5 ms·

The elephant in the room is not whether I‘m worth 150K in S.V. but 50K if my cost of living is lower elsewhere. The real issue is what enables S.V. companies to

The elephant in the room is not whether I‘m worth 150K in S.V. but 50K if my cost of living is lower elsewhere. The real issue is what enables S.V. companies top pay three times as much. Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower. I think neither S.V. nor the market is rational.

Ericson2314 6y ago
https://en.wikipedia.org/wiki/Economic_geography https://en.wikipedia.org/wiki/Economic_geography cities matter. You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matter. Maybe when we get that soviet internet that browses you. > I think neither S.V. nor the market is rational. I agree, and it's possible general "bullshit jobs" and Q.E./softbank bubble type phenomena dwarf the intrinsic value of cities. But still, those are orthogonal effects. Contrary to most American nostalgia, going rural does not defeat the bullshit.
- SilasX 6y ago
  >cities matter. >You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matte Yes, I can totally get why anyone would pay a premium for someone who is physically present, or can be on relatively little notice. But that only be relevant as far as "local or remote?", where the former gets a premium against the latter, and it shouldn't care about looking up the specific CoL of which remote location you're working from (so long as business hours are maintained). The issue is that location-based pay does do this.
  - dasil003 6y ago
    Yeah a few years ago I was looking around at companies and had some interest in joining Gitlab. Then I saw their pay scale for Oakland and it was laughably low compared to SF even though that was all within my local job market. Ultimately remote first companies that don’t do this will win the talent war and steadily push remote salaries up. Depending how successful they are it may also push major market salaries down over time.
  - Ericson2314 6y ago
    I agree. PP was asking about why SV pays so much more in the first place. That's a related question but with different variables fixed constant. Indeed, it's very stupid to so discriminate between different locals. And it's not even clear this is in the employer's interests besides the higher order effects of dominating labor: in simplistic first-order modeling pay scales like this only hinder the arbitrage between different remote locations that are equivalent in the big corp's eyes.
- minikites 6y ago
  All the more reason to implement a land value tax, with additional taxes on speculation properties (say, lived in for less than 33% of the year), and on vacancy (blight tax).
  - Ericson2314 6y ago
    Amen to that! Land is a public good, and density even more so.
dasil003 6y ago
What “enables” companies to pay more is profits, but what forces them to is the labor market. SV pays more because as an IC you can get a $150k job at thousands of other companies within commute distance. Of course it is possible to set up a tech company elsewhere and have lower operating costs—there are plenty of examples—but that doesn’t it’s a slam dunk; remote work is a trade off that does not work for every person or company, and talent pools and ecosystems matter a great deal.
- IshKebab 6y ago
  It's kind of amazing how many people on this site don't understand the very simple economics of how salary is determined.
6gvONxR4sf7o 6y ago
Right. It indicates that market forces aren’t benefitting labor as much as they could an extreme degree. What aspect of the market needs to be changed in order for everyone to benefit similarly? Clearly companies are making far more per worker than they’re paying out (at least in this case). Why is it so extreme?
UncleMeat 6y ago
> Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower. There are two reasons why SV companies pay outrageous amounts. 1. Some companies have insane revenues. Google/Facebook lead the way but others are in this space as well. They can pay engineers huge amounts because they can afford it. These companies are rare and there aren't many outside of a few hubs. 2. Other companies run huge deficits and are funded by VCs. These companies pay huge amounts because their VCs want them to grow crazy fast and want them to hire top people, so they have to compete with the rich companies. The VCs are primarily located in a few hubs because they want to be able to physically stop in to their startups. If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God.
- jjav 6y ago
  > If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God. The companies I worked for in the 90s, well before goog or fb existed, had location-based salary tables. There's nothing post-2005 about this.
  - UncleMeat 6y ago
    Location-based salary tables aren't new. But salaries that are 5x above the US median for software engineers are. We didn't have such a huge stratification in the past.
s1artibartfast 6y ago
>Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower. The canned answer is that SV provides easy access to capital and talent. These are rationale incentives, although they may be overvalued and this is changing. Companies can absolutely pocket the difference. I know a SV CEO who is building out his software team in Pakistan because college educated programmers are paid $6/hr and the talent is adequate
gnopgnip 6y ago
Apple has a gross revenue of $1.9 million per employee. Paying 150k is generally only a small fraction of the value they create and Apple could afford to pay more, and at the same time a better offer than anywhere else for many
ip26 6y ago
It's like a black hole. The more dollars & developers you feed SV, the more gravity it has to suck in more dollars & developers, in an endless feedback loop. If the supply of dollars was limited, it would never have reached such critical mass.
lrem 6y ago
Well, one reason that S.V. companies can pay more is that they earn more thanks to being in S.V. Once I've been visiting the mothership and took a bike to drive up/down the road. There have been offices of all kinds of companies I would've never heard about... Except I've seen so many of the logos on various things in the office a quarter world away. I imagine there's quite some value in having your engineers mingle with potential customer's engineers after work.

