Is Job Stacking Rational?
The expected value of working multiple full-time jobs
People working multiple full-time jobs —”job stacking” — has been a funny result of the normalization of remote work. I don’t know how common it truly is, but every so often I’ll hear of a software engineer working 3 jobs at once, without the knowledge of the employers, and making an absurd amount of money. It’s the sitcom trope where someone is on two dates at once, running back and forth, but with a lot more Zoom meetings (including breakups, as this tweet references):
It sounds quite miserable to me (and possibly fraudulent? idk, don’t actually do this), but obviously tripling your income is a substantial incentive. So, nostalgic for my undergrad economics classes, I wanted to lay out a simple model of the rationality of job stacking.
The intuition underpinning it is that working multiple jobs raises your income a lot in the short term, but probably makes you less likely to do a good job and get paid more in the long term. So, if your career was just a single year, it would clearly make financial sense to work multiple jobs if you can, because there are no future earnings to worry about. On the other hand, if you’re planning on having a 40 year career at Microsoft and becoming the CEO, job stacking probably doesn’t make sense because your income will grow a lot if you focus on your one job.
The way to read the above chart is that there is a software engineer who could take 3 jobs right now each paying $200k each, and so make $600k per year. But their income would stay at $600k each year because they don’t get promoted because they’re spread too thin running around maintaining 3 jobs. Or, they could just stick to one $200k job, and get generous 10% raises each year because they are focused and do a good job.
I take the net present value of these two choices by applying a discount rate to future earnings. A higher discount rate makes job stacking more attractive, because you earn more money today (that you could then invest at the high discount rate to grow over time) whereas if you just work one job, you earn less today but then grow your salary in the future.
Under the assumptions above, if this person has a 24 year career, the net present value of the two options breaks even: if the engineer focused on the single job, they’d be making $1.8M per year at the end of it (unfortunately for society, I think this is not unrealistic for an ambitious person at FAANG) and that high salary will make up for the years earlier in their career when they were making a lot less than the $600k they could have made by job stacking.
If the person has a 40 year career, their salary at the end of it if they focus on 1 job would be $8M a year. The NPV of this option is roughly double that of the job stacking option. BUT if they have a career that is just 10 years long (which is a long time not to burn out in big tech!), the NPV of job stacking is actually higher, even though they’re getting healthy raises each year! This is even true if you “just” stack 2 jobs, and make $400k each year.
Feel free to make a copy of the model and play around with it. A few of the assumptions I’m making here are:
Your salary will substantially increase over time if you work a single job, and working multiple jobs makes you less likely to be promoted at any of them. This seems reasonable, although I could imagine cases where being busy makes someone more productive and better at all of their jobs, instead of mopey and purposeless at a single one1
I’m assuming someone who can get 3 jobs that each pay $200k a year can’t just work to qualify for a job that is more challenging that pays $500k a year and thus avoid this mess. This is sort of baked into the idea of job stacking, and is probably true in cases where engineering salaries are determined based on levels / years of experience.
I’m also assuming someone can keep up the multiple jobs thing for their whole career, which seems unlikely both because of the stamina it would take and the likelihood that it becomes a lot harder to do in the future as employers bring people back to the office.
I’m valuing these purely financially; i’m not taking into account (dis)utility of needing to sit through 3 stand-ups a day and make up excuses to your coworkers about why you can’t join a remote happy hour.
I’m only thinking about cash compensation. If you get stock-based comp from multiple jobs, that could actually be beneficial in that you’re more diversified and get more shots at a good outcome.
I’m not taking into account inflation (because I think it would cancel out between the two options, and a 5% discount rate seems okay net of inflation? Correct me if i’m wrong!)
If anyone knows anyone who has actually done this, please have them email me (joe at residualthoughts.com); I would love to hear their stories.
Fred Wilson actually wrote about this because he does multiple jobs: “I can tell you that being able to work on many different things at the same time makes me better at every one of those things. I have always had that situation in the VC business. I get to work with dozens of companies at the same time. But now I get to work on all of them and also different problems in different industries. It keeps me energized, motivated, curious, and excited. And productive as hell.”
The rationale behind your reasoning is flawed.
1. Not everyone gets 10% raises every year, in fact as a dev manager, only 1 person is allowed on my team to get 5-8% raise depending on how well our company is doing. The rest get 0-3%. That's the reality, and the team is around 10 people large. So you must invest a huge amount of time into your single job to be the best out of 10 people, which probably takes as much time and effort as doing 2-3 jobs.
2. You're not calculating in taxes, as secondary jobs can easily be pushed into companies or tax havens as you can also be a contractor on the side. At 1M income, you're talking a marginal tax rate of >50%.
3. Your chart says you'll start making really difference in the 30-40 year mark in your career, which means you've wasted most of your youth. I don't intend to be filthy rich at 60-70 years only to have to spend money on my health again.
4. Working a single job is not garaunteed of this success, you never know if there is another recession or depression or pandemic or war on the horizon. Very few people in the world actually have a 30-40 year non-stop career trajectory as this.
5. Using my own experience as a stat, only 1 person I know became super rich, 2 people I know became a millionaire, and the rest - 99% of people are average 9-5ers. They benefit the most from the job stacking concept as they can now make double and retire early.
6. I've see people working at companies for 30-40 years, and I don't see them as directors, VP or even CEOs. There are very few stories in the world where someone climbed the ladder, and the fact that we know these stories means how rare it is. Vast majority of people spend 20-30 years at a job and settle into a medium position and just work the average amount, nothing more, nothing less. Stacking jobs would benefit these people tremendously.