5 ms·

The Engineering Talent Bubble

21 points by jtb99 16y ago

webginja 16y ago
You're absolutely wrong - this is the most open ended prediction without any tangible evidence to back it up. We'll run out of oil first before this happens. I'm sure I'll get negative karma points for this too. You HN fanboy's tend to negate everything that is contrary to your belief system.
YooLi 16y ago
I don't know if I agree with the authors position based on the examples he gives. I'm willing to bet the Google engineer who allegedly was offered the $3.5M in stock to stay was a very key engineer. Google doesn't offer everyone millions in stock not to quit. And as many of the readers of HN know, every startup is not being acquired for talent grabs. Just because we hear of a few (or even what might seem a lot), the percent in comparison to the number of startups is miniscule. I hear about someone winning the Lotto every week; that doesn't mean everyone is winning.
- jtb99 16y ago
  Hi, I'm the author, I appreciate your comment. You're demonstrating that you still have some rational perspective here; my thesis is that many people have lost that perspective. I am an ex-Googler, and I am seeing more and more talented engineers leave Google to start a "company" with the express goal of getting acquired for talent, sometimes even hoping to get acquired back by Google. When people see a valuation in the marketplace (eg, a talent acquisition that makes everyone extremely wealthy) and assume they can achieve the same kind of returns with minimal effort, that is the hallmark of a bubble. The same thing happened with day traders and real estate speculation.
  - sbov 16y ago
    Googlers and ex-Googlers may be living in a bubble. That doesn't mean that the wider engineering talent pool is. From what I could find on the bls.gov site, in 2008 there were about 900,000 jobs in software engineering and 75,000 jobs in computer engineering. From what I can tell from searching, Google has 20,000 employees, but not all of them are necessarily engineers. Even if all google employees were engineers, and they were going out and trying to create startups in order to be bought, that would be 2.0% of the US-wide engineer pool.
russell_h 16y ago
His argument seems to rely on companies becoming unable to pay going rates. I'm not saying thats not going to happen, but he seems to be predicting a software bubble without really defending that prediction.
klochner 16y ago
He had me until "This is going to end, and badly." Bubbles end badly because of leveraged bets on overvalued assets. Call me insensitive, but this doesn't strike me as so bad: "they will find themselves unemployed and without savings." It's not like you're going to work your entire career at a non-paying startup. At worst you come out with a unique experience and go find a paying job.
- wyclif 16y ago
  Yes, like I said, that last paragraph didn't work for me either.
cridal 16y ago
You know Facebook + Google, as big as they are, do not equal United States of America, which is still bogged down by the biggest recession since the Great Depression. What bubble are you talking about? These companies sit on small mountains of cash and can afford bidding wars over top engineering talent, especially that software is their livelihood. Let me assure you, hiring managers of 99% of companies in the US don't stand on street corners and bid up software engineers' salaries. You can sleep in peace...
biggitybones 16y ago
My thoughts on the potential "bubbles" aside, I find it funny how it's become a thing to try to call out bubbles that may be occurring, given the recent monumental financial collapse. So called bubbles always exist - they're hot sectors - and then there's a self correction of varying severity.
gte910h 16y ago
I don't find the positions to be supported by anything. 99.9% of engineers get paid an upper middle class salary, with a few more getting these 7 figure bumps from acquisitions that aren't really. I don't think something like 1/10 of 1% of engineers having something happen to them is something to worry about ending.
paulbaumgart 16y ago
I don't think it's a bubble. A lot of people talk about top engineers being 10x (or even 100x) as productive as mediocre engineers. Assuming that's true (and I suspect it is, but admittedly I don't have any evidence to back that up): Historically, those 10x engineers got paid maybe 2-3x. Because it's become so much easier to start software companies recently (thanks in no small part to folks like Y Combinator, but largely due to cheap servers and FOSS), those 10x engineers can now easily go seek compensation that's more proportional to the value they actually create. In turn, large software companies are finding they need to pay more to stay competitive with the alternative of striking out on your own. What we're seeing here is pay becoming more proportional to value creation. Which I think is a very good thing. As an aside, I think the rise in talent acquisitions is largely a backdoor for companies to hire top talent without needing to change their deeply entrenched pay-scales. Apparently Google is starting to figure out that it's more efficient to just pay people more instead of having them leave for a couple of years in order to take advantage of this backdoor.
- yawniek 16y ago
  also an interesting approach and i see more similarities to the financial industry where exactely this happens all the time. it is also the political justification of their salaries.
- asmithmd1 16y ago
