Athan Slotkin, The Shadow CEO talks about the reasons why unemployment benefits play a role in increasing the cost of employees and what should tech startups rather do.

1. Can you briefly introduce yourself?
Athan Slotkin, my clients (I think lovingly) call me ‘The Shadow CEO.’ This is because I’m quietly behind the scenes helping develop their businesses, including business plans, financial strategy, or overall business strategy, especially for startups.

2. Can you share with us your journey in the industry?
I started my career in management consulting, worked in corporate, and while at corporate created my own businesses. Then people caught wind and started to ask for help with their businesses. Fast forward to 2018/19, and it became..’a thing.’ It’s been an awesome ride. I get to work with clients from all over the world, and across every industry and business type imaginable. And my team is from all over the world as well. I’m quite lucky.

3. How do you think unemployment benefits increase the cost of the employees?
It all comes down to incentives. When people are incentivized to not work, as with unemployment benefits, they don’t work. For 99% of people, if you hand them $500 for free or $500 and they have to work, most would choose the former. The same concept exists for the marginal tax curve. People are incentivized towards gains, but only to a certain point. For most it’s all about the ratio of effort to gains. All this ‘raises’ the bar for how much it would cost to hire (and motivate) and employee.

4. Why do you think the supply of freelancers is tightened due to these benefits?
Similar premise.

People getting unemployment simply don’t want to work. What has helped is the rise of millennials and Gen Z (and the rise of technology/job accessibility); all of those have helped create the freelancer market.

But even for these demographics, it’s become a challenge to motivate people who are getting “free money.”

You believe that into the future, early stage business hiring will become expensive. With a recession naturally comes layoffs (and “furloughs”). With that comes the feeling and unshakeable memory of companies’ lack of allegiance. We saw this in 2008, and we’re seeing it moreso now. The golden historical tool that early stage businesses had in its warchest was equity – meaning shares in the company. Equity, in most forms, only has value upon sale of the company (exit) or initial public offering (IPO). However, people want control of their own fate and to be a working part of the company. As allegiance is down (or even perceived allegiance is down), this will result in more job hopping or planned job hopping. That in turn will reduce the perceived value of equity (and it was already not likely the equity would pan out anyway). If equity has low perceived value, that value will need to come from somewhere will have to move to salary. There’s only so much free trail mix you can give to employees..

5. What do you think should be done to offer unemployment benefits without hurting small businesses and entrepreneurs?
Pay people to do alternate jobs. Instead of giving people money, give people something to do to earn the money. If that’s done, they’ll focus more time, faster on alternate jobs as they’d prefer that alternative to doing some random job unrelated to their goals.
Alternatively, incentivize them with a rapid bonus for rapid job placement.
We need and want productivity in the economy. Productivity comes from people being deployed into jobs at their ‘max’ skill level. Incentivize that.

6. What would be your best strategy to increase the retention rate for a small business?
Show a track record of growth and retaining employees. Create an epic culture that people know and speak about. Stand for those things that Millennials and Gen Z truly care about. Give people the compensation that they want (some might want equity, some not as much).

7. What advice would you like to give to the technology Start Ups?
Spend extra time screening people. Get truly committed people. The tech predecessors have in some ways helped us, but in other ways have hurt us (lack of profitability, busts, etc). Be mindful of this and experiences some people may have had. And make sure then that your company overdelivers to its employees in all ways. Oh, and gather feedback from your team often.

8. How do you prepare for an AI-Centric world?

Train tech. Learn tech. There’s always room for more innovation, just a larger portion will come from automating and streamlining.

If you don’t learn tech in some capacity, there will just be fewer awesome opportunities to attack.

9. What are the major developments you are planning, in recent time?
I have a program coming out in 2021 for new entrepreneurs. I also have some products coming out and a new brand as well. Those are the external. The internal (nerdy things that excite me), are the automation and development of my team. It’s pretty special to watch and share with them.

10. What movie inspires you the most?
Not to sound corny, but the first thing that came to mind with this question was Rudy. Epic landscape, extremely tough competition, and yet this ‘undersized’ person was able to have some success. There are some limitations (in life everyone has some limitations) but he was able to push and put in extra work to overcome many of them. For anyone feeling like that with their new idea, especially with seeing all of these “behemoth” companies out there..yes, you should take your time to plan..but there’s always an opportunity for innovation and business success.

11. Which book are you currently reading?
I’m re-reading Traction. It’s an oldie, but always good to re-listen to framework books. (I don’t read too much fiction.. ).