10 ms·

That's good for most HN readers, as the tech industry depends entirely on low interest rates to make insane amounts of capital available to unprofitable busines

That's good for most HN readers, as the tech industry depends entirely on low interest rates to make insane amounts of capital available to unprofitable businesses. If you're enjoying your inflated salary, thank Janet Yellen.

quonn 11y ago
Why call a salary inflated, if lawyers or doctors still make more? I have yet to meet one lawyer who feels his salary is undeserved or inflated. Unprofitable businesses (startups) don't even pay their employees that much. The established/big players pay higher salaries and do not depend on much credit at all.
- dovereconomics 11y ago
  Even if unrealizable business don't pay very much(close to doctors/lawyers), it still is a distortion in the market that wouldn't be possible in a free market. Btw, big players are also dependent on a ZIRP, which goes beyond simply 'more credit'.
- vonmoltke 11y ago
  According to Google[1], the median salary for a lawyer in the US is $113,530 and for a software engineer is $93,350. Considering a lawyer requires a Masters degree and a software engineer typically (but not necessarily) only has a Bachelors, I don't think there is much effective difference. On top of that, the median starting salary for lawyers is $62,000[2], which I think is significantly less than the median for software engineers. Lawyers also graduate with significantly higher debt load. Doctors are a different ball of wax. They require effectively PhD-level education plus a seriously underpaid multi-year residency before they can actually practice. They also have debt loads that make law degrees look cheap. [1] Search "lawyer salary" and "software engineer salary" [2] http://money.cnn.com/2014/07/15/pf/jobs/lawyer-salaries/ http://money.cnn.com/2014/07/15/pf/jobs/lawyer-salaries/
  - repiret 11y ago
    Lawyers have a doctorate - it's what the D in JD stands for.
    - geebee 11y ago
      True, but if I have a bouquet of carnations and call it a dozen roses, that doesn't make it so. A law degree is an almost entirely coursework based degree with no dissertation. Attrition rates at elite law schools are vanishingly low (like, less than a half of a percent, whereas PhDs are as high as 50%, 100 times higher). Undergraduate majors prior to law school tend to be the easier ones. They're smart and hard working students, but no, I wouldn't consider a law degree to be a "doctoral" level accomplishment by any external standard. Personally, I think that simply majoring in CS or other rigorous undergraduate majors represents a greater academic accomplishment than Poly Sci or Lit + Law School. Think of it this way - to me, a law degree is like running for 70 minutes at an 8 minute mile pace. Not bad, you're certainly fit. Majoring in CS at a tough program is like running a 6 minute mile for 40 minutes. You aren't running as long, or even as far, but the athletic challenge is greater.
    - dragonwriter 11y ago
      Lawyers in the US (though not much of the rest of the English-speaking world) have a "doctorate" because American lawyers got tired of physicians having a professional doctorate while lawyers only had a bachelor's degree, which is how the LL.B. (Bachelor of Laws) got transformed into the JD (Juris Doctor) -- a legacy of that is that the LL.M. (Master of Laws) is a post-JD degree, reversing the usual order of Masters vs. Doctorate degrees (and beyond that is the DJS/SJD -- Doctor of Juridical Science.)
      - go1979 11y ago
        Top echelon PhDs don't get paid as much as lawyers or doctors of similar caliber btw.
      - sandworm101 11y ago
        Tired, but the switch to the JD also has to do with the US draft. They wanted attorneys who were drafted to be paid on par with other pros like dentists. And the upgrade away from the 'undergrad' label had advantages for those students taking deferments. The standard 2-year deferment for gradschool didn't cover the 3 years needed for law school. Lawschool is a strange thing somewhere between a gradschool and a doctorate. It's a professional school that, like med school, isn't directly comparable to other degree programs.
SilasX 11y ago
"Yeah, we're expecting our investment in CoolApprfy to return about 150% yoy ... wait, what? The risk-free interest rate is 3.75% instead of 3.25%??? What fools we were to invest in this! Cancel all upcoming investment rounds, stat! Conswilio is just gonna have to bootstrap their own multi-interactive paradigms for now." Seriously, I've heard that claim a lot, but I don't see any plausible mechanism for the two to be related. The folks investing in tech startups aren't the same ones with easy access to cheap capital who pick nits over a few bps on bonds.
- murbard2 11y ago
  They're expecting their investment to appreciate as the value of the company becomes evident to other investors. However, that value is ultimately contingent on when the profits will be realized, and what the interest rates are going to be.
- jameslk 11y ago
  The ones investing in startups are VCs who receive their money from institutional investors, who in turn receive their money from various pension funds, endowments, and funds of funds. There's many layers of abstraction where a fraction of a percentage is just a portfolio adjustment. The ones buying startups are the larger corporate entities who are quite liquid right now due to all the money sloshing around. Especially digital media entities like Google, Facebook, Yahoo, et al who have been making a killing on advertising revenue from other highly liquid industries. They may adjust decisions to purchase startups if that no longer becomes the case.
