11 ms·

Silicon Valley’s engineering salaries are finally getting fair. Thank Facebook

160 points by barredo 15y ago

fleitz 15y ago
90% of value is created post-IPO, 10,000 shares of MSFT stock in 1983 when they IPO'd is now worth $100 million.
- michaelochurch 15y ago
  Companies used to IPO a lot earlier than they do now, because of the regulatory drag associated with being public.
- perokreco 15y ago
  For that to be true for Facebook they would have to end up at $1 trillion valuation.
  - rgrieselhuber 15y ago
    It would be worthwhile to factor in inflation to this. I could actually see that happening in 20-30 years if they manage to survive that long.
  - tomjen3 15y ago
    Considering how fast Washington prints money that will happen and properly soon.
  - rmc 15y ago
    Depends if Facebook is the main way to socialize for the next century. Imagine having that much data on that many people and owning that channel! That's worth a lot of money.
    - zitterbewegung 15y ago
      Yes, considering the previous Facebook didn't nearly last as long. I'm thinking that social networks don't have nearly as high of a shelf life than you think.
      - rmc 15y ago
        In my mind, that's the big gamble with Facebook. It could either be THE source for socializing for 100 years (and hence very valuable), or it could be another MySpace (etc.), and hence not worth a lot. The cynic in me, would say that people who own stock now don't think it would last and are getting out when it's at it's top.
        philwelch 15y ago
        Not even the entire Bell system would be worth $1 trillion today, and unlike Facebook, people actually had to use the Bell system, it wasn't just a source of idle entertainment.
      - coopdog 15y ago
        When it comes to investing though you invest in a management team and not a product. The rate of change is increasing, all the products on the market today will be well and truly obsolete in a few years, even the market opportunities themselves could change It's things like Facebook putting 'the hacker way' into their DNA and being able to retain top talent that makes the company worth anything. If you took the facebook source code and all their customers away they'd probably have a pretty good chance of making something else that's quite good. Today anyway, but if tomorrow they can't it'll be because they somehow lost their way and let the MBA's in. Kodak had a great place in the market but they just couldn't successfully adapt I haven't looked at the price but if I was in the USA I'd probably buy some shares, the google float of $100 seemed outrageous at the time, and unless they get further involved with Microsoft I'm pretty bullish that they'll keep going up
- spitfire 15y ago
  Most of todays internet tech companies don't have the shelf life of Microsoft. Many will be has-beens in 10 years time (or even 5!). So you want to take the cash upfront.
  - _delirium 15y ago
    (Disclaimer: Not a real survey.) Doing a spot-check of big tech IPOs in 2004 (first post-crash year with a significant number), there do seem to be pretty inconsistent outcomes. Big IPOs that year: Google, DreamWorks Animation, InPhonic, Shopping.com, SalesForce.com, Atheros, PortalPlayer, Shanda. Of those, Google, DreamWorks Animation, SalesForce.com, and Shanda continue to be successful. Shopping.com was acquired by eBay within a year at a modest premium over the IPO price (15%), and Atheros was acquired by Qualcomm after 7 years, for about 3x the IPO price (also around 15% annual return). PortalPlayer was acquired by Nvidia after 3 years for 20% below the IPO price (and 45% below the first-day closing price). InPhonic went bankrupt after 3 years.
  - rmc 15y ago
    And most companies don't have a big IPO, let alone a big IPO and a long shelf life. Money up front.
  - fleitz 15y ago
    Most of the companies back then didn't have that kind of shelf life either. Making an investment in an early stage company is inherently risky. If your goal is to get rich via investment opportunities I would not recommend trying to win the stock option lottery via the employee option pool as the best strategy to achieve that goal.
deleted 15y ago
[deleted]
mwsherman 15y ago
Gibberish article, I’m afraid. As one of said engineers I don’t see how my employer is undercutting me by paying only twice the median, plus bennies. The expense of Silicon Valley is largely down to growth policy, which is to say, they can’t build housing concomitant with demand. Similarly here in NYC. Making very good money in an very expensive place is not a struggle, it’s a privilege of very few.
- vladd 15y ago
  If your employer is paying below market rate, he's screwing you, no matter how the market-rate for your skills compares to the median. Being a privilege to work somewhere doesn't make the screwing less wrong.
  - randomdata 15y ago
    If Walmart puts a widget on sale, am I screwing them by paying below market rate? They agreed to the terms of sale. So why is selling your services any different?
    - vladd 15y ago
      Imagine Walmart saying: you cannot buy this if you've already had trips to Costco and looked at something similar.
- rmc 15y ago
  As one of said engineers I don’t see how my employer is undercutting me by paying only twice the median, plus bennies. Your employer would probably pay you more if you had true freedom to take your labour to another company. Your employer seems to have agreed to a cartel to limit your ability to sell your labour.
- mjwalshe 15y ago
  Housing in Sv is cheap try central London even grotty areas near Silicon Roundabout are way more expensive than that
- 15y ago
3pt14159 15y ago
I keep thinking Dropbox is the next Facebook in terms of the next 100 billion IPO. Does anybody know what their option pool looks like? I know they want to be the hard drive of the internet, and will probably happen once their latency gets better (I recently built an App where I really, really wanted to use them but a minimum of 1.2 seconds latency just to _list_ the files in the directory was way too much).
- jrockway 15y ago
