9 ms·
> The reality is that the employee was being taken advantage of by the employer and received an offer more closely aligned with their actual value. In the vast
by thomascgalvin 6y ago
> The reality is that the employee was being taken advantage of by the employer and received an offer more closely aligned with their actual value.
In the vast majority of cases, I agree. If someone is working at CompuTech for $100K per year, and gets an offer from TechuComp for $110K per year, that's market forces working in favor of the developer. This is a good thing.
But there is the possibility for entities the size of Google to ignore market forces entirely in order to better position themselves. For example, a guy working on self-driving cars might command a salary of $400K in most cases, but Google or Tesla or someone might offer them $600K just to prevent competitors from having access to them.
Most companies couldn't afford to do that, but FAANG are so vastly wealthy that they can hire entire engineering teams as a loss leader.
This is still good for the developers involved, at least in the short term, but it isn't so great for the market, or society, overall.
- wry_discontent 6y agoIsn't this still exactly market forces, though? In your example, Google is just driving up the market price for somebody who works on self-driving cars. In what way is it a deviation from market principles?
- Bootvis 6y agoIn the same way as offering products below costs would be to drive out competition and become a monopolist. I'm not sure I think this is bad but I believe this is the argument.
- JoshTriplett 6y agoEquating the two creates a perception that employees shouldn't be paid as much as they're worth. An employee being paid $500k/year is probably producing even more value to their employer than that, and if anything, the goal should be to close the gap between value and compensation, not widen it.
- Cederfjard 6y agoI think the point is that very wealthy companies can temporarily pay employees more than the value they provide, and willingly eat that cost until the competition has been stifled, at which point they can lower compensation again.
- jefftk 6y agoOn the other hand, offering extremely high salaries makes a lot of people consider becoming programmers who wouldn't otherwise think of it. You can't buy your way out of having your competitors having access to skilled labor, outside of perhaps the very short-term.
- saalweachter 6y agoYeah, this is the housing problem all over again. If the price to buy (well, rent) an engineer is too high, build more engineers.
- thesuitonym 6y ago>is probably producing even more value to their employer than that That's the crux of the argument, though. Google can afford to take a loss on the employee's salary for years, just to keep them from a competitor. We're not talking about Google arbitrarily paying a developer more than their competitors, we're talking about Google diverting funds from other business units to cover costs.
- deleted 6y ago[deleted]
- wry_discontent 6y agoIn the same way, isn't that just the way markets work?
- Bootvis 6y agoIANAL but I believe lowering prices to kill competition is illegal in the western world and in the US in particular. Googled: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost https://www.ftc.gov/tips-advice/competition-guidance/guide-a... It’s called predatory pricing in that case and legality is unclear. It seems you probably get away with it in the US.
- danudey 6y agoIt's the "invisible hand of the market" vs. the "invisible hand of rich monopolists". I think one is (conceptually) good, while the other is (provably) bad.
- benburleson 6y agoIt really depends on the perspective. If we're considering this a zero-sum situation, we have to conclude that your situation is good for developers in general because it will cause all developer/engineer salaries to rise to meet the (possibly inflated) salaries that the market has deemed required to recruit talent. On the other hand, does it mean that some employers won't have money to hire talent? And will that result in some businesses failing? And is that ultimately bad for developers? I don't know, but it feels like it's such a big system that it will balance itself if that is the case.
- thomascgalvin 6y agoShort term, yes. Having a company with deep pockets driving up salaries is great for the people working for those salaries. I've definitely benefited from having a bunch of tech companies a short walk down the road. Long term, however, there's a risk of a monopoly forming, which isn't good for developers or society. FAANG are willing to pay big salaries because they are competing. If they use their power to destroy the competition, that market force goes away.
- stale2002 6y ago> Long term, however, there's a risk of a monopoly forming, which isn't good for developers or society. FAANG are willing to pay big salaries because they are competing. If they use their power to destroy the competition, that market force goes away. Big companies have been overpaying developers for almost a decade now. It is not going away. It is not some short term thing. Instead, that is what these elite tech companies pay. It is not some singular company, that is buying up all of the tech talent. Instead, it is a whole bunch of elite tech companies, paying lots of developers lots of money. The idea that there is one singular company, that is a monopoly on developer talent, that is false, given that there are a whole bunch of them doing it.
- ghaff 6y agoYes. To oversimplify the model, there are n<10(?) companies that have first dibs on developers who can pass their interview process and want the best comp (and/or want to work at one of those companies for other reasons). But there is competition among those companies even if "everyone" else pretty much doesn't even try to compete with them based on comp. (Which makes talking market price a bit odd in this case. I imagine an economist has some term for it. I guess there's a market price for developers who can get a FAANG offer and then there's a market price for everyone else.)
