The $26 Billion Genius Of LinkedIn

The market has a dazzling way of putting a price tag on services that have changed the world fundamentally. And so Microsoft is paying $26 billion to buy LinkedIn, which sounds like a crazy amount of money until you consider just what an awesome innovation it truly is.

Of all social media on the Internet, LinkedIn is the least splashy. A movie will never be made about this tool. It has introduced no new words into our vernacular. The teen crowd doesn’t download the app.

But if you measure this technology by the positive way it has changed lives, LinkedIn deserves celebration. It is sheer genius.

I’ve suspected this for a while, but had it confirmed as I’ve followed some friends who are in the job market. They talked about updating their profile, the people they’ve met through the network, how they have found possible positions by using it, how they are fielding applications coming and going, and more.

Of course people talk about it nonchalantly, as if it is just part of life. Not so. It is a singular thing in the history of the world, a tool for jazzing up the labor marketplace in a way never seen before.

LinkedIn is many things and offers many services: a global “water cooler,” a universal job bank, a method of learning from experts, and more. It has more than 400 million users in 200 countries. It is the 17th-most popular site in the entire world. The company went public in May 2011 (LNKD), and remains profitable today.

But I suspect that its main benefit has not really been openly noted.

Worker Liberation

LinkedIn has solved a problem that has vexed people since the beginning of time: the problem of being trapped in a job that undervalues your services. Maybe that doesn’t seem like a big deal, but in terms of the actual quality of life for hundreds of millions of people, this is a daily soul-killing disaster. LinkedIn is the liberation.

Had LinkedIn been around in the 19th century, people would have laughed derisively at Karl Marx with his prattle about the need for frenzied revolution. The workers of the world didn’t need to expropriate the expropriators or establish the dictatorship of the proletariat. All they really needed was a well-constructed web-based networking tool.

You might say, “This is ridiculous, since there is no slavery. Everyone chooses to work in a particular job. There is no gun at anyone’s head. It’s all based on mutual agreement.”

All that’s true enough, but the problem is subtler than that. Most employers can’t help but regard any employee on an active job search as something of a traitor. That’s an unfair attitude, and bosses know this, but it is just the way things are. Hiring these days is a big headache, and it extracts large upfront and ongoing costs. To recoup them, employers have developed unreasonable expectations of their employees.

Labour Mobility in Practice

And here is the problem: Labour mobility is very difficult to put into practice in real life. How do you get your application out there without letting your current employer know that you are looking around? How can you use the capital and skills you have accumulated in your current position to upgrade to a new position with a different firm, without using your boss as your reference? How can you shop for new jobs and go for interviews without letting anyone in your social network know, for fear that your aims might get back to the boss?

Even dressing up for interviews poses a problem. You come back to the office and people wonder where you have been so you have to lie and say you went to a funeral. Or you take a sick day and have to make up some tale about a 24-hour bug. This is all rather ridiculous!

And if you can’t actively search for a new position, how can you actually achieve professional advancement?

Job Lock

These are truly awful problems that end up locking people in positions they don’t like but which offer no way out. It restricts labor mobility. People get trapped. Fearing the reaction within the firm to looking outside the firm, people begin over time to block out the outside world. They secretly wonder if they are actually overpaid and worry about testing their wares on the job marketplace.

As a result, they are tempted to turn their attention to other things, figuring that jobs shouldn’t be happy or fulfilling; they are just supposed to pay the bills. The result is internal stagnation, and if many people feel this way, this sorry attitude begins to spread throughout the firm. You can end up with a whole building filled with quietly disgruntled and fearful employees, sort of like the pathetic scenes we see in “The Office.”

In the early days of the Web, there were, of course, large job marketplaces out there, and there still are. But they were limited because they were for those who had self-consciously decided to look for a job or look for an employer. There is no real reason to be on them otherwise. As we know, that’s not how real networking and good hiring takes place. Great jobs are often the result of a long process of experience and knowledge.

Thus the genius of LinkedIn: it permits you to stay constantly on the job market — cultivating a network — without seeming to be disloyal to your colleagues and managers and bosses. It is a completely unobjectionable thing to put your name up there. And because LinkedIn allows you to create networks based on your current employer, it is even seen as a benefit by your firm. It suggests that you care about your job and are happy to have it as part of your public identity.

If John Doe works at FastCompany, that appears by his name and serves as a kind of advertisement for the company itself. Other employees at FastCompany link up this way, too, so that the whole office can use this as a platform for communication, and even discussion. Yet your profile can be public, and you can send the link out to prospective employers. They can see what you are doing and why you are valuable — and you can do this without ever alerting your present employer that you are somehow looking around.

And then, if you change jobs, it is merely a matter of a few clicks. Your institutional affiliation changes, but the network capital you have built up is wholly retained by you. Your value is yours and it is portable. This encourages every worker to have a better understanding of himself or herself as a self-managing individual firm. You are not part of a collective. You are an individual enterprise unit, offering services in exchange for money — exactly how market theory posits it should be.

It’s a simple solution to a mighty problem — simple in the sense that truly brilliant solutions are obvious once they are stated.

The company opened its doors in 2003. It was founded by Reid Hoffman, along with executives from PayPal and socialnet.com. Hoffman is an interesting guy in his own right. His background is in philosophy, and he was ascending the academic career ladder through his training at Stanford and Oxford.

One day, Hoffman realized that he didn’t want to spend his life writing books that “50 or 60 people read.” He wanted to have more impact on the world. In a digital age, this meant developing new and better tools to improve people’s lives. He got to work on solving a universal human problem. And it worked.

And contrary to the popular perception that social media is goofy and that the main purpose of technology is to push more gizmos, LinkedIn really has improved people’s lives and transformed the nature of the job and employee hunt. It has worked to dramatically reduce the information asymmetries that exist between buyers and sellers in the labor marketplace.

Better than Politics

Now, let’s turn to a political point. Think of all the politicians who, for many decades, have claimed to have some great program for improving the lives of workers, making labor more mobile, and helping to link up employees with employers. All of this is standard fare on the campaign trail. How many hundreds of billions of dollars have they spent? And ask yourself: how many of the zillion programs these people have created have you used? None? Thought so.

What’s more, these programs actually have the opposite effects of their advertised benefits. Government intervention in labor markets has entrenched unemployment by raising the costs of hiring, raising the floor for job entry, forcing businesses to provide benefits that make jobs sticky in ways they shouldn’t be. With LinkedIn, we have entrepreneurs and private capital coming together to provide an amazing service that directly improves lives, one by one, every day, with more each day.

A takeaway political lesson: if you really want to do something dazzling, stay out of politics and find a way to do something wonderful in the commercial world. This is the path to human liberation; this is the path to true progress for humanity.

This piece was originally published in here.