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Isn't the balance of power between workers and employers in Silicon Valley massively lopsided in favor of the former? We have companies that are losing money pa

Isn't the balance of power between workers and employers in Silicon Valley massively lopsided in favor of the former? We have companies that are losing money paying their engineers six-digit salaries. Restoring the balance is the last thing this place needs.

jldugger 9y ago
> We have companies that are losing money paying their engineers six-digit salaries. I assume that's a tactical decision on their part to bootstrap a new company. A brief analysis I did a few months ago suggests that six digit salaries aren't bankrupting established companies. The largest SV employers could arguably double or triple engineer salaries without dipping into negative salary territory: Facebook Employees: 18,000 Profit: 11.51B Profit per employee: ~$600,000 Google Employees: 57,000 Profit: 20B Profit per employee: ~$400,000 Apple Employees: 115,000 Profit: 45B Profit per employee: ~$390,000 Microsoft Employees: 114,000 Profit: 17B Profit per employee: ~$150,000 And for comparison: IBM Employees: 380,000 Profit: 11B Profit per employee: ~$29,000 Wal-Mart Employees: 2.3 million Profit: 13.64B Profit per employee: ~$5,000 And yet we have cartel-like behavior from SV's largest firms agreeing not to bid up the price of engineering talent not all that long ago.
- hueving 9y ago
  Where are people getting the notion that engineers should be paid whatever the current profit per engineer is? Engineers are not shareholders. You can't have it both ways where employees get to take all of the upside of a business without all of the risks of being an investor. When IBM has a bad year, would you be okay with clawing back all of the salary paid out that year?
  - maxxxxx 9y ago
    Employees take on a lot of risk. They risk being laid off and they have to put all their eggs in one basket. They also risk damage to their career if their company assigns to them work that doesn't look good on resume. In my view investors have less risk.
    - hueving 9y ago
      >Employees take on a lot of risk. They risk being laid off and they have to put all their eggs in one basket. That's not a lot of risk. If they get laid off, they don't lose an initial investment like the shareholders do. If I get laid off today, I will just go find another job. I don't lose my previous wages. >They also risk damage to their career if their company assigns to them work that doesn't look good on resume. Doing something shitty is entirely the employees choice. If they aren't happy with the compensation they get for doing that thing, then they should move to a different company.
      - maxxxxx 9y ago
        Most of us live in a world where it's not so easy to just take another job if the current doesn't meet expectations. In addition you have almost no way tell upfront if the new job will be any better.
        fuzzfactor 9y ago
        This is by design.
  - humanrebar 9y ago
    It's a bit muddier with technology workers, though. Engineers do invest in their employers, by specializing in the relevant tech stack. To the extent that the employer uses a marketable and generally useful tech stack, that's not saying much, but if you specialize in some legacy garbage processes and systems it could be a net negative on your career prospects. Likewise if your employer wants you to repeat the same year of experience over and over without any realistic advancement prospects. The risk being that you are a proficient line employee for BigCo maintaining their systems written in BigCoLang and then you have a hard time getting a similarly paying gig after you're laid off. And nobody else uses BigCoLang. Sure, we can argue that talented engineers can retrain, but I don't see many weak senior engineer candidates being offered junior engineering positions so they can bone up on a new tech stack. Typically they just say "technically weak" or "not a good fit" and interview the next candidate.
  - umanwizard 9y ago
    To add to your point, it's also not linear -- maybe the first 100 MS employees are responsible for half the value and the next ~100,000 are responsible for the other half.
