Access is underrated

The world is witnessing a talent shortage. But access to this capital is highly underrated.

If you’re following the latest in the world of business, tech and finance, you would spot a recurring theme in all of it - “lack of talent”, “worker shortage” and (consequentially) “higher wages”, “big bonuses” and so forth. We talk a lot about business models, supply-demand dynamics, management and product, but there’s one thing that gets much less attention than it warrants. Access to capital. Human capital.

Software has eaten the world in the last decade. Adoption of tech, which was a secular trend long underway, was pulled forward due to this exogenous event of 2020. And a lot of it is never going away. But this adoption is getting much harder.

According to a recent survey by Gartner, IT executives see talent shortages as the most significant barrier to adoption of emerging technologies and cite talent availability as a leading factor inhibiting adoption of tech.

Lets say half of the world’s population is a user of tech of some sort, say roughly 4 billion people. Here’s what blows my mind. There are only 27 MILLION software developers in the world. A massive demand-supply imbalance, even if you consider that one person doesn’t write code for one user. All that demand for talent from companies adopting and building these tools, competing with a tiny amount of human capital.

Some two decades ago, if you were a small (or at times large) firm, access to financial capital was hard to come by. The situation is no longer the same today. The world is awash with liquidity and VCs and investors are lining up to get introduced to the next big winner, instead of the other way around. Financial capital is abundant and you are more likely to have access to it. Its the human capital that is scarce. Financial clout is no longer a guarantee for success. Access to human capital today is what differentiates the wheat from the chaff, as they say.

Everyone, it seems, has come to realise this. Major banks in Europe and the U.S are hiking wages and paying out huge bonuses this year. Goldman Sachs, for example, increased salaries for first, second and third year bankers by about 30%. Apple, apparently, is paying a $180k ‘special’ bonus to prevent its top engineering talent from joining Meta (Facebook), and other more lucrative jobs in Crypto.

And it is not easy for young startups either.

Hiring at startups is even harder now.

In Europe, people are being paid cash bonuses upto 1000 euros just to appear for an interview. Such are the times!

It is particularly difficult to find anyone with IT skills, “We compete with giants like Allianz who can easily hire hundreds of people around the world — but we are not interested in hiring people in India, we want people here in Frankfurt.”

Worker shortages are driving wage inflation and a tight labour market, Source: Financial Times

The war for talent is real. Access to this scarce resource is limited. Special bonuses, wage hikes and remote/hybrid work will be here for a while. We might as well see working cultures improve to attract better talent.

Success at all stages, and of all sizes is increasingly being determined by who has this access. Underrated, but not for long.

The Atomic Investor