  Unfortunately for Dropbox, cloud storage doesn't really have the network effect that social networking does. Anyone can clone Dropbox and if the price is right, users can switch without suffering any hardship. This makes Dropbox look like something that will be bought rather than made public. Amazon can provide storage infrastructure for cheaper than Dropbox can, but they haven't written good client-side software. Buying Dropbox would fix that.
  - frisco 15y ago
    > Anyone can clone Dropbox Right. Okay. I think you don't quite understand why Dropbox is Dropbox.
    - jimbokun 15y ago
      I don't understand why, either. Any good articles on what makes Dropbox Dropbox?
      - shinratdr 15y ago
        There are articles on the subject, I can't recall them off the top of my head. The gist of it is that Dropbox is more than just cloud storage. They've put an unbelievable amount of work into the syncing client itself on all platforms so it's really robust, very cross platform, while at the same time uniquely tailored to each platform and completely seamless in operation. Here is a little snippet from Quora on the subject, sorry I couldn't find anything more: http://www.quora.com/How-does-Dropbox-integrate-with-OS-X-finder http://www.quora.com/How-does-Dropbox-integrate-with-OS-X-fi...
pg 15y ago
This article is an embarrassment. He does not offer any evidence at all for his claim that the no-poaching agreement drove down programmers' salaries. It may have been anticompetitive enough for the participants to get sued, but how much did it actually decrease salaries? 10%? 1%? 0%? If this guy knows the answer, he doesn't tell us. And I know for a fact that Facebook is not the only reason programmers' salaries are rising. There are a huge number of new startups all competing for the best people.
- thurn 15y ago
  "pandodaily.com" is starting to become a URL I associate with low-quality linkbait.
  - pg 15y ago
    I was thinking that too. Though to be fair in this particular case they seem to be following the TechCrunch tradition of running linkbait guest posts on weekends (when there is less real news).
    - earbitscom 15y ago
      It's sad, given that so many good startups would love to get any kind of press coverage, weekend or not. Every time I see a worthless article on TC, I think, "There's 500 words that some good startup would have loved to have, and the audience probably would have enjoyed it more, too."
      - robryan 15y ago
        Would be interesting to see what percentage of posts covered the really big companies vs startups on there. Feels pretty skewed towards the ever small and often pointless detail of the big tech companies rather than startups.
  - mjwalshe 15y ago
    Well I would disagree they don't have rose tinted glasses and will call out the emperors new clothes when required. Ive seen plenty more spun for SEO linkbait on here which are gaming the system to post articles with tons of affiliate links for hosting companies
markerdmann 15y ago
This article tries hard to give coders a warm, fuzzy feeling about how important they are. As a coder working on a startup, I can tell you one thing I've learned: coding (at least for me) is not the hard part. If your dream is to be an entrepreneur, here's my advice: learn to code and learn to sell, or find a great cofounder who knows how to sell.
- cunac 15y ago
  by time you will learn that coding and building sustainable software product are not same thing there are ton of code monkeys but they will not produce product
  - LearnYouALisp 15y ago
    But given enough time... (joking)
- bradhe 15y ago
  As a technical cofounder that also wears the CEO hat, jesus christ I agree.
- dkrich 15y ago
  I think you're missing the point of the article. He's not talking about starting a company, he's talking about employee poaching (or lack thereof) by large tech companies, and its effects on engineering salaries. But as an aside, I definitely agree about selling. There seems to be this disdain for MBA/business types that don't build. As an engineer I can tell you that I have the utmost respect for skilled salespeople and I would definitely want one on my side when starting out.
- ootachi 15y ago
  Yeah, that rubbed me the wrong way too. Engineers are completely overrated; your best bet is to hire no engineers and outsource to India or odesk, or if you absolutely must hire engineers, hire them for rock-bottom prices and fire them if they ask for more.
abalashov 15y ago
Waaah, waaaah! Are these self-entitled vermin seriously trying to claim poor house? It's not anyone else's fault you choose to live amidst a hyperinflated housing bubble, so quit bitching that it's so expensive. The rest of us don't whine about not being able to afford Manhattan penthouses. This type of sob story only reinforces the external prejudice that the Valley is a phenomenally insular echo chamber, wholly disconnected from all semblance of national or global reality. (Yes, I'm a coder, not a business guy.)
olalonde 15y ago
My understanding of economics and game theory lead me to believe that the free market will eventually take care of this "no-poach" cartel (looks like it's already happening). If I recall correctly, this agreement can be reduced to a "prisoner's dilemma" game: the rational decision for a given company is to cheat the agreement or simply not take part in it.
- Nutella2 15y ago
  Perhaps economics and game theory will in the long run but here and now the Department of Justice and the class-action plaintiffs are doing a good job taking down the cartel.
CPlatypus 15y ago
As Silicon Valley salaries rise, they will eventually reach the point where more employers will decide to spend their personnel dollars elsewhere. Engineers in Austin or Ann Arbor or Cambridge (either one) can work out of local offices, or straight out of their homes, and produce more lines of useful code per dollar than their peers in Palo Alto, Mountain View, or Sunnyvale. Go ahead, call it "inshoring" and look down your nose at those cheaper programmers if you like. They'll still be taking your jobs, and you'll be left living in a very expensive place after the salary bubble collapses. The only question is when. I think the process has already begun. Some might predict another year or two. Nobody sane would expect the ride to last longer than that before supply and demand reassert themselves over mere fashion.