  - SubiculumCode 9y ago
    Most investors have the privilege to take risks because they have pre-existing wealth; but yeah their investments carry risk. Workers also carry risk; they invest resources to establish and maintain their employment with a company.
    - hueving 9y ago
      >Workers also carry risk; they invest resources to establish and maintain their employment with a company. What are they investing that they aren't being compensated for in their salary/bonuses?
  - jldugger 9y ago
    Leaving aside the fact that many engineers are sharedholders, or bonus structures based on company performance, it's more a metric of the ceiling these companies have for increased wages. Obviously there's a risk premium that shareholders should be compensated for, but at the same time, Google has more or less explicitly structured themselves around their reliable profit stream with no obvious place to reinvest the profits. Those Other Bets are essentially all funded through Google's ad network profits. Obviously my simple model has pitfalls, but it's fairly apparent that, absent an illegal covenant preventing it, there would have been more upward pressure on wages in SV. The economic principle of wages tied to productivity has gone off the rails recently, and the investor entitlement you've demonstrated seems to be part of the problem.
    - hueving 9y ago
      >The economic principle of wages tied to productivity That's not an economic principle. There are no economic theories that make sense to support it. Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Labor is a market good like any other. Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. >but it's fairly apparent that, absent an illegal covenant preventing it, there would have been more upward pressure on wages in SV The upward pressure exists when companies can't hire at the rate they want to pay and still have more to compensate. Even if companies have a wide gap where they could compensate more, the upward pressure will not exist if there are enough qualified employees to fill the positions at a lower wage.
      - fuzzfactor 9y ago
        >Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Companies still fail to profit on some transactions whether intentionally or not. Probably not sustainable except for a non-profit corporation. Even giving away part of the money does seem to be so much less common that it is understandable for there to be not much remaining general perception that it occurs any more at all. But generousity can span the complete spectrum from compassion to empowerment to downright charity all the way to absolute philanthropy. Of course greed has its own spectrum too based around money-motivated indivduals having very little worthwhile to offer while also having very little interest in anything else. This should be able to be completely avoided by truly productive operators, whether capitalists or employees. But leaving money on the table can be very revealing about the generousity or greed of the other party. There should be enough to go around that you should be be able to avoid cutthroat negotiations especially when relative to the stronger party what you are leaving on the table amounts to table scraps for them. If you blink and someone rich as hell makes it disappear faster than a common thief could rob you I would consider that a bad sign. >Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. If a hardware company can truly afford to pay more than the market rate for components, and no one else is doing it, many times they should be able to gain a competitive advantage by leveraging the generousity to their suppliers into a much more productive and/or higher quality supply chain. For a very small premium on top of your minimum component cost you can virtually double the resources your suplier has to work with on your behalf, all they need to do is leverage it back in your favor and everybody wins. It is silly to think employees are any different.
twobyfour 9y ago
Oh, then it's a good thing the article was talking entirely about Silicon Valley. Oh, wait...