allsystemsgo 11y ago
Uh, I wouldn't say salaries are inflated right now at all. As the other commenter said, doctors and lawyers still grossly outpace software engineers. For whatever reason, I've noticed engineer pay plateaus around 120-150K, which is odd to me. If you have a lead engineer who's building the product that is bringing in millions of dollars of revenue and funding, you should pay them accordingly. Also even if you were right, it's not just the tech industry that relies on low rates. Anyone who needs capital, which is everyone, relies on low interest rates.
- Nicholas_C 11y ago
  >If you have a lead engineer who's building the product that is bringing in millions of dollars of revenue and funding, you should pay them accordingly. How much money someone "brings in" is not the sole determinant of how much money they make. And do you believe that engineers should be making the same as doctors?
  - JoeAltmaier 11y ago
    In fact its rarely correlated. Good Engineers are woefully underpaid most of the time. Case: a support Engineer of my acquaintance worked to retain $24M worth of at-risk customer contracts last year. He got a better job offer, and when he told his employer he was leaving they said "Tell us what it would take to keep you" He replied "$3M paid over a two year contract" They said "No, really, what would it take?" That's how badly Engineers get treated. Given a proven track record, they still couldn't imagine paying him what he was worth. They'd rather lose the next customer.
    - Nicholas_C 11y ago
      That's great work and I would love to be able to say I helped my company save $24M, but I'm willing to bet he isn't the only engineer in the world capable of doing that. It really wouldn't make sense to pay him $3M based on his past work when it's possible to hire another engineer and pay him $150k, assuming they can do the same job.
allsystemsgo 11y ago
Uh, I wouldn't say salaries are inflated right now at all. As the other commenter said, doctors and lawyers still grossly outpace software engineers. For whatever reason, I've noticed engineer pay plateaus around 120-150K, which is odd to me. If you have a lead engineer who's building the product that is bringing in millions of dollars of revenue and funding, you should pay them accordingly. Also even if you were right, it's not just the tech industry that relies on low rates. Anyone who needs capital, which is everyone, relies on low interest rates.
dragonwriter 11y ago
> That's good for most HN readers, as the tech industry depends entirely on low interest rates to make insane amounts of capital available to unprofitable businesses. That statement would be more true if you substituted "startup scene" for "tech industry". There's a lot of solidly-profitable tech-industry businesses. At least, as regards the need for "insane amounts of capital" being made available to "unprofitable businesses". The relation to low interest rates and the direct sensitivity to small changes in the Fed Funds rate is, even in that case, far from clear.
dredmorbius 11y ago
Without addressing whether or not Tech is underpaid (there's a strong argument it is based on pervasive industry collusion dating back decades, and generally a monopsony/oligopsony market), Adam Smith has a delightful articulation of factors contributing to wages in Weath of Nations: Chapter 10: Of Wages and Profit in the different Employments of Labour and Stock https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_10 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/... "Part 1: Inequalities arising from the Nature of the Employments themselves[edit] "The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them." The section continues to explore each of these in detail. Note particularly the risks and preparation components: training, stability of employment, and probability of success. Also the "trust premium" for certain professions: "the wages of labour vary accordingly to the small or great trust which must be reposed in the workmen. "The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen, not only of equal, but of much superior ingenuity, on account of the precious materials with which they are intrusted. "We trust our health to the physician: our fortune and sometimes our life and reputation to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour...." Another factor, one Smith doesn't consider, is the durability of skill or ability within a profession or trade. In the Tech world, state-of-the-art is constantly evolving, to the extent that professional obsolesence is a real risk. This is the case in other trades as well (Car Talk discussed this in auto repair som years back). But it's a consideration not much weighed in the market. Also cumulative stress and burnout. Pricing these into the market is a challenge.
notNow 11y ago
If you're enjoying your inflated salary, thank Janet Yellen. Toda תודה Madame Yellen Don't you love trickle-down economics, crony capitalism and the Fed/Wall St. cartel? I really like how Americans have no qualms about the fact that a private institution controlling their currency and their economy and in turn their life but whatever floats their boat.
- eli_gottlieb 11y ago
  Why "todah" and not "thanks"?