160 points by barredo 15y ago

fleitz 15y ago

90% of value is created post-IPO, 10,000 shares of MSFT stock in 1983 when they IPO'd is now worth $100 million.

michaelochurch 15y ago
Companies used to IPO a lot earlier than they do now, because of the regulatory drag associated with being public.
perokreco 15y ago
For that to be true for Facebook they would have to end up at $1 trillion valuation.
- rgrieselhuber 15y ago
  It would be worthwhile to factor in inflation to this. I could actually see that happening in 20-30 years if they manage to survive that long.
- tomjen3 15y ago
  Considering how fast Washington prints money that will happen and properly soon.
- rmc 15y ago
  Depends if Facebook is the main way to socialize for the next century. Imagine having that much data on that many people and owning that channel! That's worth a lot of money.
  - zitterbewegung 15y ago
    Yes, considering the previous Facebook didn't nearly last as long. I'm thinking that social networks don't have nearly as high of a shelf life than you think.
    - rmc 15y ago
      In my mind, that's the big gamble with Facebook. It could either be THE source for socializing for 100 years (and hence very valuable), or it could be another MySpace (etc.), and hence not worth a lot. The cynic in me, would say that people who own stock now don't think it would last and are getting out when it's at it's top.
      - philwelch 15y ago
        Not even the entire Bell system would be worth $1 trillion today, and unlike Facebook, people actually had to use the Bell system, it wasn't just a source of idle entertainment.
    - coopdog 15y ago
      When it comes to investing though you invest in a management team and not a product. The rate of change is increasing, all the products on the market today will be well and truly obsolete in a few years, even the market opportunities themselves could change It's things like Facebook putting 'the hacker way' into their DNA and being able to retain top talent that makes the company worth anything. If you took the facebook source code and all their customers away they'd probably have a pretty good chance of making something else that's quite good. Today anyway, but if tomorrow they can't it'll be because they somehow lost their way and let the MBA's in. Kodak had a great place in the market but they just couldn't successfully adapt I haven't looked at the price but if I was in the USA I'd probably buy some shares, the google float of $100 seemed outrageous at the time, and unless they get further involved with Microsoft I'm pretty bullish that they'll keep going up
spitfire 15y ago
Most of todays internet tech companies don't have the shelf life of Microsoft. Many will be has-beens in 10 years time (or even 5!). So you want to take the cash upfront.
- _delirium 15y ago
  (Disclaimer: Not a real survey.) Doing a spot-check of big tech IPOs in 2004 (first post-crash year with a significant number), there do seem to be pretty inconsistent outcomes. Big IPOs that year: Google, DreamWorks Animation, InPhonic, Shopping.com, SalesForce.com, Atheros, PortalPlayer, Shanda. Of those, Google, DreamWorks Animation, SalesForce.com, and Shanda continue to be successful. Shopping.com was acquired by eBay within a year at a modest premium over the IPO price (15%), and Atheros was acquired by Qualcomm after 7 years, for about 3x the IPO price (also around 15% annual return). PortalPlayer was acquired by Nvidia after 3 years for 20% below the IPO price (and 45% below the first-day closing price). InPhonic went bankrupt after 3 years.
- rmc 15y ago
  And most companies don't have a big IPO, let alone a big IPO and a long shelf life. Money up front.
- fleitz 15y ago
  Most of the companies back then didn't have that kind of shelf life either. Making an investment in an early stage company is inherently risky. If your goal is to get rich via investment opportunities I would not recommend trying to win the stock option lottery via the employee option pool as the best strategy to achieve that goal.

