Continuing Conversation... Reid Hoffman and Ben Casnocha on LinkedIn and The Alliance

EconTalk Extra
by Amy Willis
Reid Hoffman and Ben Casnocha ... Barry Weingast on Law...

This week's episode featured two guests, Reid Hoffman and Ben Casnocha of LinkedIn and co-authors of The Alliance and The Start-Up of You.

Whether you're looking to improve your own employment prospects, build a better team at work, or interested in the newest in tech and V.C., we'd love to hear from you. Use the prompts below the fold to join the conversation in this forum, or start your own conversation offline, and let us know how it goes.

Check Your Knowledge:

1. Roberts says that when he looks at LinkedIn, it reminds him of Ronald Coase. In what ways can services such as LinkedIn reduce transaction costs?

2. Hoffman and Casnocha describe the corporate world as having transitioned to a "team" framework from a "family" framework. What sort of changes does this entail, and to what extent do you agree with their characterization?

Going Deeper:

3. In "Don't Send Your Kid to the Ivy League," William Deresiwicz argues that the U.S. system of higher education is "exacerbating inequality, retarding social mobility, perpetuating privilege, and creating an elite that is isolated from the society that it's supposed to lead." To what extent do you believe Hoffman and Casnocha share this concern? How do you think their remedies for such ills would compare to Dereswicz's?

4. Revisit the panel discussion Roberts recently hosted on the future of work. Which of the three panelists (McAfee, McArdle, or Ohanian) seem to most share the outlook on technology and the future of work of Hoffman and Casnocha? Explain.

Extra Credit:

5. Toward the end of the interview, Roberts asks Hoffman and Casnocha what the biggest education/training problem in the workforce today is, as well as what they would do to solve it. How would you answer this question, and what actions would you take to rectify the problem(s) you identify?

Comments and Sharing

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COMMENTS (5 to date)
Brendan writes:

1. According to the Coase Theorem, networking-online services such as LinkedIn can reduce transition costs by easing the burden on human resources in looking through piles of resumes when they can see an organized profile of the applicant which allows potential employees to relatively connect with other employees and/or employers in informal online settings that lowers any costs that follows with travelling to a career fair or setting up a table at a fair in order to make connections which now could be made on chat rooms and phone calls and video conference, all of which always more time and money to reallocate to more productive work.

2. Hoffman and Casnocha has viewed the corporate world now as a team rather then a family the consequences of this could provide more accountability on behalf of management since if it is going to raise their pay it needs to really think it through because as partners the employees can leave at anytime to pursue better opportunities so to retain them managers will gravitate to some modesty. Employees will also have to reset their behavior since if companies are more like teams then families then their will be no unconditional love, if employees don't provide value to the team then, seeya! All of this is a better and more productive way of during business and shareholder confidence.

Brendan Quinn writes:

1. According to the Coase theorem, online-networking services such as LinkedIn reduces transaction costs by lowering the amount of time it takes to pour through piles of resumes to looking at a clear organised profiles similar to Facebook allowing recruiters to search and fine more quickly. Potential employees can reduce their traveling and resume printing costs in going to career fair or saving companies valuable time spent setting up shop at recruiting fairs and more time focusing and getting to know potential employees. Connections are now getting quicker and faster literally with a click of a button and you've made a connection and can make more productive calls to employers and more planned meetings.

2. The transformation of the corporate world from family to team, as Hoffman and Casnocha points out, is a significant change to how we work. If employers and employees are more of a team rather then family means that both partners become more modest toward each other since if management is considering raising their pay without thinking of the impact on employee morale they might risk loosing valuable talent resigning to take better opportunities and employees also realizes that they need to be at the top of their game to provide value to the team because employees can be replaced at anytime with someone with more talent which would not occur in a

since that kind of organisation has unconditional love that isn't true for companies that have interchangeable team members leaving and coming which doesn't build the kind of familiarity and closeness that exist in families. This transformation of companies can provide accountability across the company and the kind of modesty in the employers and employees in the team relationships will also show more shareholder confidence.

Amy Willis writes:

Thanks for the great responses, @Brendan!

Regarding #1, I suspect that transaction costs for the job seeker can be lowered as well...Would you agree?

Allen Hutson writes:

Questions 1 and 2 suggest something very interesting about today’s job market and Coase. The notion of a team instead of a family parallels the question Coase poses in The Theory of the Firm nicely, and the difference also exposes a weakness in the argument with regard to the relationship that each implies.

Coase argues in the paper that firms exist to reduce transaction costs that individual actors would face if they simply contracted for services with each other. I think that Reid and Ben’s argument may well miss the point – or at least raises an interesting question. Is reducing any transaction costs sufficient, or do we have to reduce specific transaction costs to break down the traditional notion of the employee – employer relationship?

LinkedIn and similar services reduce specific transaction costs. These cost are generally associated with knowledge, and the guests' logic about the impact of this knowledge in a connected age makes sense. The question I have is – while these are relevant and important costs – if they are the tour of duty/alumni relationship fits within Coase's model at all.

The relationship between how each party (within a culture?) views the notion of a tour of duty type relationship within the context of the requisite employee/employer relationship is critical. To be clear, LinkedIn does not solve many transaction costs issues that require employees to hire employees instead of contracting for services - that is the difference between the legal relationship that employees and employers and independent contracts is not changed by LinkedIn's service (at least obviously).

Does this relaxing of the notion of an indefinite commitment remove a necessary component of the employee/employer relationship? At what point does labor stop viewing itself as an employee and start viewing itself as an independent contractor? If Coase is correct, then the question seems to be critically important.

Philip writes:

I wouldn't trust the LinkedIn endorsement system for a moment. I have 26 endorsements from people I barely know for skills I definitely do not have. I can only presume people give endorsements for amusement and/or to stave off boredom. There is no discernible benefit for doing it and no sanction for getting it wrong.

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