quonn 11y ago

Why call a salary inflated, if lawyers or doctors still make more? I have yet to meet one lawyer who feels his salary is undeserved or inflated. Unprofitable businesses (startups) don't even pay their employees that much. The established/big players pay higher salaries and do not depend on much credit at all.

dovereconomics 11y ago
Even if unrealizable business don't pay very much(close to doctors/lawyers), it still is a distortion in the market that wouldn't be possible in a free market. Btw, big players are also dependent on a ZIRP, which goes beyond simply 'more credit'.
vonmoltke 11y ago
According to Google[1], the median salary for a lawyer in the US is $113,530 and for a software engineer is $93,350. Considering a lawyer requires a Masters degree and a software engineer typically (but not necessarily) only has a Bachelors, I don't think there is much effective difference. On top of that, the median starting salary for lawyers is $62,000[2], which I think is significantly less than the median for software engineers. Lawyers also graduate with significantly higher debt load. Doctors are a different ball of wax. They require effectively PhD-level education plus a seriously underpaid multi-year residency before they can actually practice. They also have debt loads that make law degrees look cheap. [1] Search "lawyer salary" and "software engineer salary" [2] http://money.cnn.com/2014/07/15/pf/jobs/lawyer-salaries/ http://money.cnn.com/2014/07/15/pf/jobs/lawyer-salaries/
- repiret 11y ago
  Lawyers have a doctorate - it's what the D in JD stands for.
  - geebee 11y ago
    True, but if I have a bouquet of carnations and call it a dozen roses, that doesn't make it so. A law degree is an almost entirely coursework based degree with no dissertation. Attrition rates at elite law schools are vanishingly low (like, less than a half of a percent, whereas PhDs are as high as 50%, 100 times higher). Undergraduate majors prior to law school tend to be the easier ones. They're smart and hard working students, but no, I wouldn't consider a law degree to be a "doctoral" level accomplishment by any external standard. Personally, I think that simply majoring in CS or other rigorous undergraduate majors represents a greater academic accomplishment than Poly Sci or Lit + Law School. Think of it this way - to me, a law degree is like running for 70 minutes at an 8 minute mile pace. Not bad, you're certainly fit. Majoring in CS at a tough program is like running a 6 minute mile for 40 minutes. You aren't running as long, or even as far, but the athletic challenge is greater.
  - dragonwriter 11y ago
    Lawyers in the US (though not much of the rest of the English-speaking world) have a "doctorate" because American lawyers got tired of physicians having a professional doctorate while lawyers only had a bachelor's degree, which is how the LL.B. (Bachelor of Laws) got transformed into the JD (Juris Doctor) -- a legacy of that is that the LL.M. (Master of Laws) is a post-JD degree, reversing the usual order of Masters vs. Doctorate degrees (and beyond that is the DJS/SJD -- Doctor of Juridical Science.)
    - go1979 11y ago
      Top echelon PhDs don't get paid as much as lawyers or doctors of similar caliber btw.
    - sandworm101 11y ago
      Tired, but the switch to the JD also has to do with the US draft. They wanted attorneys who were drafted to be paid on par with other pros like dentists. And the upgrade away from the 'undergrad' label had advantages for those students taking deferments. The standard 2-year deferment for gradschool didn't cover the 3 years needed for law school. Lawschool is a strange thing somewhere between a gradschool and a doctorate. It's a professional school that, like med school, isn't directly comparable to other degree programs.

