> If AppAmaGooFaceSoft ever stops hiring, if one day the heads of recruiting at those companies say “Nope, that’s it, we’re done, full house over here” then the ripples in tech salaries will be felt across the whole industry. Salaries will be driven down, because working at AppAmaGooFaceSoft is no longer a bargaining chip. It might cause a tech salary “crash”, where salaries drop way closer to the skilled worker median.
This seems very unlikely. Tech is probably very far from being "solved"; and the minute salaries stop being relatively high, that's when people will stop joining bootcamps and getting CS degrees, instead going back to finance or whatever the hot ticket is at the moment. This will likely cause a dampening effect on tech salaries, cushioning any decline in the short term, and creating a serious talent supply problem in the long term, which will just push salaries even higher.
I think that the truth is, tech is in demand everywhere. Because what tech really is, in many cases, is about improving your processes, automating work, and increasing efficiencies in all sorts of businesses - and that isn't something that has an endpoint. There are still many fields that have barely begun to benefit from what tech has to offer.
I think of this statement as less of one that the author considers likely or not and more a way to illustrate the dependencies present in tech salaries.
>what tech really is, in many cases, is about improving your processes, automating work, and increasing efficiencies in all sorts of businesses
I wish to nitpick this. I think tech has been used for this purpose extensively, but I'd argue "digital toy" or "ultimate writing tool" are just as valid (and slightly less depressing) statement of purpose for software.
I am always actively recruiting mid to senior level candidates out of FANGs. I would say about half of these people are seriously poachable, given the right opportunity. For the other half, their compensation is simply too high to pull them out. If FANG salaries dropped by half, I estimate the number would increase to 80-90%. If venture capital funding dried up such that FANG salaries decreased AND Series A+ startup opportunities dried up, then I'd predict a reversion to founder-heavy garage based startups. Because the one thing that is not going away in the near term is the sheer number of unsolved problems/opportunities in tech.
Not to say your central point is wrong, but this characterization can apply to many industries outside of tech.
You're right that supply responds to demand, but putting that aside there can and will be macro trends in the long term. Will the venture capital frenzy remain forever? Will top firms stock values grow exponentially forever? These questions will have a material effect on engineer salary in the long run
This article effectively is saying that if the demand for developers falls that salaries would fall. Which is obvious to anyone who has taken econ 101, but I have no idea how this is anymore of a "risk premium" than anyone else who works for a living.
> and the cut you’re taking from not working at AppAmaGooFaceSoft.
This pre-supposes that:
A) Apple, Amazon, Facebook, Microsoft are the highest paying companies (not only not true for liquid cash, even less true if you factor in start-up equity expectation)
B) Salaries aren't being set by all the other companies as well. [Generalists, at least in the Bay Area, are in a competitive employment market, not an oligopoly]
The article is not saying that - if IBM hires 100,000 developers but AppAmaGooBookSoft have a hiring freeze, then then you get a much smaller risk premium. The point being that AppAmaGooBookSoft pay insane salaries so other companies need to pay their employees somewhat well to minimize risk losing their (best) employees to AppAmaGooBookSoft.
I can't tell if the argument here is that the market isn't competitive or something else. It's not like FAANG pays high salaries because they are generous.
I also think that generally speaking it's a seller's market right now for tech skills, and has been for years.
At least where I live (Toronto), there are more jobs than (qualified) candidates. At my last job (a very large digital team inside one of the largest corporations in the country), we were hiring up to 20 people per month, and usually interviewing 100+ just to get those 20 people. And still had lots of job openings.
Most candidates would tell us that they're talking to 4-5 other companies, so we often didn't get people even if we made them an offer.
From speaking to colleagues elsewhere in the city and country, most (non-AppAmaGooFaceSoft + Shopify for Canada) companies are in the same boat.
Anecdata; but I know the hiring numbers of a tech-forward company with a couple hundred engineers in NYC: 1.2 in 100 applications results in a hire. They have a 4-ish step hiring process where between 1/2 and 3/4 are dropped each step.
It's an environment where both sides of the market are currently empowered to be highly selective.
> They have a 4-ish step hiring process where between 1/2 and 3/4 are dropped each step.
Isn't part of this just the standard signal / noise resulting from the fact that most people who are capable of doing the job are currently employed, so a larger than normal number of applicants will be sub-standard, since they are the ones who can't get a job?
A lot of experienced Toronto developers are working remotely. The salaries in Toronto haven't kept pace. The commute has gotten more difficult no matter what form of travel you choose.
Don't the salaries at AppAmaGooBookSoft (sorry, patio11's spelling is canonical here) themselves include a risk premium that is incenting the people there to stay instead of going to work at a small company with the opportunity to topple one of them?
How do you model those risk premiums against each other? It seems like they should both go infinity in order to keep anyone from ever leaving anywhere.
It's a market for risk. Risk premiums are worth what tech companies will pay for them. If it's more expensive to find a replacement than pay a risk premium, tech companies should and will pay the risk premium.
In the long run, the price of the risk premium = the cost of replacing the employee.
Does anyone know if there is any evidence that big tech salaries started going significantly up after this illegal agreement was ended? Intuitively it makes sense, but I am just wondering if there are any data or studies out there to prove or disprove this.
Why does a corporation making more money result in its employees earning more? Out of the goodness of the CEO's heart? I don't believe in this trickling down. They obviously need to pay more in order to attract the top talent, but why?
An employee costs you X per year, so you need to make a multiple of X to justify the hire. The higher that multiple is, the easier it is to make that decision. When there are lots of companies competing to hire tech workers for easy money, salaries rise.
Monopoly market leadership in their respective fields, which translates to high gross margin, which leads to a ton of cash on hand. Conversely, being market leaders, they are solving some really hard problems related to scale and attract good engineers.
Risk premium: you could have your money in government bonds, so to entice you to put them in something riskier, you have to offer a better return. The riskier, the more people have to think it can outperform. That's not to say that this is what ends up being realised, otherwise it wouldn't be risk.
Not clear how this connects with this idea about tech salaries. Where's the uncertain outcome? Person potentially jumps to FAANG? What's the certain outcome in the analogy?
If I am reading this correctly, the certain outcome is when the smaller company pays a salary equal to FAANG. The person has no incentive to jump. The uncertainly is when the company pays less than a FAANG salary, pocketing the extra salary not being paid, and taking the risk the person does not jump. The lower the salary, the more risk the person jumps, but the more money the company saves.
The analogy of tech salaries to returns on bonds only works, as other commentators have pointed out, when talking about programmers who have experience at a Big N company and are being recruited into well funded startups. In this case, it works because startups (corporate bonds) have to offer a higher compensation (interest rate), often times made up of equity, to offset the risk of joining a startup compared to Big N (government bonds). The uncertain outcome is the startup failing (company not meeting their expectations).
The reason why it doesn’t generalize to the entire tech industry is because not everybody has Big N experience while anyone can buy a government bond.
I think you are right - if my sleep addled brain gets it, I think that the hiring of a developer implies a programme of tech led change to be applied to the company.
so the steady state (the Treasury Bond Risk Free Return) is not changing the company to have web-enabled doodads but just collecting the cash from your customers for the next five years.
(I suspect there are plenty of businesses where this might apply - run it to the ground with minimal investment.)
So the risk premium is the cost of the programme to build doodads (the extra ROI is what you will make as a shareholder if you hire a developer to make your doodads.)
This then gives me two risks - the risk that doing nothing tanks the business away faster than predicted, and the risk that the programme fails.
So developer salaries are paid as a risk premium against tech driven change in your industry, and the risk of buy vs build.
So developer salaries might be better compared not against AmaGooFace stopping hiring, but against the spread of SaaS based services that can reduce the risk of a failed build.
Perhaps we should all go out, Luddite fashion, and smash the Looms of our SaaS startups?
That's actually a much better analogy. Companies at high scale can achieve higher productivity per developer every year.