  Also compare the recent run-up in salaries to a graph of baseball players salaries over years: http://baseballanalysts.com/archives/2010/11/mlb_salaries_ov.php http://baseballanalysts.com/archives/2010/11/mlb_salaries_ov... When you look at the linear graph it looks less like a bubble and more like settling in at a new level.
  - paulbaumgart 16y ago
    Like professional sports, we'll probably see the bottom of the salary range for software engineering drop significantly, due to increased competition resulting from globalization and because the higher pay at the top of the range will make the field more attractive.
wyclif 16y ago
There are a lot of engineers who are going to make serious life choices based on current trends, and in a year or two, when this blows up, they will find themselves unemployed and without savings. I was with him until the last paragraph. I think a lot of really bright engineers who accept the premise are banking a large percentage of their salary, no?
doyoulikeworms 16y ago
Computer science enrollment was quite crappy (still is?) after the dot com bubble burst. I started college in 2005, right when a brand new CS building was completed... which was pretty underutilized during my time there. Enrollment in CS at my school had dropped by over 1/3 from its peak, which was just a few years earlier.
dstein 16y ago
The tech industry has still not entirely recovered from the first DOT-com bubble burst. Broadcast.com selling for 5.9 Billion in 1999 was a bubble. Startups gets bought for millions is not a bubble.
deleted 16y ago
[deleted]
yawniek 16y ago
i dont think its a supply driven bubble since good engineers are still rare. also compared to the financial industry these "valuations" are not really spectacular while i think that the complexity of these fields are comparable. so either the demand is really high or we start to feel the recent influx of new money (speak: inflation)
kevinpet 16y ago
A bubble exists when people buy something based not on their belief in it's intrinsic underlying value but because people think it will appreciate in price. I.e. tulips, california real estate. You can't have a bubble in something you can't resell. This isn't an argument that salaries are at the correct long term level. I'm just saying that salaries can't have a bubble that "pops" and collapses like asset bubbles do.
- jtb99 16y ago
  Hi, I'm the author, and I disagree with you about the definition of a bubble. A bubble is when you're paying for something based purely on speculation about the future value of that thing, rather than on a rational analysis of the expected future return. I would wager that Google does not have an internal projection of the value of any engineer showing them to be worth $3.5m over four years; rather, I'd bet that comp decision was made based on an irrational fear of yet another defection from Google to Facebook.
  - d2viant 16y ago
    $3.5 million is simply too large a number for your theory to be correct. A number that large to a single employee doesn't come out of thin air, it's based on something -- whether that be formal analysis or back of the envelope calculation.
    - jtb99 16y ago
      I suspect the calculation was (expected value of FB package) * 1.5
      - sudont 16y ago
        It's also possible that it was based on the potential damage done to Google by Facebook's talent acquisition, or if this isn't a zero-sum game, to prevent any gains by Facebook.
  - kevinpet 16y ago
jperkins 16y ago
One point that this analysis is missing is that tech salaries were being artificially deflated by Google, et al with their agreement to not raid each other for talent. With those practices now being abandoned, we are going to see a spike in salaries as they seek equilibrium. Googles 10% pay hike is the first such example of this.
rythie 16y ago
Would $3.5M have been too much to keep Paul Buchheit at Google? so he could have created FriendFeed there, so Google could compete with Twitter/Facebook properly Or Ev Williams who actually created Twitter? Or Dennis Crowley who created foursquare?
deleted 16y ago
[deleted]
woan 16y ago
I also don't think there is a bubble. The company acquisitions for talent alone have been reasonable as far as I can tell. In the IT services industry this is long standing practice for talent acquisition. There is always a shortage for great engineers and they generally have great jobs, so acquiring the top tier will always be competitive as in any other industry. For most companies, the only way to gain access to this tier continues to be personal networks or if they are in the founding team. For other organizations, growing this talent from promise is the most pragmatic approach assuming have some really good talent to mentor them. The middle and lower tiers are being paid upper middle class wages commensurate with education, experience, and economic contribution. Things are more competitive in hot geographies like Silicon Valley and Seattle, but that is nothing new.
blahblahblah 16y ago
"Startups, less than two years old, with very little user traction and no revenue, getting acquired simply for talent, at valuations that give even the front-line engineers a seven-figure outcome." Seven-figure salaries for developers? Are you sure you put the decimal point in the right spot and counted the digits correctly? I find it very difficult to believe that any developer (not a manager, not a c-suite executive, etc.) is making in excess of $1,000,000. Name one. Otherwise, I call bullshit.

