my OP is a _very_ common path that people take in Australia and not at all unrealistic. The barrier to entry is drastically lower, and the access to funding/capital is far easier.

I personally know 2 people that did this route and while I don't know about a $10m valuation, one is claims 900k income annually (roofing) and the other one must make 300k+. But both are in their 50's or 60's. This is midwest usa.

Sales

Medicine, if you consider that a white collar job.

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