Not at high scale? (say a one-off consulting project). Sucks for you -- labor market is surging from the high scale company's productivity improvements. Be prepared for your labor costs to go up much faster than inflation.
But software developer productivity HAS increased over the years, primarily due to improved tools they have access to. I think developers are somewhat blind to this fact however, because the skill required to operate said tools hasn't increased in proportion to the productivity output gained.
Think about hunting with a bow & arrow vs hunting with a spear. With a bow & arrow (the improved tool), you're able to bring back more meat with less effort, but the productivity of each hunt is higher to the stakeholders (the people eating, in this situation). If it's still very difficult to find hunters with the baseline skills required to not only operate a bow & arrow, but to complete the other necessary aspects of hunting (ability to track the animal, carrying it back, etc), then it makes sense that their pay would continue to increase.
Tech salaries are high for a number of reasons: programmers are highly productive, reducing the amount of work that others must do, the job is hard, and requires basically autodidacts to do it. The personality traits for being a good programmer, I think, are rare. There are a whole suite of poorly paid positions in the United States that are similarly difficult and not as highly paid as they could be: teachers, for instance.
But why do we even discuss it when there is a whole cohort of salaries that actually make no sense in comparison: All of the VP's, CEO's, etc... even stock holders just wasting efficiency collecting dividends from existing wealth and the productivity of others. Why are tech people trying to defend their salaries when we could just point at the next people up the chain?
According to one theory, if you overpay the guy at the top, it makes all the underlings work harder to try and climb up that greasy pole. The more grossly and obviously overpaid that top guy is, the more desirable it is to try and somehow work your way to his position.
"The personality traits for being a good programmer"
Could you expand on this? I would be interested in what part you find 'rare' -- I find there are tons of different niches/archetypes that a SWE can have.
My very anecdotal experience: After teaching/mentoring quite a few SWEs from varying skill levels, the two traits that I find are the most important and at the same time rare are:
- Attention to detail
- High frustration barrier
Over the course of a career those become less and less important as one learns to use the appropriate tools (e.g. linters) and processes, but you still need them to get to that point. Especially for beginners, those two in practice most often break the "everyone can learn to program" trope, that I'd like to be true.
Indeed, I think it's two different frustration barriers. There's a high barrier to being frustrated enough to stop working on a difficult problem to improve a situation. There's a fairly low barrier to being frustrated enough with an existing solution to want to make that improvement.
I agree that that's also a very nice trait for a SWE to have, but I actually had the far more boring attention to detail in mind: Spotting syntactic errors in code and similar things like misspelling of variables, etc.. Hunting those down in the beginning also goes hand in hand with a high frustration barrier.
For lack of a better descriptor: behavioral traits one might identify as autism.
The person who for some reason is up on a Saturday night reading the NGINX source code in C to better implement their company's Lets Encrypt integration.
The person who actually stepped through Kelsey Hightower's Kubernetes the Hard way just because they thought Kubernetes was really cool.
The person who writes code for personal projects during "social hours" where others may be out with friends, out with their significant others, etc.
EDIT: I'll leave it for the integrity/honesty of the comment, but here are some descriptors I wish I'd used in the first place instead of 'autism':
* On the spectrum
* Extreme Introvert
* Socially disconnected
* Ties self-value to work-output in extreme ways
* Seeks joy from work versus social interaction & status
Heh, you do need a better descriptor. That is the media's idea of the autistic savant. A very small minority of people on the lesser end of the autism spectrum may have some of those traits. The reality for the other 99% is vastly different.
I don't think people should be so hard on you for your terminology choice. The term "autism" is overly broad. One might be talking about:
(1) Classical autism
(2) Autism spectrum disorder (ASD)
(3) Broader autism phenotype (BAP)
If people were to understand you as talking about (3), well I don't think you said anything inaccurate. You obviously weren't talking about most individuals included under (1). As far as (2) goes, well at one end (2) includes (1), and at the other end (2) has a very vague boundary with (3).
Everyone seems to be missing this. It doesn't have to be in the DSM criteria, the parent poster is talking about the popular view.
I don't necessarily agree – I don't seek joy from work but I do things that others (my wife included) would consider as "work". The moment you tackle that label on them – or whenever I lose control of what I'm supposed to be doing – I'll no longer have the same joy.
> The person who for some reason is up on a Saturday night reading the NGINX source code in C
Sigh
Now this I have issue with. I think the best programmers I know will do something like this out of their own self interest. Maybe they are setting up some elaborate and over-engineered system for their own amusement.
If this is for work, though? You bet your ass I'll be reading that NGINX source code, if I have to, during work hours, however loosely defined those are. There are exceptions, of course. Sometimes your mind will be so focused on something that it _just won't let go_. In which case, fine, Monday can't wait and I'll try this thing. As long as there is no expectations from the part of the company.
Saturday night I'll be mucking around with 3d printing, game engines, programming my own blog software for the 30th time in a new Scheme dialect, anything. Just not work.
I agree with you, but I think there’s an even more important point: spending your Saturday integrating nginx with certbot is quite frankly, an easy task - technically speaking. This is not even learning - this is your routine work task.
I wouldn't be CEO for the kind of pay they get. Getting a few million dollars a year sounds nice until you realize they all work excess hours, are often on the road: they don't get to spend much time with their family. Seeing my 6 year old solve "laser maze" puzzles is worth far more to me than the money.
I'm young and don't have kids (and plan not to). I think my wife and I would gladly trade a year or two of overworking to effectively be able to retire immediately thereafter (or at least, have financial independence and get to choose work and hours).
EDIT: I'm not suggesting a large company is going to hire me as CEO...
Well, I think it would be pretty rare for someone to suddenly find themselves the CEO of a large company without first having spent many years working just as hard at lower levels. And it would also be rare for someone to be hired as CEO if the board knew they were planning on leaving after a year or two (unless it was an interim position).
Since the OP mentioned Matt Levine's Money Stuff, here's a fun little bit from today's newsletter [1]:
> Every time you read about a workaholic billionaire and think “boy, not me, if I had a billion dollars I’d be on the beach,” the answer is always “well that’s why you don’t have a billion dollars.” If you have the characteristics that enable you to make a billion dollars, you don’t usually turn them off once you get there.
Sure, but you can also fuck upwards, as in the company can fail under your leadership but you'll still get a nice bonus with the excuse that they don't want to scare off potential incoming CEOs or some other nonsense.
"A few millions" is enough to retire if the money is invested properly. The problem is that the type of individual who even has the connections to become a CEO of a big company tend to have a lavish lifestyle.
But yeah, give me a few millions and I'll slave away for one year, then retire.
You're saying that programmers have a unique set of skills which is why they're paid so much.
And in the next sentence you're questioning why CEOs get paid so much. A good CEO or CFO or CMO can generate value for the company at a scale that's much much larger than what a single programmer does.
During Satya Nadella's reign as the CEO, Microsoft went from people speculating its impending demise to a trillion dollar company. Don't you think he deserves a billion from that $700bn rise in market cap?
TSLA stock will tank the moment Elon Musk decides to step down? In a cynical world, maybe he's just a figurehead and there are others running the show behind the scene, but creating such persona is still something that a CEO has to do.
This is the same old Tesla vs Edison discussion. It's a common misconception among people that it's enough to be a genius lone worker to be able to provide value to a company.
Seems like an odd thing to say in response to such a clear example. Deserves maybe isn’t the right word but they earn it and people are willing to pay for the value so why not?
Even if you had been earning your current salary since the day Jesus was born, you still wouldn't have today even a quarter of a billion dollars. That's the outrageous part. That kind of wealth should not be attainable for any single person. If the company is doing that well, the wealth should go to everyone who's part of it. After all, without them no actual work would be done.
(a) depends on the salary and (b) have you heard of compounding? :) But seriously, that's a weird way to think about it. Nobody pays you to be a billionaire - it happens that you create something that grows in value and takes you up with it. I used to work for Bloomberg - Mike is rich because the thing he created is just that valuable. He didn't take the money from anyone, didn't make anyone pay him a crazy salary. He just made something amazing that's been generating value for 30+ years, and has made lots of people rich in the process. Why begrudge him that?
