5 ms·

yup,in theory you keep hiring until the value of the marginal engineer is equal to its cost.

AmericanChopper 4y ago
This certainly isn’t any type of business theory. In theory you should spend as much money as you possibly can on the things that provide the most return. You shouldn’t be hiring any engineers if hiring a salesman has a greater return, or running a marketing campaign, or buying new hardware… Hiring an engineer has a significant opportunity cost.
- vidarh 4y ago
  Note that they didn't give a time constraint. You're right that in the short term you aim to hire where the return is highest, but in the long term that means they're right that you'd want to keep hiring as long as you get a positive return.
  - AmericanChopper 4y ago
    No it doesn’t. It means you want to keep _spending money_. You want to spend it on whatever has the highest return, which will frequently be on an expense other than hiring, and when it is on hiring, it will frequently be on hiring roles other than engineers.
    - vidarh 4y ago
      In the long term, as long as each thing you spend additional money on increases your return, eventually hiring more people will be the highest returning means of increasing your return.
- d4nt 4y ago
  Until recently money was very cheap, so it wasn’t a choice between hiring an engineer OR a salesperson, just hire both.
  - AmericanChopper 4y ago
    I really hope this isn’t a serious comment. No matter what your payroll budget is, the opportunity cost will still exist. You will still have to choose which roles to spend it on (and which to not).
    - ZephyrBlu 4y ago
      Facebook and the like throw off billions upon billions in profit and the market encouraged companies to spend for growth. There isn't really an opportunity cost to hiring more people when money is no object. More likely to be the opposite. Why do you think they increased their headcount so much in the last few years? Simply because they could.
      - AmericanChopper 4y ago
        If you go a read a FAANG annual report, you’ll find the headcounts are in fact finite, meaning they do in fact devote a finite budget to those resources. Just because the headcount or the budget seems so large that you can’t easily conceptualize it, doesn’t mean they are unlimited. Regardless of their motives for increasing headcounts, doing so has an opportunity cost, and so does the way in which they choose to do it.
        ZephyrBlu 4y ago
        What is the opportunity cost then? What are they trading off by hiring more people? The fact there is finite budget and headcount doesn't necessarily mean anything. If you're limited by the number of quality employees you can recruit and onboard, budget and headcount are effectively meaningless because they're not limited by money.
        scarface74 4y ago
        How many useless projects does Google already waste money on? Google has already shown a complete ineptitude at coming out with new profit generating products. Throwing more people at problem with a broken culture won’t do any good.
- clnq 4y ago
  Just for context, it is a business theory - https://www.uc.edu/content/dam/uc/aess/docs/LACResources/MathMinuteWorksheets/15%20-%20L%27Hospital%27s%20Rule.pdf https://www.uc.edu/content/dam/uc/aess/docs/LACResources/Mat.... It can be applied to anything within a company's control that has marginal costs and associated marginal revenues. How to apply it wisely is a different, much wider topic.
  - AmericanChopper 4y ago
    Optimising the marginal cost of producing goods is very different from “keep hiring engineers until $1 of engineering payroll = $1 in return”. Which is specifically the claim made in the comment I replied to.
    - clnq 4y ago
      It is not very different, the same principle can be applied because of the MC-MR association. See here - https://en.wikipedia.org/wiki/Marginal_product_of_labor#MPL,_MRPL_and_profit_maximization https://en.wikipedia.org/wiki/Marginal_product_of_labor#MPL,....

This certainly isn’t any type of business theory. In theory you should spend as much money as you possibly can on the things that provide the most return. You shouldn’t be hiring any engineers if hiring a salesman has a greater return, or running a marketing campaign, or buying new hardware… Hiring an engineer has a significant opportunity cost.

vidarh 4y ago
Note that they didn't give a time constraint. You're right that in the short term you aim to hire where the return is highest, but in the long term that means they're right that you'd want to keep hiring as long as you get a positive return.
- AmericanChopper 4y ago
  No it doesn’t. It means you want to keep _spending money_. You want to spend it on whatever has the highest return, which will frequently be on an expense other than hiring, and when it is on hiring, it will frequently be on hiring roles other than engineers.
  - vidarh 4y ago
    In the long term, as long as each thing you spend additional money on increases your return, eventually hiring more people will be the highest returning means of increasing your return.
d4nt 4y ago
Until recently money was very cheap, so it wasn’t a choice between hiring an engineer OR a salesperson, just hire both.
- AmericanChopper 4y ago
  I really hope this isn’t a serious comment. No matter what your payroll budget is, the opportunity cost will still exist. You will still have to choose which roles to spend it on (and which to not).
  - ZephyrBlu 4y ago
    Facebook and the like throw off billions upon billions in profit and the market encouraged companies to spend for growth. There isn't really an opportunity cost to hiring more people when money is no object. More likely to be the opposite. Why do you think they increased their headcount so much in the last few years? Simply because they could.
    - AmericanChopper 4y ago
      If you go a read a FAANG annual report, you’ll find the headcounts are in fact finite, meaning they do in fact devote a finite budget to those resources. Just because the headcount or the budget seems so large that you can’t easily conceptualize it, doesn’t mean they are unlimited. Regardless of their motives for increasing headcounts, doing so has an opportunity cost, and so does the way in which they choose to do it.
      - ZephyrBlu 4y ago
        What is the opportunity cost then? What are they trading off by hiring more people? The fact there is finite budget and headcount doesn't necessarily mean anything. If you're limited by the number of quality employees you can recruit and onboard, budget and headcount are effectively meaningless because they're not limited by money.
        scarface74 4y ago
        How many useless projects does Google already waste money on? Google has already shown a complete ineptitude at coming out with new profit generating products. Throwing more people at problem with a broken culture won’t do any good.
clnq 4y ago
Just for context, it is a business theory - https://www.uc.edu/content/dam/uc/aess/docs/LACResources/MathMinuteWorksheets/15%20-%20L%27Hospital%27s%20Rule.pdf https://www.uc.edu/content/dam/uc/aess/docs/LACResources/Mat.... It can be applied to anything within a company's control that has marginal costs and associated marginal revenues. How to apply it wisely is a different, much wider topic.
- AmericanChopper 4y ago
  Optimising the marginal cost of producing goods is very different from “keep hiring engineers until $1 of engineering payroll = $1 in return”. Which is specifically the claim made in the comment I replied to.
  - clnq 4y ago
    It is not very different, the same principle can be applied because of the MC-MR association. See here - https://en.wikipedia.org/wiki/Marginal_product_of_labor#MPL,_MRPL_and_profit_maximization https://en.wikipedia.org/wiki/Marginal_product_of_labor#MPL,....