21 points by jtb99 16y ago

You're absolutely wrong - this is the most open ended prediction without any tangible evidence to back it up. We'll run out of oil first before this happens. I'm sure I'll get negative karma points for this too. You HN fanboy's tend to negate everything that is contrary to your belief system.

YooLi 16y ago

I don't know if I agree with the authors position based on the examples he gives. I'm willing to bet the Google engineer who allegedly was offered the $3.5M in stock to stay was a very key engineer. Google doesn't offer everyone millions in stock not to quit. And as many of the readers of HN know, every startup is not being acquired for talent grabs. Just because we hear of a few (or even what might seem a lot), the percent in comparison to the number of startups is miniscule. I hear about someone winning the Lotto every week; that doesn't mean everyone is winning.

jtb99 16y ago
Hi, I'm the author, I appreciate your comment. You're demonstrating that you still have some rational perspective here; my thesis is that many people have lost that perspective. I am an ex-Googler, and I am seeing more and more talented engineers leave Google to start a "company" with the express goal of getting acquired for talent, sometimes even hoping to get acquired back by Google. When people see a valuation in the marketplace (eg, a talent acquisition that makes everyone extremely wealthy) and assume they can achieve the same kind of returns with minimal effort, that is the hallmark of a bubble. The same thing happened with day traders and real estate speculation.
- sbov 16y ago
  Googlers and ex-Googlers may be living in a bubble. That doesn't mean that the wider engineering talent pool is. From what I could find on the bls.gov site, in 2008 there were about 900,000 jobs in software engineering and 75,000 jobs in computer engineering. From what I can tell from searching, Google has 20,000 employees, but not all of them are necessarily engineers. Even if all google employees were engineers, and they were going out and trying to create startups in order to be bought, that would be 2.0% of the US-wide engineer pool.

russell_h 16y ago

His argument seems to rely on companies becoming unable to pay going rates. I'm not saying thats not going to happen, but he seems to be predicting a software bubble without really defending that prediction.

klochner 16y ago

He had me until "This is going to end, and badly." Bubbles end badly because of leveraged bets on overvalued assets. Call me insensitive, but this doesn't strike me as so bad: "they will find themselves unemployed and without savings." It's not like you're going to work your entire career at a non-paying startup. At worst you come out with a unique experience and go find a paying job.

wyclif 16y ago
Yes, like I said, that last paragraph didn't work for me either.

cridal 16y ago

You know Facebook + Google, as big as they are, do not equal United States of America, which is still bogged down by the biggest recession since the Great Depression. What bubble are you talking about? These companies sit on small mountains of cash and can afford bidding wars over top engineering talent, especially that software is their livelihood. Let me assure you, hiring managers of 99% of companies in the US don't stand on street corners and bid up software engineers' salaries. You can sleep in peace...

biggitybones 16y ago

My thoughts on the potential "bubbles" aside, I find it funny how it's become a thing to try to call out bubbles that may be occurring, given the recent monumental financial collapse. So called bubbles always exist - they're hot sectors - and then there's a self correction of varying severity.

gte910h 16y ago

I don't find the positions to be supported by anything. 99.9% of engineers get paid an upper middle class salary, with a few more getting these 7 figure bumps from acquisitions that aren't really. I don't think something like 1/10 of 1% of engineers having something happen to them is something to worry about ending.

paulbaumgart 16y ago

I don't think it's a bubble. A lot of people talk about top engineers being 10x (or even 100x) as productive as mediocre engineers. Assuming that's true (and I suspect it is, but admittedly I don't have any evidence to back that up): Historically, those 10x engineers got paid maybe 2-3x. Because it's become so much easier to start software companies recently (thanks in no small part to folks like Y Combinator, but largely due to cheap servers and FOSS), those 10x engineers can now easily go seek compensation that's more proportional to the value they actually create. In turn, large software companies are finding they need to pay more to stay competitive with the alternative of striking out on your own. What we're seeing here is pay becoming more proportional to value creation. Which I think is a very good thing. As an aside, I think the rise in talent acquisitions is largely a backdoor for companies to hire top talent without needing to change their deeply entrenched pay-scales. Apparently Google is starting to figure out that it's more efficient to just pay people more instead of having them leave for a couple of years in order to take advantage of this backdoor.