Because there is a limit in how much money a person can spend, and the rest of the money is working in the rent-seeking domain simply reducing the efficiency of everyone else.
You know, I respect Mike for what he created and I believe he should be doing very well. Still, he didn't do all the work himself. And billions of dollars is a ridiculous amount of wealth for someone to own. Employees should have gotten their fair share of that too.
> Employees should have gotten their fair share of that too.
You mean the employees should have asked for higher salaries and refused to work for his company if the company refused to pay? I don't think a single person has claimed that Bloomberg has paid them a single cent less than the salary specified in their contract.
That's the rub, isn't it? This is a protest against market forces, not against people. If I write a book and everybody in the world pays a dollar to read it (JK Rowling), how on earth could anyone say that I shouldn't have a billion dollars? Shouldn't they be ranting at the all the people who gave me the money of their own accord?
In Bloomberg's case, every employee made a conscious decision to work for the company to increase its value, and every employee was paid what they signed up for. What's unfair about it?
If you somehow published, distributed, translated, and marketed the book yourself then sure, you deserve a billion dollars. However, because you probably didn't do any of those things, just wrote the book (probably had a separate editor as well), you don't.
The second assumption is that people join companies to "increase their value". That may be true for some people on this forum, but most people join companies for a paycheck, because they can't live without income. If no one had to work to live comfortably, I doubt anyone would care about billionaires.
Just translate "deserves a billion dollars" to "gets to decide how most of a billion dollars gets allocated".
Nobody can actually spend/consume more than ~10% of 1Bn. But if someone is smart enough to make 1Bn, it's probably a good bet for society to "promote that person to being in charge of how most of that 1Bn gets allocated". In most of the civilized world 1Bn doesn't automagically translate into "you're a god now, you can buy off the police and the judges and the government and do whatever". (Now sure, in a corrupt country one could fully spend 1Bn by "buying out" lots of people and institution and making himself a god, but in "the civilized world" it doesn't work, or would require significantly more than 1Bn.)
The alternatives are bureaucracies / central-planning committees. For some things they work well, for some they are catastrophic, but for most thing they are simply very very very suboptimal / wasteful and non-innovative!
Hence we "bet on capitalism" and let the guy "keep" his billion.
(There are issues ofc, one could spend a significant part of the money outside of the "legal market of civilized society" or use them to subtly "bend the system"... hence it's probably a good idea to cap personal wealth at 1Bn or smth like that and force other forms of power be shared or politically mediated. Or to just monitor that the use of the money is on goods and services that are actually legally buyable and are "bought to be used or sold at a profit" instead of "bought to profit the buyer and buy his servitude" or other schemes, or not on fake donations that buy influence.)
...yeah, but there's still a "market mechanism" - you're not going to be able hire and keep a good CEO if you don't pay at least "market rate". Also, probably most people worth >1Bn have not made that by being CEOs, that's more like what you get through successful investment (the "rich daddy" + "some brains" combo), or through being really really incredibly lucky as a founder.
> No, nobody deserves a billion dollars, I don't care what they do.
If somebody single-handedly invented a cure for all cancer and made it free to the world... you'd have a hard time convincing me that person didn't deserve a billion dollars.
Thing is, bad CEOs that drive their company into the ground still get paid way more than we do. Terrible managers often get paid more than the talented people working under them. Salaries are determined more by power than by supply and demand. Also by supply and demand, but more by power. People who wield power get paid more, even if they're bad at it.
What's worse is that someone who is faking-it can impact the income of many people. For example, if you're a young engineer that works at a company that switches a good CEO for a bad CEO.
They don't need the money; their pay is already more than enough to retire from. Also, a bad CEO needs to fail spectacularly to not get hired. Plenty of mediocre CEOs keep getting hired for insane salaries.
And a terrible programmer can cause a lot more problems than they solve...
Both programmers and CEOs (and others) can be "force multipliers". If they're really good, they can help their company do better than the sum of the parts.
If the programmer is mostly working on code it's usually easy to discover if they're detrimental. Though if they're doing more fleeting stuff like design, it can be more difficult because the effects are less direct.
In a similar way, a CEOs performance can easily be masked by other factors, such as the market in general and good employees. Say the company increases sales by 10x, but most other candidate CEOs could have done 20-30x or more.
That said, I do think there's some other factors at play when hiring CEOs, as some with known repeated terrible histories still get hired etc.
> A good CEO or CFO or CMO can generate value for the company at a scale that's much much larger than what a single programmer does.
Based on the numbers, usually it's luck. It isn't to say that there are some outstanding CEOs. But the majority are in the mediocre camp and just get lucky.
"It shouldn't take a careful empirical study to convince you that CEOs don't get where they are on the basis of ability alone. If that were true, the C-suite would not be so dominated by white men," Frick writes.
Down-votes when there's numbers to back up the statement. Some upset C-level people (or people planning to be C-level some-day) reading Hacker News today?
It's almost impossible to directly quantify in dollar terms the productivity of individual programmers. I am suspicious of the claim that all programmers who command a high salary are "highly productive" and "reduce the amount of work that others must do." Unlike professional sports or finance, where extreme outperformers are generally compensated in proportion to their contributions, the output of engineers is generally less quantifiable at tech companies so median engineers are paid more than their personal labor can justify.
Tech salaries are also a function of how much VC money has flooded the sector since the crisis - expect this effect to dissipate as (i) investors focus on profitability before growth at all costs in the wake of WeWork etc. and (ii) if/when valuations in private capital markets undergo a correction (for which they are long overdue!)
It would be more precise to say that programmers can be highly leveraged by the scale of organizations.
A glorified Wordpress theme for a cornershop isn't valuable. The same thing for a redesign that materially affects the decisions of millions of consumers may be super valuable.
Some people believe it's the opposite ( chicken and egg blah blah blah) that because a lot of people got very rich in the tech boom, it 1. attracted more people to the area and 2. gave them a lot more pricing power over the already constrained housing... the restrictive housing policies just poured more fuel on the fire.
I'm not close to the area so I'm happy to be corrected by those who saw things unfold over the years
> Here’s where we reach our very strange conclusion. If we take the above as true, then every family member you convince to buy an iPhone or use Gmail or subscribe to Amazon Prime is contributing some small percentage to your salary increases at Random Startup, Inc. Which is a fascinating, if deeply disturbing and perverse, incentive.
If we're extrapolating, this is just saying growing market means growing jobs? I don't know why this is disturbing or perverse.
The opposite is true, if people stopped buying iPhones all those people who support iPhones would be out of a job.
If one whole industry stops hiring then of course the premiums go down. The supply is huge and the demand is low.
Sorry, I feel like this article is taking something simple and making it sound complicated and insightful without necessarily bringing a new insight?
This article left the same exact taste in my mouth (eyes?)
The author has roughly described the concepts of wage inflation and supply-and-demand (for workers, in one industry, and for consumer goods), and reduced almost everything to "risk premium". Risk is everywhere in the economy, yes. The word "premium" implies additional cost over and above a base cost, which encompasses many more factors.
Edit: To be fair, I'm glad that the author and some readers are excited about learning new concepts. I have many similar blog posts written, though admittedly they stay in my drafts folder if I feel they aren't contributing significant insight :)
> they stay in my drafts folder if I feel they aren't contributing significant insight
You should publish them! A blog post doesn't have to be wholly or even slightly novel to be immensely useful for someone.
Right delivery, right place, right time. Others will almost certainly have thought, discussed, written about the same ideas before you but the reader might not land on their blogs or equivalent, and even if they do, the delivery might not speak to them.
They might however land on yours and your delivery may be just right for them.
Anyway, nobody owns ideas - to the reader, whether it's you or someone who thought of it before you delivering the idea doesn't matter - all that matters is the delivery of the idea itself.