deleted 15y ago

[deleted]

mwsherman 15y ago

Gibberish article, I’m afraid. As one of said engineers I don’t see how my employer is undercutting me by paying only twice the median, plus bennies. The expense of Silicon Valley is largely down to growth policy, which is to say, they can’t build housing concomitant with demand. Similarly here in NYC. Making very good money in an very expensive place is not a struggle, it’s a privilege of very few.

vladd 15y ago
If your employer is paying below market rate, he's screwing you, no matter how the market-rate for your skills compares to the median. Being a privilege to work somewhere doesn't make the screwing less wrong.
- randomdata 15y ago
  If Walmart puts a widget on sale, am I screwing them by paying below market rate? They agreed to the terms of sale. So why is selling your services any different?
  - vladd 15y ago
    Imagine Walmart saying: you cannot buy this if you've already had trips to Costco and looked at something similar.
rmc 15y ago
As one of said engineers I don’t see how my employer is undercutting me by paying only twice the median, plus bennies. Your employer would probably pay you more if you had true freedom to take your labour to another company. Your employer seems to have agreed to a cartel to limit your ability to sell your labour.
mjwalshe 15y ago
Housing in Sv is cheap try central London even grotty areas near Silicon Roundabout are way more expensive than that
15y ago

3pt14159 15y ago

I keep thinking Dropbox is the next Facebook in terms of the next 100 billion IPO. Does anybody know what their option pool looks like? I know they want to be the hard drive of the internet, and will probably happen once their latency gets better (I recently built an App where I really, really wanted to use them but a minimum of 1.2 seconds latency just to _list_ the files in the directory was way too much).

jrockway 15y ago
Unfortunately for Dropbox, cloud storage doesn't really have the network effect that social networking does. Anyone can clone Dropbox and if the price is right, users can switch without suffering any hardship. This makes Dropbox look like something that will be bought rather than made public. Amazon can provide storage infrastructure for cheaper than Dropbox can, but they haven't written good client-side software. Buying Dropbox would fix that.
- frisco 15y ago
  > Anyone can clone Dropbox Right. Okay. I think you don't quite understand why Dropbox is Dropbox.
  - jimbokun 15y ago
    I don't understand why, either. Any good articles on what makes Dropbox Dropbox?
    - shinratdr 15y ago
      There are articles on the subject, I can't recall them off the top of my head. The gist of it is that Dropbox is more than just cloud storage. They've put an unbelievable amount of work into the syncing client itself on all platforms so it's really robust, very cross platform, while at the same time uniquely tailored to each platform and completely seamless in operation. Here is a little snippet from Quora on the subject, sorry I couldn't find anything more: http://www.quora.com/How-does-Dropbox-integrate-with-OS-X-finder http://www.quora.com/How-does-Dropbox-integrate-with-OS-X-fi...

