For most U.S. workers, their human capital represents their largest economic resource. However, the longer you stay with a company, the more you accumulate job-specific human capital. These are skills that aren’t easily transferable to another company. (A close-to-home example is making the COVID vaccine under a nondisclosure agreement.) Thus, your company’s risk of doing poorly and going under becomes your risk. You become a stock—not a general stock, but rather your company’s stock.

Ideally, you’d like to buy insurance that pays off if your company tanks. But there’s no market in such policies. Why not? If enough employees bought such insurance, they might collectively shirk work in order to bring their companies down and reap an insurance payoff. Insurers, realizing this in advance, wouldn’t supply the policy.

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There are, however, ways to sell your company short if it’s listed on the stock market. The safe way to do this is to purchase special financial securities called put options that pay off if your company’s stock drops below a certain value. Unfortunately, such options are expensive to buy, and you’d need to keep buying them each year that your company was still hiring you. So this, too, isn’t, as we economists would put it, in the feasible set.

There are two things, though, that are feasible. If you’ve been vested with your company’s stock as part of your compensation package, sell it. Otherwise, when the company fails, not only will you lose your job, but also your company stock will become worthless. The second move entails investing in your company’s competitors’ stock (or the stock of any company that would benefit from your company’s demise). This might sound disloyal, but it’s just hedging your bets and protecting your living standard. It’s like buying B when you own A, where A and B are the previously described, perfectly negatively correlated securities. To put this succinctly:

No matter how much you love your company, sell it short if possible.

From Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life by Laurence Kotlikoff. Copyright © 2022 by Laurence Kotlikoff. Published by Little, Brown Spark, a division of Hachette Book Group, Inc.