This happens to me too. I read a new concept or a book apply it to some real world problem and I am almost certain that my new hypothesis is the new Nash theory. Only to re-read it the next day to realize how I overcomplicated my hypothesis just to fit the case.
I'm also not sure why the author keeps talking about tech wages as being "risk premiums", as opposed to simple supply-and-demand. If being a tech worker is very financially/physically risky, there would be a premium in wages as compared to other similar professions. But that doesn't seem applicable at all to tech workers who enjoy far more security than other professions. If anything, the fact that startup compensation is far lower than FANG salaries, would mean that there is a risk-discount. Not a risk premium.
I usually don't make comments like these, but I'm honestly surprised that this article is sitting on the front page of HN.
It's because it's not actually about supply and demand; it's actually about information asymmetry. The article is specifically arguing that non-FAANG employees are getting higher wages not because of competition from (e.g.) Google, but because employers don't know whether or not they're competing with Google and have to pay extra just in case.
>> If we're extrapolating, this is just saying growing market means growing jobs? I don't know why this is disturbing or perverse.
Except it doesn't mean a growing market at all, it means increased concentration of wealth and power in the hands of a few manipulative zero-sum game mega-corps. Where economists are wrong is that the S&P500 index has become a terrible way to measure economic growth. It mostly measures economic concentration.
Also, by manipulating the market for software engineering talent, megacorps are holding the entire industry hostage. These megacorps don't need so many employees, they only hire them because they can afford it and it allows them to maintain dominance; these are smart people and their skills are basically wasted and their minds atrophy in the midst of mind-numbing bureaucracy.
That's why big tech companies have so much power over politics; through market manipulation (through media influence and job market manipulation), they've created an economic fiction of fast growth and success and they're holding it for ransom over politicians' heads. The politicians have to choose between helping them to perpetuate the fiction or to be blamed for a market crash.
I don't even know given the cost of living in the Bay Area if $300K is even really "high" anymore.
If you max out 401k and IRA this is $275k, which is $168K take home or $14k a month.
1-bedroom in SF + Utilities: $4000
Car: $500
Parking: $200
Groceries: $500
Healthcare (copays/premium contribution): $200
Entertainment (incl drinks, streaming services, going out to eat): $500
Phone: $100
Misc. transit: $200
Debt payments (Student loans): $400
Left over: $7400
If you want a child or buy a home...
A 2-bedroom condo will take $1.5M or $300K for a down payment. Then you have to add insurance + HOA. A 1.2M mortgage + insurance + HOA will be close to $8K/month.
Full-time childcare costs $2K/month (+ need to save for college, then all the costs with raising a child).
If you have more left over than the median household income sees in a month, while living in the most expensive city in the nation, I think that's more than liveable.
You’re using some pretty aggressive housing numbers but conveniently omitting the part where you’re dumping most of that money into the equity of your million+ dollar home so that if and when you want to quit the rat race, you still have massive assets to take with you.
Real estate prices in places like SF or LA have plateaued a bit for a few years now, so yes while you're increasing your equity in your home it's not clear anymore where housing prices are headed at this point.
Even if your home value doesn't increase whatsoever, you are still progressing dumping a higher and higher percentage of your monthly housing-related payments into the equity (payments are interest-heavy early on, shifting to principal-heavy later on). In 15-30 years, you have a paid off house that's worth what you bought it for which can be millions. Or you can leave in a handful of years and take the 100,000s of equity with you that will buy you house in cash in most of the country. Either way, you're hardly worse off.
In the first few years you're converting a small percentage of that $8K payment into equity...most of it goes to interest, insurance, HOA, property taxes, etc.
With the SALT restrictions you can't write off more than $10K in state taxes now either, which means basically $0 off your property taxes since that your income tax alone in CA will be more than that.
Personally most "wage workers" aren't in a great state in the US. Is it "normal" for workers to be able to barely save anything while getting into six figure student debt for a college degree? I would say no.
But saving $30k-$40k a year isn't going to cut it if you want a child or save for a downpayment.
And that's why founding a new company in the Bay area is a ridiculous waste. It's basically funnelling venture capital and giving it to landlords. People should be investing elsewhere these days.
Your "left over" is more than most people's salaries. Even in SF it's above the individual median and not far below household. And you are maxing out a 401k and IRA while doing it, which most people are not.
"I am saving (eventually) millions for retirement, while having thousands of dollars left over each month even after accounting for all my 'entertainment' expenses etc. Is this even a living wage?"
==factor in tech jobs aren't super stable (or as stable as people think they are)==
Which industry's jobs are "super stable"?
==layoffs happen frequently, the average tenure at any one company is only a few years, and ageism is rampant.==
Are average tenures low because tech companies fire people or because people are leaving for even better jobs? (my anecdotal experience says the latter is more true)
==annual performance reviews regularly involve getting let go for a non-insignificant number of people.==
Again, which industry does this not exist? Have you ever met someone who works in retail?
==this is hardly a "company for life" role or industry for most.==
Spending $14k/month is luxury living even in the Bay Area.
1. Your housing numbers are "luxury" prices. (those are generally numbers you see in say SOMA).
2. Having a car in SF in such premium neighborhoods is a further luxury item.
3. Homes are also way overpriced here compared to rent, but that's another story.
Your childcare numbers are actually more on the average side, but again, $300k for a single earner (with stay at home spouse) is obviously way better than $300k combined -- meaning you either:
A) shouldn't count childcare.
B) it's another luxury item.
Now don't get me wrong - if you are earning $300k a year as a one-earner family, you'll probability still be feeling money woes, but that's more of a testament to the standard of living in your social group being so high (who sends their kids to public schools?? weird!!) than any absolute metric.
I think you have to factor in tech jobs are not as stable as people think. Performance review cycles regularly involve getting let go for a non-insignificant number of people. And people do not stay at companies for very long relatively speaking, either voluntarily or not.
Also hard to imagine that the bull run will last forever. A recession will hit the tech industry hard.
Top tech companies are very stable in terms of employment. It is notoriously hard to get fired at the likes of Google and even if you draw the short straw, you often have 6-12 months of notice. People generally leave because they get job offers for more money or a combination of same money + shorter commute or more interesting work or change of scenery. Finally, the last recession was a doozy and still hit tech no harder than any other industry. Most of the same tech giants you’re talking about didn’t even have layoffs. I would call that as stable as it comes.
I am quite familiar with the performance review process at top tech companies given that I work at one. The difficulty in getting fired (especially without advanced notice) is often laughed about. The only thing harder than getting into these companies is getting fired from them.
Netflix, Amazon, and Uber, no, but Microsoft is a hard yes. It was the first tech giant to popularize the whole "rest and vest" cliche and still does. Facebook and Apple vary by org but it's still quite possible if that's what interests you. Then drop down a tier and it's very easy -- the likes of Oracle, IBM, eBay, PayPal, Adobe, etc. push very few out because barely anyone wants to come in.
So I named 4 well known tech companies, and you admitted 3 of them do regularly layoff workers during performance review cycles, and yet continue to argue that it isn't true that companies lay off employees on a regular basis...?
I admitted that it's not laughably hard to get fired but it's still pretty hard if you show any semblance of effort. Naming three (of the most cut throat) exceptions out of thousands of companies is not an argument.
> don't even know given the cost of living in the Bay Area if $300K is even really "high" anymore.
> If you max out 401k and IRA this is $275k, which is $168K take home or $14k a month.
> Left over: $7400
That sounds like a lot to me? I think the vast majority of the US would absolutely be ecstatic if they could save 7400 a month on top of maxing their 401k.
Just maxing my 401k (with employer match) I'll already have enough for my own retirement. Most people aren't able to do even that though =/
If you wanted to buy a place then your left over is probably closer to $3400/month.
I haven't added less regular expenses like personal travel costs (maybe another $400/mo on average), misc shopping/clothing ($100), and gym membership ($80).
