The big idea: Career insurance for professional catastrophes

Sometimes people make mistakes at work. Why can't you insure against the downside?

Last year, Macy’s announced that an employee hid $151 million in delivery expenses. Unexpectedly, this wasn’t embezzlement — an accountant just screwed up and got in too deep.

“The employee told investigators about having mistakenly understated the amount of small parcel delivery expenses in late 2021…

To hide the error, the employee continued to intentionally make erroneous accounting entries and falsify underlying documentation until the misstatement was discovered this fall.”

This guy probably should have come clean at the beginning to avoid becoming an international news story. But if he had, his career would probably have been derailed! He made the wrong move because the consequences of confessing were massive.

This doesn’t just happen with nine-figure frauds. You accidentally break DRM for every streaming service. You built a house on the wrong plot of land. The big presentation to the CEO went awry and your promotion no longer seems so certain. There are lots of goofs, big and small, that can damage your career — having employees hold all of that risk seems like a market failure. Sometimes you mess up!

Shouldn’t there be a safety net for your career lows? Introducing: career insurance.

Existing insurance doesn't cover this

Unemployment insurance has a major flaw: it only pays out if you lose your job. Accidentally screenshare your chat making fun of the client? Posted a tasteless Slack emoji to a crowd that didn’t appreciate it? Excel model kind of sloppy and your boss saw it? You’re still employed — but with no payout and lots of anxiety.

The underlying goal of career insurance is to mitigate the real damage that comes from intangible mistakes. An offer to present to your CEO doesn’t always feel like a good thing because it can go wrong. As a result, corporate culture becomes more about protecting against downside risk than trying to maximize your success.

In the same way that students who graduate into a recession see up to a 15% reduction in early career earnings, a big enough mistake at work can have effects that last for years. Some quick math¹ suggests that each year your career stagnates reduces your 10-year earnings by ~57% of your starting salary.

Career insurance compensates you when these things go wrong, replacing your expected salary loss over a multi-year period. It doesn’t feel as good as getting a promotion, but a check every month goes a long way to easing the pain.

And the premiums wouldn’t be so outrageous: using a simple model, a 2% chance of making a 1-year error in your career suggests you need to pay ~1.1% of your salary in premiums — about $95 per month for someone making $100,000.

Turning this into reality

Here’s the hard part: how do you make this actually work? Calling your boss “mom” is not the same thing as emailing internal data to the wrong person which is not the same thing as being Jeffrey Toobin.

The reimbursement process is going to be horrendously complex — insurers will need massive actuarial tables covering your individual circumstances (age, salary, promotion history), market trends (journalism is dying), and overall economic data (raises go down in a recession). On top of THAT, they need to look at what you actually did. The final formula might look something like:

(26 years old) x (journalism industry) x (backend engineer) x (0.5% GDP growth) x (deleted the prod database) = 0.87 salary years payout.

The model would be constantly refined, and corporate America will have to get used to answering “and how bad did that piss you off?” to insurance adjudicators. Expect to see yearly readjustments as insurers get deeper into the human psyche than they ever wished to.

Anyway, being Jeffrey Toobin is apparently an eight month offense.

Facing the economic implications

In a world where downside risk is insured, the first assumption is that people will take bigger risks. A brave set of newly empowered employees will march into their boss’ office and tell them what they really think, as a new era of corporate transparency unfolds. With more risk-taking behaviors, sclerotic companies will be reinvigorated by this new class of worker.

If they can afford the insurance.

The obvious obstacle is adverse selection: the natural buyers of career insurance are the most neurotic and the most chaotic people in the workforce. That is not a recipe for a healthy risk pool. Things will blow up quickly when insurance companies start paying out everyone saying “you should smile more” in their weekly standups.

The only solution is to universalize it. By auto-enrolling people into coverage, we can develop sustainable insurance for the moderately-risk-taking majority. The easiest way to do this would be through employers: when somebody starts a new job, basic career insurance comes as a standard benefit. But why would companies go along with this?

Welcome to the career credit score

Like other insurance products, you would pay more after making a claim on your career policy. The implication: much like how you have to provide medical information for new life insurance, you’ll have to give your career insurance history to your new employer when switching jobs.

This functionally creates a shadow referral system. A high premium morphs into a dangerous red flag. A low premium? You probably don’t step out of line much. In this way, career insurance actually works against its intended purpose; it protects you from the downside risk of a career limiting move (“CLM”), but reinforces the consequences of those events across jobs.

Of course, this already happens today, but with much lower fidelity. Working in the legal cannabis industry signals something different about your risk tolerance than working in accounting. Job hoppers could be top candidates or constantly fleeing bad performance. Everything is a social credit score, but career insurance might be a particularly unforgiving one.

