Credibility is the Constrained Resource

The basic currency of a career is personal capital, the imaginary value of your reputation. I’ll call your stock of personal capital your chips. Chips are earned by high performance, proven good judgement, and demonstrated credibility.

Every social context tracks chips, and one’s stack of chips differs between social contexts. Each organization has a different market for chips - how they’re earned, what they can be spent on. There’s an exchange rate of chips between organizations. Some organizations care a lot about prestige and will respect you for coming from a prestigious former institution. Other organizations don’t care. Highly “tracked” organizations have a centrally planned market. You do some job for a few years, and if you perform at an acceptable level you then to another job for a few years, then another. The whole time you’re hoarding chips, and then you cash them in all at once when you ask to be made a partner. In organizations with more fluid markets, you can spend chips to get equity in the company (or perks and stuff), to get regular access to someone, or to push for an initiative - anything you can think of.

Personal capital is not social capital - it’s more dangerous than that. You can burn all your bridges and still have a formidable reputation that could get you hired tomorrow.

Typically, one would want to bet their chips in hope of a return. It’s best to spend your chips in creative ways. If you stake your credibility on an unpopular decision that turns out to be right, your stack will grow. Keep doing that, with ever greater stakes, and you’ll be in the running for CEO. If you go bust, you’ll either be fired or you’ll start from 0, depending on the culture of your company. This is how a career works.

I’ve used the term “buzzing the tower” to describe the practice of engaging in peevish office behavior as a demonstration of one’s chip stack. (As in “yea I just saved this company $100k so I’m going to take an Uber Chopper home from the office tonight and expense it”). This is conspicuous personal capital waste.

An older friend explained this framework to me, and I think it’s powerful. I pass it on now because of a section in Samo’s recent article for Palladium. He says that the three sources of an individual’s power are “formal positions within …strategically relevant institutions, personal or professional connections to other elites or groups with which elites need to interact, and talent”. Personal capital is an interesting conceptual link between the first and the third. Personal capital is how you get a position in an important institution. Talent is how you get personal capital.

There are three ways to lead an important corporation: 1) found a startup, 2) buy control of a corporation, 3) be a successful professional manager. For #1, only execution matters. For #2, only financial capital matters. For #3, you have to manage your chip stack like you’re managing a boxer on the path to a championship: pick realistic challenges to keep a good win/loss record, gradually increasing the challenge and the stakes each round.