Average tenure is heavily skewed by massive head count growth. When you add 20,000 employees in one year (Google, 2019) + replace the churn from the population of 100,000 people hopping companies for more compensation, it will drive your average tenure number way down. This is a commonly referenced but completely invalid argument. Very few people are pushed out at the large, stable tech companies.
Even with the outlandish, made up costs and taxes you're proposing (healthcare premiums and even co-pays with FSA are pre-tax, don't need a car in SF, why are tech workers with free meals spending $1k/mo on food?)...that's still a > 50% savings rate. You'd be ready to retire in 16 years. Even sooner if you took your savings to a lower-cost place.
> AppAmaGooBookSoft ignores Netflix, which is important for salary calibration since they are cash-only. And FAANG ignores MS.
Why does it matter if it's cash only? The stock is equivalent to cash unless you care that much about the fluctuation.
At Google we have Autosale so any time I get a stock grant it's automatically sold and deposited into my bank account as cash.
At Microsoft I think they go even further and give you an amount of stock based on the cash value at the time you receive it so you don't even have to worry about price fluctuations. (At least that is my understanding)
I believe the reason FAANG ignores MS is that MS salaries are lower, but that is only based on my personal experience.
If tech salaries were risk premia, you would expect the expected value (weighted average over all foreseeable futures) of compensation packages at startups to be higher than those at established tech giants. This might be true, but it doesn't seem obvious: there are often comments on HN doubting the claims of high packages at tech giants, suggesting the commenters aren't getting paid more at their more risky (p(fired | laid off | shutdown)) jobs.
Software engineering salaries are high because there's competition for the 'best' software engineers. In a competitive hiring market, the absolute upper cap on compensation is the marginal contribution of an additional engineer, less some percentage to account for uncertainties. That marginal contribution is high at the largest tech companies, so salaries are high. Other companies can either pay high, too or, if they can't use a software engineer as efficiently (e.g. because they don't get as much leverage from software, or if their engineering is poorly managed), they won't be willing to pay the market rate.
I'd like to add that tech salaries are somewhat unique compared to other industries because, given the nature of software development, the marginal contribution of a single developer can be substantially greater than an additional expert in most other industries. Software development in general lends to resource accumulation because useful code is written once and then potentially sold/downloaded indefinitely.
Sure, but this line of thinking applies to many non-tech jobs. For example:
- developing a training curriculum or materials
- designing operational processes
- developing a brand identity
The difference with software is that the software kind of runs itself, without much need for humans. The examples I gave above are also 'create once and execute many times' things, but they require humans to do the execution.
To add to this, I have friends who work in hedge funds and there, the salaries really are risk premiums. You can be very smart and capable, but have a bad year due to luck and get fired. In my career as a software engineer, I've yet to see a great engineer get fired due to bad luck alone (not saying it doesn't happen, but not with the same frequency).
Correct, the author is describing the effect of a competitive, liquid talent market. The other dynamic he correctly identified was asymmetry in switching costs (cheap for me to quit my job and go work at Google, expensive for Google if I quit and leave some project in the lurch). But he didn't call it this, and it's not a risk premium per se.
I don't buy the part about asymmetry of switching costs. It's possible to argue that asymmetry exists in the opposite direction: each employee has one job, so switching jobs is time-consuming and risky; Google has thousands of engineers who have had the same training/experience on internal tools/standards, so it's easy to replace a single engineer when they leave a project.
The other point I made is analogous to Baumol's cost disease except that, instead of applying to different types of job, it applies to different types of employer.
I got fired once they realized I had an interview with a certain company. My wife was best friends with the CEO’s assistant’s hairdresser (true story of bad luck).
They fired me because they knew they couldn’t afford to keep me and if I was courting these companies, they knew I would get an offer. Which was true.
I don't understand the logic in firing you though. Wouldn't it make sense to keep you for however little time longer they could? Knowing that you would be quitting soon they could try to get knowledge out of you or have you help train a replacement.
And if they knew that you were going to get an offer they couldn't match, then obviously you were worth more than what they were paying you. In other words, a great deal for them. Why would they cut that any shorter than they had to?
Was it just good old fashioned spite, cutting off their own nose?
I didn't mention timelines. My wife and I put two and two together and realized they must have known at least a month before they fired me, and aligned with when they suddenly asked me to document a bunch of things I had built -- and focus on fixing even the smallest bugs in them. Once all that was done, I was fired. Exactly one week before I would have put in my notice.
This feels like an overreach of the risk premium concept. At the very least, it doesn't describe how AppAmaGooFaceSoft arrive at their compensation scheme. You need to separate out uncertainty from the supply function (sell your time to the highest bidder). If the risk is someone might come along with a better offer, but the job market is too opaque to know for sure, there are systems we can set up to make it more transparent. Or at least lock in the current rate for a span of time with a contract.
I'm relatively certain that if you established a clearing house for tech jobs the way the AEA does for economists, even if it removed all the uncertainty of who the highest bidder for an employee was, wages would remain high or possibly go higher. There's a lot of room for top tech firms to bid up wages yet, and even the small bootstrapped companies value programmer time pretty highly.
The author misunderstands risk premium, which is the extra reward the market offers in expected value to induce you to take a risky proposition over a certainty equivalent.
I think programmers’ salaries are weighed down by risk aversion. It’s tough to measure marginal impact, you don’t know want to be punished for being placed on a less productive team, etc. So salary is some function of your expected marginal productivity on an average team but scaled down by a risk premium. If you don’t want to pay this risk premium, trading is an option.
This article is taking a questionable idea way too far.
The reason I get paid what I'm paid, is because the company hiring me expects the work I do for them to be worth at least that much. If not, they would not hire me.
So the money I'm paid is not "risk premium", it's simply getting paid what you're worth. It could actually still be less than what my work is worth to them, but I don't have a good way of telling, and it's probably still more than what I'd be able to earn making my own product.
Though if there's one profession where it's easy to make your own product with very little risk or investment, it's software engineering, and that's probably the reason why we get paid much closer to what we're worth than many other professions; because to us, leaving and starting out own business is always an option when employers don't want to be reasonable about what they pay us.
Also, there's enormous demand for what we do, so that increases our bargaining power, and therefore our salaries.
So to what extent is our salary risk premium? I suppose an employer could pay us much less than what we think we're worth, and if we have nothing better at the moment, we might take it and leave the moment we find something better. In that case, it would be better for the employer to pay us more to discourage us from leaving.
But is that risk premium? If it is, then practically any salary, and perhaps any cost, can be considered risk premium. I don't see this as a very useful way of looking at things.
And Google and Facebook have little to do with my salary; they barely have any jobs in my field in my country, and I don't want to emigrate. Sure, I could make more if I worked in Silicon Valley, but I don't see that being worth it for me.
AppAmaGooFaceSoft is only one part of the picture. The ability for engineers to open their own companies, from one person businesses to unicorn startups is the other part of the picture and I think even more important because, barring some extreme changes to our business laws, it's not going away as long as such companies are valuable. If salaries drop, I thin we would see a giant increase in entrepreneurs. The more the drop, the higher the increase. There's no need to build a unicorn to make good money. One or two people is all it takes, often. Startups know this because they all were in the same position not too long ago. What's to keep their employees from going out and forming their own startup with the same idea, especially when non-competes can't be enforced? Why wouldn't tech workers do so if their salaries dropped so significantly? Or pursue other ideas? Or work easier, non-tech jobs?
I am sorry, but this article is just an air (fiber?) tremor. The matter is much easier, it is pure free market process.
There are companies who needs software to increase their profits and/or gross margins. There are people who can engineer software.
There are different levels of software complexity (think between Excel spreadsheet's formulae and operating system). There are different skill levels of software engineering.
There are different gross margins obtainable via software of different complexity. There is everlasting competetion between companies for market shares.
Everything else is demand and supply curve from Economy 101.
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[ 2.9 ms ] story [ 202 ms ] threadThis seems very unlikely. Tech is probably very far from being "solved"; and the minute salaries stop being relatively high, that's when people will stop joining bootcamps and getting CS degrees, instead going back to finance or whatever the hot ticket is at the moment. This will likely cause a dampening effect on tech salaries, cushioning any decline in the short term, and creating a serious talent supply problem in the long term, which will just push salaries even higher.