Ericson2314 6y ago

https://en.wikipedia.org/wiki/Economic_geography https://en.wikipedia.org/wiki/Economic_geography cities matter. You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matter. Maybe when we get that soviet internet that browses you. > I think neither S.V. nor the market is rational. I agree, and it's possible general "bullshit jobs" and Q.E./softbank bubble type phenomena dwarf the intrinsic value of cities. But still, those are orthogonal effects. Contrary to most American nostalgia, going rural does not defeat the bullshit.

SilasX 6y ago
>cities matter. >You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matte Yes, I can totally get why anyone would pay a premium for someone who is physically present, or can be on relatively little notice. But that only be relevant as far as "local or remote?", where the former gets a premium against the latter, and it shouldn't care about looking up the specific CoL of which remote location you're working from (so long as business hours are maintained). The issue is that location-based pay does do this.
- dasil003 6y ago
  Yeah a few years ago I was looking around at companies and had some interest in joining Gitlab. Then I saw their pay scale for Oakland and it was laughably low compared to SF even though that was all within my local job market. Ultimately remote first companies that don’t do this will win the talent war and steadily push remote salaries up. Depending how successful they are it may also push major market salaries down over time.
- Ericson2314 6y ago
  I agree. PP was asking about why SV pays so much more in the first place. That's a related question but with different variables fixed constant. Indeed, it's very stupid to so discriminate between different locals. And it's not even clear this is in the employer's interests besides the higher order effects of dominating labor: in simplistic first-order modeling pay scales like this only hinder the arbitrage between different remote locations that are equivalent in the big corp's eyes.
minikites 6y ago
All the more reason to implement a land value tax, with additional taxes on speculation properties (say, lived in for less than 33% of the year), and on vacancy (blight tax).
- Ericson2314 6y ago
  Amen to that! Land is a public good, and density even more so.

dasil003 6y ago

What “enables” companies to pay more is profits, but what forces them to is the labor market. SV pays more because as an IC you can get a $150k job at thousands of other companies within commute distance. Of course it is possible to set up a tech company elsewhere and have lower operating costs—there are plenty of examples—but that doesn’t it’s a slam dunk; remote work is a trade off that does not work for every person or company, and talent pools and ecosystems matter a great deal.

IshKebab 6y ago
It's kind of amazing how many people on this site don't understand the very simple economics of how salary is determined.

6gvONxR4sf7o 6y ago

Right. It indicates that market forces aren’t benefitting labor as much as they could an extreme degree. What aspect of the market needs to be changed in order for everyone to benefit similarly? Clearly companies are making far more per worker than they’re paying out (at least in this case). Why is it so extreme?

UncleMeat 6y ago

> Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower. There are two reasons why SV companies pay outrageous amounts. 1. Some companies have insane revenues. Google/Facebook lead the way but others are in this space as well. They can pay engineers huge amounts because they can afford it. These companies are rare and there aren't many outside of a few hubs. 2. Other companies run huge deficits and are funded by VCs. These companies pay huge amounts because their VCs want them to grow crazy fast and want them to hire top people, so they have to compete with the rich companies. The VCs are primarily located in a few hubs because they want to be able to physically stop in to their startups. If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God.

jjav 6y ago
> If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God. The companies I worked for in the 90s, well before goog or fb existed, had location-based salary tables. There's nothing post-2005 about this.
- UncleMeat 6y ago
  Location-based salary tables aren't new. But salaries that are 5x above the US median for software engineers are. We didn't have such a huge stratification in the past.

s1artibartfast 6y ago

>Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower. The canned answer is that SV provides easy access to capital and talent. These are rationale incentives, although they may be overvalued and this is changing. Companies can absolutely pocket the difference. I know a SV CEO who is building out his software team in Pakistan because college educated programmers are paid $6/hr and the talent is adequate

gnopgnip 6y ago

Apple has a gross revenue of $1.9 million per employee. Paying 150k is generally only a small fraction of the value they create and Apple could afford to pay more, and at the same time a better offer than anywhere else for many

ip26 6y ago

It's like a black hole. The more dollars & developers you feed SV, the more gravity it has to suck in more dollars & developers, in an endless feedback loop. If the supply of dollars was limited, it would never have reached such critical mass.

lrem 6y ago

Well, one reason that S.V. companies can pay more is that they earn more thanks to being in S.V. Once I've been visiting the mothership and took a bike to drive up/down the road. There have been offices of all kinds of companies I would've never heard about... Except I've seen so many of the logos on various things in the office a quarter world away. I imagine there's quite some value in having your engineers mingle with potential customer's engineers after work.