- sjburt 6y agoI really fail to see the distinction. If someone is willing to pay 600k for something, then the value of that thing on the market is 600k. That is what a market is.
- benrbray 6y agoIf Google is willing to pay 200k above market rate to hire an employee from a competitor, chances are part of the "value" of that employee is that they will no longer be working for someone else. Yes, literally speaking, it's "worth it" to Google, or they wouldn't do it. Being so large, Google can throw advertising money on their self-driving car division, no problem. They can take a loss for 5-10 years, no problem. However, it's extremely anti-competitive, which is the problem others are pointing out here.
- FartyMcFarter 6y ago> If Google is willing to pay 200k above market rate This is not possible according to the usual definition of "market rate". If Google is willing to pay X, that is the market rate.
- benrbray 6y agoI disagree with your definition of "market rate", but let's suppose you're right: Do you not see it as a problem that Google alone decides the cost of entry to an entire market?
- FartyMcFarter 6y agoWhy do you think that Google alone can afford to hire software engineers? edit - I see how my post was misleading. I should have said X is a "lower bound" for the market rate.
- benrbray 6y agoDo you mean upper bound?
- pietrovismara 6y ago>someone might offer them $600K just to prevent competitors from having access to them. Those are still market forces. They aren't paying the worker value, but the damage they will cause to competitors. Welcome to capitalism.
- fragmede 6y agoFacebook's stock price will keep going up (hopefully, for people holding them), but they're never going to appreciate in value in the same way an early state startup is going to. 100x returns between strike and exercise price exist. CompuTech can give the programmer more options to make up the difference, and while there's advice to value those options at $0, that's harder for an engineer to ignore once a salary threshold is met. After the first $100k or so in salary - enough for living expenses, soft things like culture fit, are able to become more important to employees, and by offering services like on-site massages directly, employers are able to offer more value than employees could capture themselves. (On-site massages are also used to keep employees on campus longer, but once you start getting "free" massages, they're hard to give up!)
- dakna 6y ago> to ignore market forces entirely in order to better position themselves > just to prevent competitors from having access to them They don't ignore the market, they use their resources earned from participating in that market to keep and/or improve their current market positioning. Which is exactly what their shareholders want, and is fair game until treated as a monopolist.
- nickpeterson 6y agoPeople want to work on their interests more than take more money after a certain amount is met. The real power of someone like Google isn’t just paying more money, it’s the variety of projects under its umbrella. They can entice curious cats better.
- robocat 6y ago> but Google or Tesla or someone might offer them $600K just to prevent competitors from having access to them This arguments fails on so many dimensions that it must just be a meme. I’ll use Google as the example. For it to work Google has to be able to monopolise the buying of talent. Most damning, the premise itself is self defeating. Somehow Google is picking the most talented people (delivering far in excess of say $1M marginal returns), yet somehow it is paying well below that to steal that talent and furthermore Google is then wasting that talent (employee delivering value below their pay+overhead). To assume Google chooses to waste talent merely to achieve some low value outcome (damaging a competitor by $1 doesn’t magically enhance Google’s returns by $1 so the factors are way out here) seems to assume the Google is somehow acting against their best financial interests. I don’t think Google is as poorly run as that. Also: 1. Occam’s razor: Could it be that a Google is actually getting good value by paying very high salaries? Yes. The average revenue per person for Google is about 160G$ / 115kiloemployees = 1M4 per employee. I do note that using an average is silly because the value distribution is not flat, but neither is the employee salary distribution flat. But the figure is so large, average does say something useful for back-of-envelope calcs. 2. Can Google monopolise by buying power alone? No. Other companies have similarly high returns per employee (Apple is 260G$/160kiloemployees, Netflix is 20G$/20kiloemployees) so for Google to outbid them, it needs to outbid above the marginal revenue per employee, which clearly is well above a 600k$ salary. 3. Can Google corner the market for talent by restricting supply? No. We know that there are plenty of talented developers because Google isn’t the only company making over $1M revenue per employee. Google employs about 115000 people. Let’s say 50000 of those were “overpaid“ to remove them from the competitors. If the total pool of equivalent talent were as small as 250000, then Google couldn’t monopolise talent. Yet other companies with high revenues per employee have a sum total of employees higher than 250000. Furthermore Google’s returns per effective employee become ~$2.8M/employee, so Google can obviously afford to pay $1M for talent it really wants!
- throwawaygh 6y agoBy the same argument, Computech's sky-high $100K salaries deny k12 access to good stem teachers whose districts can only afford $40K/yr...