I think that the truth is, tech is in demand everywhere. Because what tech really is, in many cases, is about improving your processes, automating work, and increasing efficiencies in all sorts of businesses - and that isn't something that has an endpoint. There are still many fields that have barely begun to benefit from what tech has to offer.
For what it's worth, I agree with you as well.
I wish to nitpick this. I think tech has been used for this purpose extensively, but I'd argue "digital toy" or "ultimate writing tool" are just as valid (and slightly less depressing) statement of purpose for software.
You're right that supply responds to demand, but putting that aside there can and will be macro trends in the long term. Will the venture capital frenzy remain forever? Will top firms stock values grow exponentially forever? These questions will have a material effect on engineer salary in the long run
> and the cut you’re taking from not working at AppAmaGooFaceSoft.
This pre-supposes that:
A) Apple, Amazon, Facebook, Microsoft are the highest paying companies (not only not true for liquid cash, even less true if you factor in start-up equity expectation)
B) Salaries aren't being set by all the other companies as well. [Generalists, at least in the Bay Area, are in a competitive employment market, not an oligopoly]
I can't tell if the argument here is that the market isn't competitive or something else. It's not like FAANG pays high salaries because they are generous.
At least where I live (Toronto), there are more jobs than (qualified) candidates. At my last job (a very large digital team inside one of the largest corporations in the country), we were hiring up to 20 people per month, and usually interviewing 100+ just to get those 20 people. And still had lots of job openings.
Most candidates would tell us that they're talking to 4-5 other companies, so we often didn't get people even if we made them an offer.
From speaking to colleagues elsewhere in the city and country, most (non-AppAmaGooFaceSoft + Shopify for Canada) companies are in the same boat.
It's an environment where both sides of the market are currently empowered to be highly selective.
Isn't part of this just the standard signal / noise resulting from the fact that most people who are capable of doing the job are currently employed, so a larger than normal number of applicants will be sub-standard, since they are the ones who can't get a job?
We (my previous employer) were quite selective in our screening, so there were plenty of people applying that we turned away.
But I would say the majority of people we interviewed were employed but looking for something better or different.
How do you model those risk premiums against each other? It seems like they should both go infinity in order to keep anyone from ever leaving anywhere.
In the long run, the price of the risk premium = the cost of replacing the employee.
And the internal competition between themselves (that wasn't always there: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L... )
In essence all of'supply' and 'demand' would fall into this risk premium bucket by this interpretation.
Not clear how this connects with this idea about tech salaries. Where's the uncertain outcome? Person potentially jumps to FAANG? What's the certain outcome in the analogy?
The reason why it doesn’t generalize to the entire tech industry is because not everybody has Big N experience while anyone can buy a government bond.
so the steady state (the Treasury Bond Risk Free Return) is not changing the company to have web-enabled doodads but just collecting the cash from your customers for the next five years.
(I suspect there are plenty of businesses where this might apply - run it to the ground with minimal investment.)
So the risk premium is the cost of the programme to build doodads (the extra ROI is what you will make as a shareholder if you hire a developer to make your doodads.)
This then gives me two risks - the risk that doing nothing tanks the business away faster than predicted, and the risk that the programme fails.
So developer salaries are paid as a risk premium against tech driven change in your industry, and the risk of buy vs build.
So developer salaries might be better compared not against AmaGooFace stopping hiring, but against the spread of SaaS based services that can reduce the risk of a failed build.
Perhaps we should all go out, Luddite fashion, and smash the Looms of our SaaS startups?
Not at high scale? (say a one-off consulting project). Sucks for you -- labor market is surging from the high scale company's productivity improvements. Be prepared for your labor costs to go up much faster than inflation.
Think about hunting with a bow & arrow vs hunting with a spear. With a bow & arrow (the improved tool), you're able to bring back more meat with less effort, but the productivity of each hunt is higher to the stakeholders (the people eating, in this situation). If it's still very difficult to find hunters with the baseline skills required to not only operate a bow & arrow, but to complete the other necessary aspects of hunting (ability to track the animal, carrying it back, etc), then it makes sense that their pay would continue to increase.
But why do we even discuss it when there is a whole cohort of salaries that actually make no sense in comparison: All of the VP's, CEO's, etc... even stock holders just wasting efficiency collecting dividends from existing wealth and the productivity of others. Why are tech people trying to defend their salaries when we could just point at the next people up the chain?
According to one theory, if you overpay the guy at the top, it makes all the underlings work harder to try and climb up that greasy pole. The more grossly and obviously overpaid that top guy is, the more desirable it is to try and somehow work your way to his position.
Sure, it might be a little harder, but to me its absurd to claim the salary difference makes any moral sense.
Could you expand on this? I would be interested in what part you find 'rare' -- I find there are tons of different niches/archetypes that a SWE can have.
- Attention to detail
- High frustration barrier
Over the course of a career those become less and less important as one learns to use the appropriate tools (e.g. linters) and processes, but you still need them to get to that point. Especially for beginners, those two in practice most often break the "everyone can learn to program" trope, that I'd like to be true.
Indeed. Everyone can learn to write code. Not everyone can learn to program.
http://www.eis.mdx.ac.uk/research/PhDArea/saeed/SD_PPIG_2009...
The person who for some reason is up on a Saturday night reading the NGINX source code in C to better implement their company's Lets Encrypt integration.
The person who actually stepped through Kelsey Hightower's Kubernetes the Hard way just because they thought Kubernetes was really cool.
The person who writes code for personal projects during "social hours" where others may be out with friends, out with their significant others, etc.
EDIT: I'll leave it for the integrity/honesty of the comment, but here are some descriptors I wish I'd used in the first place instead of 'autism':
* On the spectrum
* Extreme Introvert
* Socially disconnected
* Ties self-value to work-output in extreme ways
* Seeks joy from work versus social interaction & status
I wouldn't identify any of your examples as signs for someone being on the autistic spectrum.
(And the boundary between BAP and ASD is rather ill-defined and subjective anyway.)
(1) Classical autism
(2) Autism spectrum disorder (ASD)
(3) Broader autism phenotype (BAP)
If people were to understand you as talking about (3), well I don't think you said anything inaccurate. You obviously weren't talking about most individuals included under (1). As far as (2) goes, well at one end (2) includes (1), and at the other end (2) has a very vague boundary with (3).
Everyone seems to be missing this. It doesn't have to be in the DSM criteria, the parent poster is talking about the popular view.
I don't necessarily agree – I don't seek joy from work but I do things that others (my wife included) would consider as "work". The moment you tackle that label on them – or whenever I lose control of what I'm supposed to be doing – I'll no longer have the same joy.
> The person who for some reason is up on a Saturday night reading the NGINX source code in C
Sigh
Now this I have issue with. I think the best programmers I know will do something like this out of their own self interest. Maybe they are setting up some elaborate and over-engineered system for their own amusement.
If this is for work, though? You bet your ass I'll be reading that NGINX source code, if I have to, during work hours, however loosely defined those are. There are exceptions, of course. Sometimes your mind will be so focused on something that it _just won't let go_. In which case, fine, Monday can't wait and I'll try this thing. As long as there is no expectations from the part of the company.
Saturday night I'll be mucking around with 3d printing, game engines, programming my own blog software for the 30th time in a new Scheme dialect, anything. Just not work.
EDIT: I'm not suggesting a large company is going to hire me as CEO...
Since the OP mentioned Matt Levine's Money Stuff, here's a fun little bit from today's newsletter [1]:
> Every time you read about a workaholic billionaire and think “boy, not me, if I had a billion dollars I’d be on the beach,” the answer is always “well that’s why you don’t have a billion dollars.” If you have the characteristics that enable you to make a billion dollars, you don’t usually turn them off once you get there.
[1] https://www.bloomberg.com/opinion/articles/2020-02-03/amazon...
