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"...the value Google is getting out of my work is worth many multiples of my total compensation. And that’s a position that every engineer should strive for,

• sparky 16y ago
  On the flip side, much of the value you are able to create may come as the result of the infrastructure and colleagues provided to you by that same "someone else". Seems particularly true at a place like Google. When you work for yourself, you get to keep 100% (minus taxes) of (probably) a smaller number; whether that is best for you depends on your personality.
  • thetrumanshow 16y ago
    Even so, if you're a top performer, you end up subsidizing the paychecks of a lot of people.
    • ced 16y ago
      Subsidizing is such a loaded word. Your comment is an example of the pie fallacy. Yes, your colleagues may get a bigger paycheck because you're a top engineer. But that doesn't necessarily imply that the additional money they get is "taken" from you. And obviously, doing a startup is no guarantee that your returns will be better.
      • thetrumanshow 16y ago
        Is it really a pie fallacy? Here's what I really mean by subsidizing, in context, and you can decide if it fits, or if I am suggesting something else... If you buy into the idea that a developer, for example, can be 10x more productive than another, which I do (and I'm not one of the 10x guys at all), then you tend to think that those people should be paid a heap more than the average IT guy... but in fact, they are bound by the same corporate salary ranges as everyone else on the team... so you end up with the delta between the bottom guy and the most productive guy is at most 70K. Therefore, thanks primarily to the top performers, our overall team performs well and everyone benefits similarly... but they really shouldn't benefit similarly since the amount of value creation is wildly different from developer to developer.
        • jshen 16y ago
          so that developer decides to try his hand doing his own startup and quickly realizes that the market generally rewards those that are best at marketing and not those that are best at writing code 10x faster than the average.
        • mathgladiator 16y ago
          The problem of being super productive is that the organization can't exactly support it. Just because you are 10 or 100 times more productive doesn't mean the company can sell 10 or 100 times more.
    • enneff 16y ago
      And guess what - we need those lesser mortals so we can keep doing the fun stuff.
    • vladd 16y ago
      Look at it this way: A and B can be freelancers and gain at most 100K yearly, or they can work for C, where they commonly create wealth for C in amount of 1000K; C pays them 150K each (and keeps the rest, 1000K-150K-150K=700K). Economically, it would make sense for A and B to work for C, since they gain 50K more. Economically it makes sense for C to hire them since together they create wealth, and the 700K that C gets to keep is a reward for his willingness to risk hiring them and managing them into a productive team etc. If A and B would like the risk, they could start pairing themselves together and attempt to create wealth independently. But they could fail. 10% chance of a 1000K is still just 100K on average (it just has an interesting distribution of the payout). The difference up to 1000K is a payout to C for the risk they took in growing their business up to the current level of scalability. (otherwise other companies would pay more for the value that A and B provide) If A and B care only about technology and are risk adverse, the economy doesn't award them more than the 150K which they are already getting. For such people, creating wealth of 1000K for the companies where they work is not a result of their behaviour, but a reward for the founders that took the risks and had the vision to create organizations allowing that.
    • jshen 16y ago
      How much of your startup is subsidized by all the open source software that many engineers work on for free? Your subsidy argument cuts both ways.
    • MaysonL 16y ago
      Neither society nor the enterprise are zero-sum games, and that kind of thinking seems to imply that they are.
    • pauljburke 16y ago
      If you're a top performer, unless the place you are at is losing money you aren't subsidising anyone's paycheck - I assume that the people skimming the cream off your contribution do exactly the same to every employee and anyone that isn't contributing (the value of) at least their own salary (should) would be shown the door. I suspect it gets diverted to senior management (founders?) and shareholders. Given we are commenting on this at ycombinator.com, I don't have a problem with it, since I'm hoping to end up in either or both categories at some point.
• nostromo 16y ago
  I agree with your comment, but would like to point out that this is almost always the case. As an example, I used to work at a SaaS company, and we generated more value for our customers than we charged in fees. Well, duh, otherwise they wouldn't be our customers for long. Same goes for every lasting business model: your cut <= your value generated.
  • DannoHung 16y ago
    Though I suppose it depends on the definition of value, something seems somewhat wrong about this maxim, otherwise there wouldn't be abhorrent anger at certain business models. For example, Payday lenders.
    • chc 16y ago
      The problem with loan sharks is not that others create more value for them than the borrowers necessarily keep for themselves — that could be said of all loans. The problem with loan sharks is that they prey on the weak in a way that is not just suboptimal, but outright harmful.
