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Having a hard time processing how it could be anything but a good thing in the short or long run. Memo to Tim Cook: not sure you'll want to have $100+ billion

by Steko 15y ago

Having a hard time processing how it could be anything but a good thing in the short or long run. Memo to Tim Cook: not sure you'll want to have $100+ billion dollars just chilling in the bank when ex-employees start winning class action suits against you.

yummyfajitas 15y ago
Having a hard time processing how it could be anything but a good thing in the short or long run. Suppose developers/software companies create a large consumer surplus which they fail to capture. If prices go up, then either quantity supplied will go down (reducing consumer surplus) or companies will focus on efforts where they can capture a larger portion of the gains due to trade. In practical terms, low cost developers might make a free music service economical. If the cost of producing software goes up, the free music service might be uneconomical, and the developers may refocus their efforts on creating DRM (allowing producers to capture a greater portion of the gains due to trade). I'm not asserting that this will happen, merely pointing out that it's not hard to imagine scenarios under which rising developer costs might be bad.
- lawnchair_larry 15y ago
  Although this sounds plausible, the fact that it happened at companies who made boatloads of profits suggests that won't really happen in practice. Greed is irrational like that.
CPlatypus 15y ago
If developer salaries grow out of proportion to the value they create (which IMO has already happened), that creates downward pressure for everyone else in the value chain - non-technical employees, suppliers, etc. Also, when the bubble inevitably bursts it will affect lots of people who never benefited from the inflation in the first place. Bidding wars and speculation are not always good in the long term. [edit] Allow me to expand on that in a very specific way. I'm currently sitting in Bengaluru, surrounded by some excellent developers. What effect does wage inflation in Silicon Valley have on people here? Every time a Silicon Valley engineer's salary gets inflated by US$20K, how many people here are affected by reduced job prospects or raises? From that perspective, what's hard to see is how a bidding war among SV employers could possibly be a good thing.
- salem 15y ago
  When Cisco was booming, they made a big deal about the metric of revenue per employee, which hit $1m. Apple and Google both exceeded this number in 2008, and with decent margins. I think you'll have a tough time convincing their engineers that their salary is out of proportion to the value they created. http://royal.pingdom.com/2009/05/14/congratulations-google-staff-210k-in-profit-per-head-in-2008/ http://royal.pingdom.com/2009/05/14/congratulations-google-s...
  - CPlatypus 15y ago
    "In proportion" merely means an optimal or expected ratio, which might be considerably greater than 1:1. Therefore, even if the value:salary ratio for that Silicon Valley engineer is 10:1, if a 20:1 ratio is possible somewhere else then that Silicon Valley engineer's salary is still out of proportion. Also, dividing revenue per employee by salary for a subset of employees doesn't really give you the right ratio. A lot of corporate revenue is not directly tied to developer contributions, and it's a rare employee who actually moves the bottom line by 10x their salary. At best you could divide the revenue attributable to that year's development by the salary paid during that time, but even that's a weak approximation.
    - CPlatypus 15y ago
      I'd appreciate it if the downvote-abusing coward(s) would explain their objection to that comment. It's quite factual, and relevant, and IMO importantf for people to consider. Do you seriously believe that revenue for all employees divided by salary for some tells you anything meaningful? Do you believe that availability of a better ratio by hiring someone else doesn't mean you're overpaid? Come on, let's have some actual debate instead of bullying.
      - aptwebapps 15y ago
        Stop telling people they aren't worth a million bucks and they'll stop voting you down. Wouldn't it be a neat if user profiles here displayed a downvote/reply metric? Not replies in general, but replies to comments which the user had downvoted.

by Steko 15y ago

yummyfajitas 15y ago

Having a hard time processing how it could be anything but a good thing in the short or long run. Suppose developers/software companies create a large consumer surplus which they fail to capture. If prices go up, then either quantity supplied will go down (reducing consumer surplus) or companies will focus on efforts where they can capture a larger portion of the gains due to trade. In practical terms, low cost developers might make a free music service economical. If the cost of producing software goes up, the free music service might be uneconomical, and the developers may refocus their efforts on creating DRM (allowing producers to capture a greater portion of the gains due to trade). I'm not asserting that this will happen, merely pointing out that it's not hard to imagine scenarios under which rising developer costs might be bad.

lawnchair_larry 15y ago
Although this sounds plausible, the fact that it happened at companies who made boatloads of profits suggests that won't really happen in practice. Greed is irrational like that.

CPlatypus 15y ago

If developer salaries grow out of proportion to the value they create (which IMO has already happened), that creates downward pressure for everyone else in the value chain - non-technical employees, suppliers, etc. Also, when the bubble inevitably bursts it will affect lots of people who never benefited from the inflation in the first place. Bidding wars and speculation are not always good in the long term. [edit] Allow me to expand on that in a very specific way. I'm currently sitting in Bengaluru, surrounded by some excellent developers. What effect does wage inflation in Silicon Valley have on people here? Every time a Silicon Valley engineer's salary gets inflated by US$20K, how many people here are affected by reduced job prospects or raises? From that perspective, what's hard to see is how a bidding war among SV employers could possibly be a good thing.

salem 15y ago
When Cisco was booming, they made a big deal about the metric of revenue per employee, which hit $1m. Apple and Google both exceeded this number in 2008, and with decent margins. I think you'll have a tough time convincing their engineers that their salary is out of proportion to the value they created. http://royal.pingdom.com/2009/05/14/congratulations-google-staff-210k-in-profit-per-head-in-2008/ http://royal.pingdom.com/2009/05/14/congratulations-google-s...
- CPlatypus 15y ago
  "In proportion" merely means an optimal or expected ratio, which might be considerably greater than 1:1. Therefore, even if the value:salary ratio for that Silicon Valley engineer is 10:1, if a 20:1 ratio is possible somewhere else then that Silicon Valley engineer's salary is still out of proportion. Also, dividing revenue per employee by salary for a subset of employees doesn't really give you the right ratio. A lot of corporate revenue is not directly tied to developer contributions, and it's a rare employee who actually moves the bottom line by 10x their salary. At best you could divide the revenue attributable to that year's development by the salary paid during that time, but even that's a weak approximation.
  - CPlatypus 15y ago
    I'd appreciate it if the downvote-abusing coward(s) would explain their objection to that comment. It's quite factual, and relevant, and IMO importantf for people to consider. Do you seriously believe that revenue for all employees divided by salary for some tells you anything meaningful? Do you believe that availability of a better ratio by hiring someone else doesn't mean you're overpaid? Come on, let's have some actual debate instead of bullying.
    - aptwebapps 15y ago
      Stop telling people they aren't worth a million bucks and they'll stop voting you down. Wouldn't it be a neat if user profiles here displayed a downvote/reply metric? Not replies in general, but replies to comments which the user had downvoted.