But yeah, give me a few millions and I'll slave away for one year, then retire.
And in the next sentence you're questioning why CEOs get paid so much. A good CEO or CFO or CMO can generate value for the company at a scale that's much much larger than what a single programmer does.
During Satya Nadella's reign as the CEO, Microsoft went from people speculating its impending demise to a trillion dollar company. Don't you think he deserves a billion from that $700bn rise in market cap?
TSLA stock will tank the moment Elon Musk decides to step down? In a cynical world, maybe he's just a figurehead and there are others running the show behind the scene, but creating such persona is still something that a CEO has to do.
This is the same old Tesla vs Edison discussion. It's a common misconception among people that it's enough to be a genius lone worker to be able to provide value to a company.
No, nobody deserves a billion dollars, I don't care what they do.
You mean the employees should have asked for higher salaries and refused to work for his company if the company refused to pay? I don't think a single person has claimed that Bloomberg has paid them a single cent less than the salary specified in their contract.
That's the rub, isn't it? This is a protest against market forces, not against people. If I write a book and everybody in the world pays a dollar to read it (JK Rowling), how on earth could anyone say that I shouldn't have a billion dollars? Shouldn't they be ranting at the all the people who gave me the money of their own accord?
In Bloomberg's case, every employee made a conscious decision to work for the company to increase its value, and every employee was paid what they signed up for. What's unfair about it?
The second assumption is that people join companies to "increase their value". That may be true for some people on this forum, but most people join companies for a paycheck, because they can't live without income. If no one had to work to live comfortably, I doubt anyone would care about billionaires.
So he summoned it out of thin air
Leadership is the other side of that coin.
Nobody can actually spend/consume more than ~10% of 1Bn. But if someone is smart enough to make 1Bn, it's probably a good bet for society to "promote that person to being in charge of how most of that 1Bn gets allocated". In most of the civilized world 1Bn doesn't automagically translate into "you're a god now, you can buy off the police and the judges and the government and do whatever". (Now sure, in a corrupt country one could fully spend 1Bn by "buying out" lots of people and institution and making himself a god, but in "the civilized world" it doesn't work, or would require significantly more than 1Bn.)
The alternatives are bureaucracies / central-planning committees. For some things they work well, for some they are catastrophic, but for most thing they are simply very very very suboptimal / wasteful and non-innovative!
Hence we "bet on capitalism" and let the guy "keep" his billion.
(There are issues ofc, one could spend a significant part of the money outside of the "legal market of civilized society" or use them to subtly "bend the system"... hence it's probably a good idea to cap personal wealth at 1Bn or smth like that and force other forms of power be shared or politically mediated. Or to just monitor that the use of the money is on goods and services that are actually legally buyable and are "bought to be used or sold at a profit" instead of "bought to profit the buyer and buy his servitude" or other schemes, or not on fake donations that buy influence.)
[0] https://www.forbes.com/sites/hbsworkingknowledge/2015/11/18/...
If somebody single-handedly invented a cure for all cancer and made it free to the world... you'd have a hard time convincing me that person didn't deserve a billion dollars.
Bad CEOs get a severance package on millions and go working elsewhere.
If you're a bad programmer, your failures aren't public and you can job hop to the next gullible company.
I don’t really think that is true at all.
Both programmers and CEOs (and others) can be "force multipliers". If they're really good, they can help their company do better than the sum of the parts.
If the programmer is mostly working on code it's usually easy to discover if they're detrimental. Though if they're doing more fleeting stuff like design, it can be more difficult because the effects are less direct.
In a similar way, a CEOs performance can easily be masked by other factors, such as the market in general and good employees. Say the company increases sales by 10x, but most other candidate CEOs could have done 20-30x or more.
That said, I do think there's some other factors at play when hiring CEOs, as some with known repeated terrible histories still get hired etc.
Based on the numbers, usually it's luck. It isn't to say that there are some outstanding CEOs. But the majority are in the mediocre camp and just get lucky.
https://www.inc.com/will-yakowicz/study-luck-looking-the-par...
This is an extremely optimistic view of the majority of developers who are essentially building glorified Wordpress themes.
A glorified Wordpress theme for a cornershop isn't valuable. The same thing for a redesign that materially affects the decisions of millions of consumers may be super valuable.
There's the feedback loop between the salary competition and the stupidly constrained housing market.
I'm not close to the area so I'm happy to be corrected by those who saw things unfold over the years
If we're extrapolating, this is just saying growing market means growing jobs? I don't know why this is disturbing or perverse.
The opposite is true, if people stopped buying iPhones all those people who support iPhones would be out of a job.
If one whole industry stops hiring then of course the premiums go down. The supply is huge and the demand is low.
Sorry, I feel like this article is taking something simple and making it sound complicated and insightful without necessarily bringing a new insight?
The author has roughly described the concepts of wage inflation and supply-and-demand (for workers, in one industry, and for consumer goods), and reduced almost everything to "risk premium". Risk is everywhere in the economy, yes. The word "premium" implies additional cost over and above a base cost, which encompasses many more factors.
Edit: To be fair, I'm glad that the author and some readers are excited about learning new concepts. I have many similar blog posts written, though admittedly they stay in my drafts folder if I feel they aren't contributing significant insight :)
You should publish them! A blog post doesn't have to be wholly or even slightly novel to be immensely useful for someone.
Right delivery, right place, right time. Others will almost certainly have thought, discussed, written about the same ideas before you but the reader might not land on their blogs or equivalent, and even if they do, the delivery might not speak to them.
They might however land on yours and your delivery may be just right for them.
Anyway, nobody owns ideas - to the reader, whether it's you or someone who thought of it before you delivering the idea doesn't matter - all that matters is the delivery of the idea itself.
https://www.researchgate.net/publication/261567941_The_Dark_...
I'm also not sure why the author keeps talking about tech wages as being "risk premiums", as opposed to simple supply-and-demand. If being a tech worker is very financially/physically risky, there would be a premium in wages as compared to other similar professions. But that doesn't seem applicable at all to tech workers who enjoy far more security than other professions. If anything, the fact that startup compensation is far lower than FANG salaries, would mean that there is a risk-discount. Not a risk premium.
I usually don't make comments like these, but I'm honestly surprised that this article is sitting on the front page of HN.
Except it doesn't mean a growing market at all, it means increased concentration of wealth and power in the hands of a few manipulative zero-sum game mega-corps. Where economists are wrong is that the S&P500 index has become a terrible way to measure economic growth. It mostly measures economic concentration.
Also, by manipulating the market for software engineering talent, megacorps are holding the entire industry hostage. These megacorps don't need so many employees, they only hire them because they can afford it and it allows them to maintain dominance; these are smart people and their skills are basically wasted and their minds atrophy in the midst of mind-numbing bureaucracy.
That's why big tech companies have so much power over politics; through market manipulation (through media influence and job market manipulation), they've created an economic fiction of fast growth and success and they're holding it for ransom over politicians' heads. The politicians have to choose between helping them to perpetuate the fiction or to be blamed for a market crash.
Therefore, it's unlikely that additional sales of iPhones would impact on salaries.
In fact supply and demand is a prerequisite (but apparently not sufficient) for understanding it.
If you max out 401k and IRA this is $275k, which is $168K take home or $14k a month.
1-bedroom in SF + Utilities: $4000
Car: $500
Parking: $200
Groceries: $500
Healthcare (copays/premium contribution): $200
Entertainment (incl drinks, streaming services, going out to eat): $500
Phone: $100
Misc. transit: $200
Debt payments (Student loans): $400
Left over: $7400
If you want a child or buy a home...
A 2-bedroom condo will take $1.5M or $300K for a down payment. Then you have to add insurance + HOA. A 1.2M mortgage + insurance + HOA will be close to $8K/month.
Full-time childcare costs $2K/month (+ need to save for college, then all the costs with raising a child).
Again, if you bought an average house then your left over goes to maybe $3K/month (without account for less regular costs above).