SilasX 11y ago

"Yeah, we're expecting our investment in CoolApprfy to return about 150% yoy ... wait, what? The risk-free interest rate is 3.75% instead of 3.25%??? What fools we were to invest in this! Cancel all upcoming investment rounds, stat! Conswilio is just gonna have to bootstrap their own multi-interactive paradigms for now." Seriously, I've heard that claim a lot, but I don't see any plausible mechanism for the two to be related. The folks investing in tech startups aren't the same ones with easy access to cheap capital who pick nits over a few bps on bonds.

murbard2 11y ago
They're expecting their investment to appreciate as the value of the company becomes evident to other investors. However, that value is ultimately contingent on when the profits will be realized, and what the interest rates are going to be.
jameslk 11y ago
The ones investing in startups are VCs who receive their money from institutional investors, who in turn receive their money from various pension funds, endowments, and funds of funds. There's many layers of abstraction where a fraction of a percentage is just a portfolio adjustment. The ones buying startups are the larger corporate entities who are quite liquid right now due to all the money sloshing around. Especially digital media entities like Google, Facebook, Yahoo, et al who have been making a killing on advertising revenue from other highly liquid industries. They may adjust decisions to purchase startups if that no longer becomes the case.

allsystemsgo 11y ago

Uh, I wouldn't say salaries are inflated right now at all. As the other commenter said, doctors and lawyers still grossly outpace software engineers. For whatever reason, I've noticed engineer pay plateaus around 120-150K, which is odd to me. If you have a lead engineer who's building the product that is bringing in millions of dollars of revenue and funding, you should pay them accordingly. Also even if you were right, it's not just the tech industry that relies on low rates. Anyone who needs capital, which is everyone, relies on low interest rates.

Nicholas_C 11y ago
>If you have a lead engineer who's building the product that is bringing in millions of dollars of revenue and funding, you should pay them accordingly. How much money someone "brings in" is not the sole determinant of how much money they make. And do you believe that engineers should be making the same as doctors?
- JoeAltmaier 11y ago
  In fact its rarely correlated. Good Engineers are woefully underpaid most of the time. Case: a support Engineer of my acquaintance worked to retain $24M worth of at-risk customer contracts last year. He got a better job offer, and when he told his employer he was leaving they said "Tell us what it would take to keep you" He replied "$3M paid over a two year contract" They said "No, really, what would it take?" That's how badly Engineers get treated. Given a proven track record, they still couldn't imagine paying him what he was worth. They'd rather lose the next customer.
  - Nicholas_C 11y ago
    That's great work and I would love to be able to say I helped my company save $24M, but I'm willing to bet he isn't the only engineer in the world capable of doing that. It really wouldn't make sense to pay him $3M based on his past work when it's possible to hire another engineer and pay him $150k, assuming they can do the same job.

allsystemsgo 11y ago

dragonwriter 11y ago

> That's good for most HN readers, as the tech industry depends entirely on low interest rates to make insane amounts of capital available to unprofitable businesses. That statement would be more true if you substituted "startup scene" for "tech industry". There's a lot of solidly-profitable tech-industry businesses. At least, as regards the need for "insane amounts of capital" being made available to "unprofitable businesses". The relation to low interest rates and the direct sensitivity to small changes in the Fed Funds rate is, even in that case, far from clear.

dredmorbius 11y ago

Without addressing whether or not Tech is underpaid (there's a strong argument it is based on pervasive industry collusion dating back decades, and generally a monopsony/oligopsony market), Adam Smith has a delightful articulation of factors contributing to wages in Weath of Nations: Chapter 10: Of Wages and Profit in the different Employments of Labour and Stock https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_10 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/... "Part 1: Inequalities arising from the Nature of the Employments themselves[edit] "The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them." The section continues to explore each of these in detail. Note particularly the risks and preparation components: training, stability of employment, and probability of success. Also the "trust premium" for certain professions: "the wages of labour vary accordingly to the small or great trust which must be reposed in the workmen. "The wages of goldsmiths and jewellers are everywhere superior to those of many other workmen, not only of equal, but of much superior ingenuity, on account of the precious materials with which they are intrusted. "We trust our health to the physician: our fortune and sometimes our life and reputation to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour...." Another factor, one Smith doesn't consider, is the durability of skill or ability within a profession or trade. In the Tech world, state-of-the-art is constantly evolving, to the extent that professional obsolesence is a real risk. This is the case in other trades as well (Car Talk discussed this in auto repair som years back). But it's a consideration not much weighed in the market. Also cumulative stress and burnout. Pricing these into the market is a challenge.

notNow 11y ago

If you're enjoying your inflated salary, thank Janet Yellen. Toda תודה Madame Yellen Don't you love trickle-down economics, crony capitalism and the Fed/Wall St. cartel? I really like how Americans have no qualms about the fact that a private institution controlling their currency and their economy and in turn their life but whatever floats their boat.

eli_gottlieb 11y ago
Why "todah" and not "thanks"?