pg 15y ago

This article is an embarrassment. He does not offer any evidence at all for his claim that the no-poaching agreement drove down programmers' salaries. It may have been anticompetitive enough for the participants to get sued, but how much did it actually decrease salaries? 10%? 1%? 0%? If this guy knows the answer, he doesn't tell us. And I know for a fact that Facebook is not the only reason programmers' salaries are rising. There are a huge number of new startups all competing for the best people.

thurn 15y ago
"pandodaily.com" is starting to become a URL I associate with low-quality linkbait.
- pg 15y ago
  I was thinking that too. Though to be fair in this particular case they seem to be following the TechCrunch tradition of running linkbait guest posts on weekends (when there is less real news).
  - earbitscom 15y ago
    It's sad, given that so many good startups would love to get any kind of press coverage, weekend or not. Every time I see a worthless article on TC, I think, "There's 500 words that some good startup would have loved to have, and the audience probably would have enjoyed it more, too."
    - robryan 15y ago
      Would be interesting to see what percentage of posts covered the really big companies vs startups on there. Feels pretty skewed towards the ever small and often pointless detail of the big tech companies rather than startups.
- mjwalshe 15y ago
  Well I would disagree they don't have rose tinted glasses and will call out the emperors new clothes when required. Ive seen plenty more spun for SEO linkbait on here which are gaming the system to post articles with tons of affiliate links for hosting companies

markerdmann 15y ago

This article tries hard to give coders a warm, fuzzy feeling about how important they are. As a coder working on a startup, I can tell you one thing I've learned: coding (at least for me) is not the hard part. If your dream is to be an entrepreneur, here's my advice: learn to code and learn to sell, or find a great cofounder who knows how to sell.

cunac 15y ago
by time you will learn that coding and building sustainable software product are not same thing there are ton of code monkeys but they will not produce product
- LearnYouALisp 15y ago
  But given enough time... (joking)
bradhe 15y ago
As a technical cofounder that also wears the CEO hat, jesus christ I agree.
dkrich 15y ago
I think you're missing the point of the article. He's not talking about starting a company, he's talking about employee poaching (or lack thereof) by large tech companies, and its effects on engineering salaries. But as an aside, I definitely agree about selling. There seems to be this disdain for MBA/business types that don't build. As an engineer I can tell you that I have the utmost respect for skilled salespeople and I would definitely want one on my side when starting out.
ootachi 15y ago
Yeah, that rubbed me the wrong way too. Engineers are completely overrated; your best bet is to hire no engineers and outsource to India or odesk, or if you absolutely must hire engineers, hire them for rock-bottom prices and fire them if they ask for more.

abalashov 15y ago

Waaah, waaaah! Are these self-entitled vermin seriously trying to claim poor house? It's not anyone else's fault you choose to live amidst a hyperinflated housing bubble, so quit bitching that it's so expensive. The rest of us don't whine about not being able to afford Manhattan penthouses. This type of sob story only reinforces the external prejudice that the Valley is a phenomenally insular echo chamber, wholly disconnected from all semblance of national or global reality. (Yes, I'm a coder, not a business guy.)

olalonde 15y ago

My understanding of economics and game theory lead me to believe that the free market will eventually take care of this "no-poach" cartel (looks like it's already happening). If I recall correctly, this agreement can be reduced to a "prisoner's dilemma" game: the rational decision for a given company is to cheat the agreement or simply not take part in it.

Nutella2 15y ago
Perhaps economics and game theory will in the long run but here and now the Department of Justice and the class-action plaintiffs are doing a good job taking down the cartel.

CPlatypus 15y ago

As Silicon Valley salaries rise, they will eventually reach the point where more employers will decide to spend their personnel dollars elsewhere. Engineers in Austin or Ann Arbor or Cambridge (either one) can work out of local offices, or straight out of their homes, and produce more lines of useful code per dollar than their peers in Palo Alto, Mountain View, or Sunnyvale. Go ahead, call it "inshoring" and look down your nose at those cheaper programmers if you like. They'll still be taking your jobs, and you'll be left living in a very expensive place after the salary bubble collapses. The only question is when. I think the process has already begun. Some might predict another year or two. Nobody sane would expect the ride to last longer than that before supply and demand reassert themselves over mere fashion.