jldugger 9y ago

> We have companies that are losing money paying their engineers six-digit salaries. I assume that's a tactical decision on their part to bootstrap a new company. A brief analysis I did a few months ago suggests that six digit salaries aren't bankrupting established companies. The largest SV employers could arguably double or triple engineer salaries without dipping into negative salary territory: Facebook Employees: 18,000 Profit: 11.51B Profit per employee: ~$600,000 Google Employees: 57,000 Profit: 20B Profit per employee: ~$400,000 Apple Employees: 115,000 Profit: 45B Profit per employee: ~$390,000 Microsoft Employees: 114,000 Profit: 17B Profit per employee: ~$150,000 And for comparison: IBM Employees: 380,000 Profit: 11B Profit per employee: ~$29,000 Wal-Mart Employees: 2.3 million Profit: 13.64B Profit per employee: ~$5,000 And yet we have cartel-like behavior from SV's largest firms agreeing not to bid up the price of engineering talent not all that long ago.

hueving 9y ago
Where are people getting the notion that engineers should be paid whatever the current profit per engineer is? Engineers are not shareholders. You can't have it both ways where employees get to take all of the upside of a business without all of the risks of being an investor. When IBM has a bad year, would you be okay with clawing back all of the salary paid out that year?
- maxxxxx 9y ago
  Employees take on a lot of risk. They risk being laid off and they have to put all their eggs in one basket. They also risk damage to their career if their company assigns to them work that doesn't look good on resume. In my view investors have less risk.
  - hueving 9y ago
    >Employees take on a lot of risk. They risk being laid off and they have to put all their eggs in one basket. That's not a lot of risk. If they get laid off, they don't lose an initial investment like the shareholders do. If I get laid off today, I will just go find another job. I don't lose my previous wages. >They also risk damage to their career if their company assigns to them work that doesn't look good on resume. Doing something shitty is entirely the employees choice. If they aren't happy with the compensation they get for doing that thing, then they should move to a different company.
    - maxxxxx 9y ago
      Most of us live in a world where it's not so easy to just take another job if the current doesn't meet expectations. In addition you have almost no way tell upfront if the new job will be any better.
      - fuzzfactor 9y ago
        This is by design.
- humanrebar 9y ago
  It's a bit muddier with technology workers, though. Engineers do invest in their employers, by specializing in the relevant tech stack. To the extent that the employer uses a marketable and generally useful tech stack, that's not saying much, but if you specialize in some legacy garbage processes and systems it could be a net negative on your career prospects. Likewise if your employer wants you to repeat the same year of experience over and over without any realistic advancement prospects. The risk being that you are a proficient line employee for BigCo maintaining their systems written in BigCoLang and then you have a hard time getting a similarly paying gig after you're laid off. And nobody else uses BigCoLang. Sure, we can argue that talented engineers can retrain, but I don't see many weak senior engineer candidates being offered junior engineering positions so they can bone up on a new tech stack. Typically they just say "technically weak" or "not a good fit" and interview the next candidate.
- umanwizard 9y ago
  To add to your point, it's also not linear -- maybe the first 100 MS employees are responsible for half the value and the next ~100,000 are responsible for the other half.
- SubiculumCode 9y ago
  Most investors have the privilege to take risks because they have pre-existing wealth; but yeah their investments carry risk. Workers also carry risk; they invest resources to establish and maintain their employment with a company.
  - hueving 9y ago
    >Workers also carry risk; they invest resources to establish and maintain their employment with a company. What are they investing that they aren't being compensated for in their salary/bonuses?
- jldugger 9y ago
  Leaving aside the fact that many engineers are sharedholders, or bonus structures based on company performance, it's more a metric of the ceiling these companies have for increased wages. Obviously there's a risk premium that shareholders should be compensated for, but at the same time, Google has more or less explicitly structured themselves around their reliable profit stream with no obvious place to reinvest the profits. Those Other Bets are essentially all funded through Google's ad network profits. Obviously my simple model has pitfalls, but it's fairly apparent that, absent an illegal covenant preventing it, there would have been more upward pressure on wages in SV. The economic principle of wages tied to productivity has gone off the rails recently, and the investor entitlement you've demonstrated seems to be part of the problem.
  - hueving 9y ago
    >The economic principle of wages tied to productivity That's not an economic principle. There are no economic theories that make sense to support it. Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Labor is a market good like any other. Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. >but it's fairly apparent that, absent an illegal covenant preventing it, there would have been more upward pressure on wages in SV The upward pressure exists when companies can't hire at the rate they want to pay and still have more to compensate. Even if companies have a wide gap where they could compensate more, the upward pressure will not exist if there are enough qualified employees to fill the positions at a lower wage.
    - fuzzfactor 9y ago
      >Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Companies still fail to profit on some transactions whether intentionally or not. Probably not sustainable except for a non-profit corporation. Even giving away part of the money does seem to be so much less common that it is understandable for there to be not much remaining general perception that it occurs any more at all. But generousity can span the complete spectrum from compassion to empowerment to downright charity all the way to absolute philanthropy. Of course greed has its own spectrum too based around money-motivated indivduals having very little worthwhile to offer while also having very little interest in anything else. This should be able to be completely avoided by truly productive operators, whether capitalists or employees. But leaving money on the table can be very revealing about the generousity or greed of the other party. There should be enough to go around that you should be be able to avoid cutthroat negotiations especially when relative to the stronger party what you are leaving on the table amounts to table scraps for them. If you blink and someone rich as hell makes it disappear faster than a common thief could rob you I would consider that a bad sign. >Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. If a hardware company can truly afford to pay more than the market rate for components, and no one else is doing it, many times they should be able to gain a competitive advantage by leveraging the generousity to their suppliers into a much more productive and/or higher quality supply chain. For a very small premium on top of your minimum component cost you can virtually double the resources your suplier has to work with on your behalf, all they need to do is leverage it back in your favor and everybody wins. It is silly to think employees are any different.

twobyfour 9y ago

Oh, then it's a good thing the article was talking entirely about Silicon Valley. Oh, wait...