yawniek 16y ago
also an interesting approach and i see more similarities to the financial industry where exactely this happens all the time. it is also the political justification of their salaries.
asmithmd1 16y ago
Also compare the recent run-up in salaries to a graph of baseball players salaries over years: http://baseballanalysts.com/archives/2010/11/mlb_salaries_ov.php http://baseballanalysts.com/archives/2010/11/mlb_salaries_ov... When you look at the linear graph it looks less like a bubble and more like settling in at a new level.
- paulbaumgart 16y ago
  Like professional sports, we'll probably see the bottom of the salary range for software engineering drop significantly, due to increased competition resulting from globalization and because the higher pay at the top of the range will make the field more attractive.

wyclif 16y ago

There are a lot of engineers who are going to make serious life choices based on current trends, and in a year or two, when this blows up, they will find themselves unemployed and without savings. I was with him until the last paragraph. I think a lot of really bright engineers who accept the premise are banking a large percentage of their salary, no?

doyoulikeworms 16y ago

Computer science enrollment was quite crappy (still is?) after the dot com bubble burst. I started college in 2005, right when a brand new CS building was completed... which was pretty underutilized during my time there. Enrollment in CS at my school had dropped by over 1/3 from its peak, which was just a few years earlier.

dstein 16y ago

The tech industry has still not entirely recovered from the first DOT-com bubble burst. Broadcast.com selling for 5.9 Billion in 1999 was a bubble. Startups gets bought for millions is not a bubble.

deleted 16y ago

[deleted]

yawniek 16y ago

i dont think its a supply driven bubble since good engineers are still rare. also compared to the financial industry these "valuations" are not really spectacular while i think that the complexity of these fields are comparable. so either the demand is really high or we start to feel the recent influx of new money (speak: inflation)

kevinpet 16y ago

A bubble exists when people buy something based not on their belief in it's intrinsic underlying value but because people think it will appreciate in price. I.e. tulips, california real estate. You can't have a bubble in something you can't resell. This isn't an argument that salaries are at the correct long term level. I'm just saying that salaries can't have a bubble that "pops" and collapses like asset bubbles do.

jtb99 16y ago
Hi, I'm the author, and I disagree with you about the definition of a bubble. A bubble is when you're paying for something based purely on speculation about the future value of that thing, rather than on a rational analysis of the expected future return. I would wager that Google does not have an internal projection of the value of any engineer showing them to be worth $3.5m over four years; rather, I'd bet that comp decision was made based on an irrational fear of yet another defection from Google to Facebook.
- d2viant 16y ago
  $3.5 million is simply too large a number for your theory to be correct. A number that large to a single employee doesn't come out of thin air, it's based on something -- whether that be formal analysis or back of the envelope calculation.
  - jtb99 16y ago
    I suspect the calculation was (expected value of FB package) * 1.5
    - sudont 16y ago
      It's also possible that it was based on the potential damage done to Google by Facebook's talent acquisition, or if this isn't a zero-sum game, to prevent any gains by Facebook.
- kevinpet 16y ago

jperkins 16y ago

One point that this analysis is missing is that tech salaries were being artificially deflated by Google, et al with their agreement to not raid each other for talent. With those practices now being abandoned, we are going to see a spike in salaries as they seek equilibrium. Googles 10% pay hike is the first such example of this.

rythie 16y ago

Would $3.5M have been too much to keep Paul Buchheit at Google? so he could have created FriendFeed there, so Google could compete with Twitter/Facebook properly Or Ev Williams who actually created Twitter? Or Dennis Crowley who created foursquare?

deleted 16y ago

[deleted]

woan 16y ago

I also don't think there is a bubble. The company acquisitions for talent alone have been reasonable as far as I can tell. In the IT services industry this is long standing practice for talent acquisition. There is always a shortage for great engineers and they generally have great jobs, so acquiring the top tier will always be competitive as in any other industry. For most companies, the only way to gain access to this tier continues to be personal networks or if they are in the founding team. For other organizations, growing this talent from promise is the most pragmatic approach assuming have some really good talent to mentor them. The middle and lower tiers are being paid upper middle class wages commensurate with education, experience, and economic contribution. Things are more competitive in hot geographies like Silicon Valley and Seattle, but that is nothing new.

blahblahblah 16y ago

"Startups, less than two years old, with very little user traction and no revenue, getting acquired simply for talent, at valuations that give even the front-line engineers a seven-figure outcome." Seven-figure salaries for developers? Are you sure you put the decimal point in the right spot and counted the digits correctly? I find it very difficult to believe that any developer (not a manager, not a c-suite executive, etc.) is making in excess of $1,000,000. Name one. Otherwise, I call bullshit.