  • jshen 16y ago
    "Same goes for every lasting business model: your cut <= your value generated." Not if you sell weight loss pills, or run a demand media style content farm, or do cash for gold, or ... Sadly the amount of money you make is rarely a function of the value you create. How much money has linus torvalds made vs the value he's created compared to someone like jason CalAcanis?
    • jasonmcalacanis 16y ago
      fyi: it's CalAcanis.
      • AgentConundrum 16y ago
        In his defense, I have noticed on various podcasts that that A seems to get slurred in speech quite a lot.
• Goladus 16y ago
  As an entrepreneur, something about this statement bothers me... something about all the value I create getting skimmed off the top and taken away by someone else. Yeah, that's probably it. If your small, righ-risk start-up earns $300,000 in profit in one year, paying the CEO a $90,000 stipend doesn't seem unreasonably low, does it? Most of those profits are probably best invested into other parts of the company. Sure, you might still own that value in terms of stock, but that is high-risk stock as opposed to a company like Google, whose stock is much more stable. (And Google's internal investments include nap rooms and such).
• ojbyrne 16y ago
  Presumably you've read Marx then: http://en.wikipedia.org/wiki/Surplus_value http://en.wikipedia.org/wiki/Surplus_value But really that's the point of any kind of organization, even capitalism - specialization allows a group of people to create more value than 1 person alone.
  • thetrumanshow 16y ago
    I certainly didn't mean that I think these gaps shouldn't exist at all, but rather that I am spurred to move up the value chain and have a chance at taking a greater %... as opposed to just getting to play with neat technology.
• adambyrtek 16y ago
  The fallacy comes from the assumption that the added value depends solely on you, and disregarding the context. The author mentions himself that his tweaks to the Linux kernel and ext4 filesystem could have saved Google millions, but only due to the enormous number of machines they have. It doesn't mean that an average startup would get the same benefits from his work in this area.
• johngalt 16y ago
  But that's not really what's happening. A skilled engineer who focuses solely on engineering will produce much better work than a skilled engineer that also has to focus on /marketing /sales /investors /accounting /facilities /IT /management /HR Either a small fish in a big pond or a big fish in a small pond. Edit: Also consider that you may be a person that can produce a lot of value specialized, but practically no value when juggling all the above items. You'll find that if you can produce a lot of value at any level then you can negotiate from a position of power.
  • neilc 16y ago
    Note that an engineer at a startup doesn't necessarily need to focus on anything other than engineering. If your startup has 2-3 people, then sure, everyone's gotta wear multiple hats; in a startup with 10-20 people, specialization makes sense, and probably wouldn't be that different from a big company. (One big difference, however, is that even if you're doing only engineering work, a big company will probably give you more time to think long-term; at a (competently-run) startup, you're more likely to be focused on short-term, tactical, quick-and-dirty work.)
  • DevX101 16y ago
    With a name like johngalt I would think you'd be supporting his argument ;)
    • johngalt 16y ago
      Atlas Shrugged is a fun fantasy, but in reality there are many different valuable specialties. It's all too easy to dismiss anyone that doesn't do what you do as worthless. That said I do agree that a very small number of people in any organization are responsible for the lion's share of the productivity and are inadequately compensated for that.
  • thetrumanshow 16y ago
    I'm not really arguing against these points at all. What I mean by my comment is that, as an entrepreneur, when I detect high marginal return on a given activity, I want to find ways of extracting more value from the situation for myself (profit seeking), rather than just getting a paycheck (profit taking). All that value getting skimmed off and given to someone else is a lost opportunity, especially when you're working for someone else, as there are rarely ways to insert yourself at a higher point in the value chain.
• btilly 16y ago
  There is something important that you miss here. He's generating lots of value, sure. But it is value that can only be generated because his employer already has a lot of existing infrastructure to benefit. He couldn't as easily generate that much value on his own. And therefore being an entrepreneur isn't necessarily that attractive to him. Life is often like that. As an entrepreneur you should seek to understand and respect people who make that choice, not look down on it. Because after all your hope is to eventually hire people who are like him. If you sneer at smart people who are happy to generate excess value, they will notice and won't want to do that for you.
  • thetrumanshow 16y ago
    Thanks, you're absolutely right. My intention wasn't to detract from his means of self-fulfillment, but perhaps that is what I have done.
• MaysonL 16y ago
  Look at it as an entrepreneur: if your customers are getting in value received some large multiple of the price they are paying you, is that not a good thing?