With the SALT restrictions you can't write off more than $10K in state taxes now either, which means basically $0 off your property taxes since that your income tax alone in CA will be more than that.
Personally most "wage workers" aren't in a great state in the US. Is it "normal" for workers to be able to barely save anything while getting into six figure student debt for a college degree? I would say no.
But saving $30k-$40k a year isn't going to cut it if you want a child or save for a downpayment.
I'm super confused here.
EDIT: How is 30-40k/year not enough for a child unless the child is special needs with bad healthcare?
I can't believe this shit.
"I am saving (eventually) millions for retirement, while having thousands of dollars left over each month even after accounting for all my 'entertainment' expenses etc. Is this even a living wage?"
layoffs happen frequently, the average tenure at any one company is only a few years, and ageism is rampant.
annual performance reviews regularly involve getting let go for a non-insignificant number of people.
this is hardly a "company for life" role or industry for most.
Which industry's jobs are "super stable"?
==layoffs happen frequently, the average tenure at any one company is only a few years, and ageism is rampant.==
Are average tenures low because tech companies fire people or because people are leaving for even better jobs? (my anecdotal experience says the latter is more true)
==annual performance reviews regularly involve getting let go for a non-insignificant number of people.==
Again, which industry does this not exist? Have you ever met someone who works in retail?
==this is hardly a "company for life" role or industry for most.==
Do these still exist?
1. Your housing numbers are "luxury" prices. (those are generally numbers you see in say SOMA).
2. Having a car in SF in such premium neighborhoods is a further luxury item.
3. Homes are also way overpriced here compared to rent, but that's another story.
Your childcare numbers are actually more on the average side, but again, $300k for a single earner (with stay at home spouse) is obviously way better than $300k combined -- meaning you either:
A) shouldn't count childcare.
B) it's another luxury item.
Now don't get me wrong - if you are earning $300k a year as a one-earner family, you'll probability still be feeling money woes, but that's more of a testament to the standard of living in your social group being so high (who sends their kids to public schools?? weird!!) than any absolute metric.
Also hard to imagine that the bull run will last forever. A recession will hit the tech industry hard.
Ok...
The top of market salaries come from these large, competitive companies. It is more unusual to be making that much and "resting and vesting" than not.
> If you max out 401k and IRA this is $275k, which is $168K take home or $14k a month.
> Left over: $7400
That sounds like a lot to me? I think the vast majority of the US would absolutely be ecstatic if they could save 7400 a month on top of maxing their 401k.
Just maxing my 401k (with employer match) I'll already have enough for my own retirement. Most people aren't able to do even that though =/
I haven't added less regular expenses like personal travel costs (maybe another $400/mo on average), misc shopping/clothing ($100), and gym membership ($80).
I agree that if you want to live on the high end, $300k might not be sufficiently high end. But it's still high by any reasonable metric.
layoffs happen frequently, the average tenure at any one company is only a few years, and ageism is rampant.
this is hardly a "company for life" role or industry for most.
We need an acronym for all of them. (Facebook Apple Google Microsoft Amazon Netflix).
This also doesn't take into account the high salaries you can get in NYC in fintech.
https://i.warosu.org/data/g/img/0720/42/1564100253474.png
Why does it matter if it's cash only? The stock is equivalent to cash unless you care that much about the fluctuation.
At Google we have Autosale so any time I get a stock grant it's automatically sold and deposited into my bank account as cash.
At Microsoft I think they go even further and give you an amount of stock based on the cash value at the time you receive it so you don't even have to worry about price fluctuations. (At least that is my understanding)
I believe the reason FAANG ignores MS is that MS salaries are lower, but that is only based on my personal experience.
It happened that because their employees are paid heavily in stock, the acronym became synonymous to high paying jobs
Hell, a stock offer is something like 30% more valuable than cash over 4 years, though obviously riskier.
This is also why a lot of start-up offers actually blow away faang comp (way higher expected rate of return).. again at expectation.
As companies adopt more remote work strategies, I believe there will be downward pressure on salaries.
If tech salaries were risk premia, you would expect the expected value (weighted average over all foreseeable futures) of compensation packages at startups to be higher than those at established tech giants. This might be true, but it doesn't seem obvious: there are often comments on HN doubting the claims of high packages at tech giants, suggesting the commenters aren't getting paid more at their more risky (p(fired | laid off | shutdown)) jobs.
Software engineering salaries are high because there's competition for the 'best' software engineers. In a competitive hiring market, the absolute upper cap on compensation is the marginal contribution of an additional engineer, less some percentage to account for uncertainties. That marginal contribution is high at the largest tech companies, so salaries are high. Other companies can either pay high, too or, if they can't use a software engineer as efficiently (e.g. because they don't get as much leverage from software, or if their engineering is poorly managed), they won't be willing to pay the market rate.
- developing a training curriculum or materials
- designing operational processes
- developing a brand identity
The difference with software is that the software kind of runs itself, without much need for humans. The examples I gave above are also 'create once and execute many times' things, but they require humans to do the execution.
I don't buy the part about asymmetry of switching costs. It's possible to argue that asymmetry exists in the opposite direction: each employee has one job, so switching jobs is time-consuming and risky; Google has thousands of engineers who have had the same training/experience on internal tools/standards, so it's easy to replace a single engineer when they leave a project.
The other point I made is analogous to Baumol's cost disease except that, instead of applying to different types of job, it applies to different types of employer.
They fired me because they knew they couldn’t afford to keep me and if I was courting these companies, they knew I would get an offer. Which was true.
And if they knew that you were going to get an offer they couldn't match, then obviously you were worth more than what they were paying you. In other words, a great deal for them. Why would they cut that any shorter than they had to?
Was it just good old fashioned spite, cutting off their own nose?
I'm relatively certain that if you established a clearing house for tech jobs the way the AEA does for economists, even if it removed all the uncertainty of who the highest bidder for an employee was, wages would remain high or possibly go higher. There's a lot of room for top tech firms to bid up wages yet, and even the small bootstrapped companies value programmer time pretty highly.
I think programmers’ salaries are weighed down by risk aversion. It’s tough to measure marginal impact, you don’t know want to be punished for being placed on a less productive team, etc. So salary is some function of your expected marginal productivity on an average team but scaled down by a risk premium. If you don’t want to pay this risk premium, trading is an option.
The reason I get paid what I'm paid, is because the company hiring me expects the work I do for them to be worth at least that much. If not, they would not hire me.
So the money I'm paid is not "risk premium", it's simply getting paid what you're worth. It could actually still be less than what my work is worth to them, but I don't have a good way of telling, and it's probably still more than what I'd be able to earn making my own product.
Though if there's one profession where it's easy to make your own product with very little risk or investment, it's software engineering, and that's probably the reason why we get paid much closer to what we're worth than many other professions; because to us, leaving and starting out own business is always an option when employers don't want to be reasonable about what they pay us.
Also, there's enormous demand for what we do, so that increases our bargaining power, and therefore our salaries.
So to what extent is our salary risk premium? I suppose an employer could pay us much less than what we think we're worth, and if we have nothing better at the moment, we might take it and leave the moment we find something better. In that case, it would be better for the employer to pay us more to discourage us from leaving.
But is that risk premium? If it is, then practically any salary, and perhaps any cost, can be considered risk premium. I don't see this as a very useful way of looking at things.
And Google and Facebook have little to do with my salary; they barely have any jobs in my field in my country, and I don't want to emigrate. Sure, I could make more if I worked in Silicon Valley, but I don't see that being worth it for me.
There are companies who needs software to increase their profits and/or gross margins. There are people who can engineer software.
There are different levels of software complexity (think between Excel spreadsheet's formulae and operating system). There are different skill levels of software engineering.
There are different gross margins obtainable via software of different complexity. There is everlasting competetion between companies for market shares.
Everything else is demand and supply curve from Economy 101.
Unions have long fought to keep demand up for specific industries under this exact logic.
You are worth more when there’s more demand for your (and people like you) labor.