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Pay is not an absolute number. If you make $100,000 per year at an 8 person company, but the company's profit is $12 billion per year — do you have low pay? T

by seiji 11y ago

Pay is not an absolute number. If you make $100,000 per year at an 8 person company, but the company's profit is $12 billion per year — do you have low pay? The tech industry has discovered you can make employees happy by paying them more than "average," but it's still a lot lower than the benefits, productivity, and supernormal growth powers employees are providing to companies. A productive software developer is worth at a minimum $3 million per year.

ColinCochrane 11y ago
Not that I necessarily disagree, but how did you arrive at $3 million per year?
- seiji 11y ago
  Take your yearly salary and turn it into an hourly rate. The standard number is 2087 hours per year for a salaried employee. So, let's say $100k per year. That's (roughly, rounded up) $50 per hour. What's minimum wage? A few places have minimum, uneducated, non-creative wage of $15 per hour. Your hourly rate of $50/hr is about 3x of just somebody who does manual, non-creative labor. Are you worth more than 3x of a restaurant employee? I sure am. Then, what's your "better than a non-creative womp" multiplier for your output? 10x? Surely you provide more than 10x value as compared to a fast food employee. You're a creative force (or, you can be when you apply yourself). 100x? That's more in the correct range. So, 100x * minimum wage of $15/hr * 2087 hours/year = $3 million per year.
sgustard 11y ago
Amazon's profit per employee is about $2400. Not sure they can swing that. (360m/150k)
- seiji 11y ago
  Well, Amazon profit is fictional since they dump so much back into R&D&Growth. Amazon simply canceled $170 million (http://recode.net/2014/10/23/amazon-takes-170-million-writedown-on-weak-fire-phone-sales/ http://recode.net/2014/10/23/amazon-takes-170-million-writed...) due to their fire phone failure. Or, they could have given each employee working on the project a bonus of a little over a million dollars. Easy come, easy go.
Johnny555 11y ago
I don't see how fair pay is linked to company profits, if they are paying you market rate for your job, you're not underpaid whether they earn $12/year in profits or $12B/year in profits. If the company is earning $12B/year with 12 employees, then the company founders (and early employees who contributed sweat-equity to get the company off the ground) should enjoy their success, but that doesn't mean that they need to pay new hires extravagant amounts of money as a sense of "fairness". I've seen the balance sheet for my company, and right now, our software developers (well, all employees really) are worth negative dollars per year. Sure, our investors (and to a lesser extent our employees) may be rewarded handsomely some years down the road, but it's not the developers money that's on the line - they get a paycheck for as long as the company is in business, and they have no chance of losing any money they invested in the company. Though even if I could snap my fingers and make the company earn $100M/year overnight, there's no way a developer is worth $3M/year.
- seiji 11y ago
  The concept of "early start" or "sweat equity" resulting in extraordinary reward is a convenient financing meme, but it's not great for reality. It just persists because people like the idea of becoming rewarded more than their contributions. Just because you "got in early" and worked for a year then coast for the next 10 years while other people pull of the business doesn't mean you should get outsized rewards. there's no way a developer is worth $3M/year. Then perhaps your company isn't using developers as efficiently as they could be used? Sure, you can automate a $10 million industry, or you can destroy an $800 billion industry. Not all choices are equal.
  - Johnny555 11y ago
    It's not because he got in early and worked for a year, but because he got in early, worked for less (or no) pay than he would have gotten at a more established company. I.e. that developer took on risk, and with risk comes (sometimes) reward. And, his investment may never pay off, the company may never be successful so all of that time and effort spent at low pay may have been for naught. Not all developers can work for companies poised to take over an $800B industry. For every developer in a disruptive company that's going to earn huge rewards, there's 100 developers writing a web backend for a struggling publishing company, or writing integrations for an ERP implementation. (and though that ERP can save the company millions of dollars, that savings is only due in a small part to that single developer's efforts)

by seiji 11y ago

ColinCochrane 11y ago

Not that I necessarily disagree, but how did you arrive at $3 million per year?

seiji 11y ago
Take your yearly salary and turn it into an hourly rate. The standard number is 2087 hours per year for a salaried employee. So, let's say $100k per year. That's (roughly, rounded up) $50 per hour. What's minimum wage? A few places have minimum, uneducated, non-creative wage of $15 per hour. Your hourly rate of $50/hr is about 3x of just somebody who does manual, non-creative labor. Are you worth more than 3x of a restaurant employee? I sure am. Then, what's your "better than a non-creative womp" multiplier for your output? 10x? Surely you provide more than 10x value as compared to a fast food employee. You're a creative force (or, you can be when you apply yourself). 100x? That's more in the correct range. So, 100x * minimum wage of $15/hr * 2087 hours/year = $3 million per year.

sgustard 11y ago

Amazon's profit per employee is about $2400. Not sure they can swing that. (360m/150k)

seiji 11y ago
Well, Amazon profit is fictional since they dump so much back into R&D&Growth. Amazon simply canceled $170 million (http://recode.net/2014/10/23/amazon-takes-170-million-writedown-on-weak-fire-phone-sales/ http://recode.net/2014/10/23/amazon-takes-170-million-writed...) due to their fire phone failure. Or, they could have given each employee working on the project a bonus of a little over a million dollars. Easy come, easy go.

Johnny555 11y ago

I don't see how fair pay is linked to company profits, if they are paying you market rate for your job, you're not underpaid whether they earn $12/year in profits or $12B/year in profits. If the company is earning $12B/year with 12 employees, then the company founders (and early employees who contributed sweat-equity to get the company off the ground) should enjoy their success, but that doesn't mean that they need to pay new hires extravagant amounts of money as a sense of "fairness". I've seen the balance sheet for my company, and right now, our software developers (well, all employees really) are worth negative dollars per year. Sure, our investors (and to a lesser extent our employees) may be rewarded handsomely some years down the road, but it's not the developers money that's on the line - they get a paycheck for as long as the company is in business, and they have no chance of losing any money they invested in the company. Though even if I could snap my fingers and make the company earn $100M/year overnight, there's no way a developer is worth $3M/year.

seiji 11y ago
The concept of "early start" or "sweat equity" resulting in extraordinary reward is a convenient financing meme, but it's not great for reality. It just persists because people like the idea of becoming rewarded more than their contributions. Just because you "got in early" and worked for a year then coast for the next 10 years while other people pull of the business doesn't mean you should get outsized rewards. there's no way a developer is worth $3M/year. Then perhaps your company isn't using developers as efficiently as they could be used? Sure, you can automate a $10 million industry, or you can destroy an $800 billion industry. Not all choices are equal.
- Johnny555 11y ago
  It's not because he got in early and worked for a year, but because he got in early, worked for less (or no) pay than he would have gotten at a more established company. I.e. that developer took on risk, and with risk comes (sometimes) reward. And, his investment may never pay off, the company may never be successful so all of that time and effort spent at low pay may have been for naught. Not all developers can work for companies poised to take over an $800B industry. For every developer in a disruptive company that's going to earn huge rewards, there's 100 developers writing a web backend for a struggling publishing company, or writing integrations for an ERP implementation. (and though that ERP can save the company millions of dollars, that savings is only due in a small part to that single developer's efforts)