To get access to this pseudo-social credit system, companies might make changes to become legible to insurers. Lower insurance rates would drive standardized titles and promotion criteria, making it easier to evaluate employees across companies. It might be the only way to reasonably compare the damage between Exxon and GE employees showing up drunk to their client meetings.

A workplace where your mistakes are financialized gets weird fast

With a price on career mistakes, incentives in the office get confusing. The risky joke for the all-hands feels a little less risky short term, but you might pay for it the rest of your life. Certain job postings — corporate PR? — might need to come with bonus pay to justify the risk to your long term rates.

Corporate trainings could completely transform — like defensive driving programs, insurers could start offering lower rates for completing corporate sponsored public speaking, organization, and anger management courses. Insurers would have an actual incentive to develop what could possibly be the first evidence-based corporate trainings in history.

In this environment, decisions on what’s covered and what isn’t become critical. Is being too honest in your feedback on the new expense policy actionable? If it is, maybe you stay quiet to avoid adding a career limiting event to your record. But when microwaved fish is safely out of scope, you can ruin your relationships without ruining your insurability. Behaviors in the office will shift dramatically as insurers release their yearly explanation of benefits.

We may just be sorting people into two categories: “safely employable” and “forced startup founders because no corporation will hire them.” The safely employable group will conform to corporate norms, self-monitoring their behavior to avoid standing out in any way. For founders, a high insurance rate is a signal that they’re willing to take risks. Aspiring startup bros may start intentionally getting banned from LinkedIn to prove they belong in YC².

Scapegoating as a service (SaaS)

Of course, career insurance isn’t for everyone. Some people are too big to fail.

If you’re the CEO, a real career derailment could be a seven or eight figure payout. What if, instead, your insurer found someone on staff with a vague job title — “Senior Analyst for Special Projects” — that would cost significantly less to pay out for a career mistake. A fall guy.

If the client is cc’d on the email calling them a moron, the fall guy steps in: “I apologize — I was using the CEO's computer and accidentally sent that email. This was entirely my error.” They take the professional hit, collect their payout, and the CEO continues on unscathed.

There’s another approach to this idea: the professional fall guy. Someone with a low degree of shame takes vague jobs at multiple companies — each paying a nominal fee as part of their insurance. When disaster strikes, they fall on their sword and a new Strategic Operations Lead joins the team. It seems a lot cheaper than today’s risk transfer mechanism (hiring McKinsey and blaming them if it goes wrong).

You just need to make sure that a single person isn’t taking the fall for the same set of clients. You don’t want the same guy to apologize for a $2 million accounting fraud and for leaving a mess in the conference room at a different company.

Financialization of everything, but for your career

And in a world with a price on career risk, you’d see some new products.

Today, legal finance lets litigants sell their payout from a future lawsuit. Could career insurance work the same way? The moral hazard is immense; eat your boss’ birthday cake, then sell your insurance payout and go to Vegas. This could be the first-ever golden parachute available to the middle class.

On a societal level, career goofs are probably predictable. Why not bundle these predictable cash flows together to create Collateralized Career Obligations (CCOs)? Investment banks slice them into tranches while hedge funds build analyses using the Bloomberg terminals’ CLM³ feed — claims data combined with real time tracking of workplace mishaps going viral. Financial advisors will hit the road, selling these assets to retail investors. A good place for your 401k, assuming that people don’t get too well behaved and crash the market.

Why stop there? If your future payouts are an asset, create derivative products from them. Short CCOs if you think corporate America is getting more polite. Set up industry swaps — bet on finance careers becoming safer while shorting tech policies if you think their workplace norms are tightening. Arbitrage opportunities abound as first year analysts refresh LinkedIn, looking for high-risk behavior before the market prices it in.

Also — can you add your spouse to your career insurance? Instead of shotgun weddings, imagine a new trend of career-saving nuptials (“we are gathered here today after Josh’s unfortunate data breach…”)

Official idea rating

2.3/5 stars. Sorry to the Macy’s guy, but I don’t think we can insure you against this without creating a social credit system for the rest of us. We have to live with the fear that comes from offending your boss — the costs of protecting you are just too high. But there may be something to the fall-guy concept; I am positive that some CEOs have people on their team take the fall for mistakes today⁴. Maybe the proliferation of Chief of Staff jobs isn’t about strategic support — it’s about having someone to throw under the bus when things go wrong. To the fall guys of the world, good luck with the YC application.

Ever made a mistake at work that made you wish you had career insurance? Share your best (or worst) stories in the comments. I want to hear them!

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1. Assumes a 5% salary CAGR and a 2% discount rate

2. Y Combinator

3. Career-limiting move

4. There was some talk that an SVP at Uber was a “fall guy” after the journalist tracking scandal