25 ms·

Talking About Money

650 points by craigkerstiens 12y ago

philip1209 12y ago
I wonder if you could have all interviewers fill out a brief survey and give the results candidates for reference - e.g. checkboxes of: * This interviewer is comfortable talking about their salary * This interviewer is comfortable talking about diversity and equality efforts * This interviewer is comfortable talking about the visa and immigration process * This interviewer had children during employ and is comfortable talking about the process As an interviewee, knowing that I could ask direct questions instead of skirting around issues due to trying to be sensitive would drastically improve the experience.
L_Rahman 12y ago
As a recent graduate about to go into his first ever salary negotiation, I'm really grateful for the perspective this provides. My dad was a taxi driver (now drives for Uber) and my mother a stay-at-home mom. I was raised with the notion of earning enough to support myself. Anything beyond that is something I'm expected to figure out myself. Posts such as these are very helpful. A question though: 1. If I've had conversations in quarterly reviews that involved numbers but nothing was ever formalized, are those numbers open to renegotiation in a formal conversation? 2. How do I ask for equity and how much should I ask for as the first hire (technical employee of a non-technical founder)? Edit: I'm aware the user who posted this is not the author, but I'm hoping patio11 or someone else comfortable offering negotiation advice will stop by the comments section.
- benmanns 12y ago
  For 2, if a reasonable salary is $X, and the company offers you $X-$Y, you're essentially investing $Y per year into the company (at worse terms than actual investors). How much equity do/did investors want for $Y?
  - codingdave 12y ago
    It isn't that simple - investments and their returns have risks built in, and people expect more return for more risk. If you are an employee, you are not risking your own money, you are just losing some opportunities for cash. This lost opportunity does work into the equation, but not at the same risk level as an investor because if the company tanks, the investors lose every dime... But the employee still got paid the whole time. I do agree that for negotiation purposes, considering pay below market value is a good point for discussion. But don't get offended if it is not weighted as heavily as people who actually wrote checks.
    - rfrey 12y ago
      > if the company tanks, the investors lose every dime If you choose a $90k job + equity over a $130k job, and the company tanks 2 years later, you've lost every dime of that 80k. It's a bit different since your "investment" consists of 24 tranches, but that's more than balanced by the vesting schedule which gives you nothing for a year (despite accepting your investment immediately), and takes it all away if you stop investing.
    - thedufer 12y ago
      > are not risking your own money, you are just losing some opportunities for cash Those are exactly the same thing. Pretending otherwise is asking startups to rob you.
    - tomp 12y ago
      Actually, as an employee, you're actually risking more, as your total wealth is (most likely) significantly less than an investor's, so according to the economic theory of diminishing marginal utility of income, $10k/year is a significantly greater loss for an employee.
    - MagicWishMonkey 12y ago
      Opportunity cost, how does it work? http://en.wikipedia.org/wiki/Opportunity_cost http://en.wikipedia.org/wiki/Opportunity_cost
- saryant 12y ago
  Re 2), you should make sure your salary is at market-level and more or less ignore equity. Chances are you'll be let go or the company will collapse before it's worth anything. If you have a reasonable salary, equity is just a cherry on top, but if an employer tries to get you to trade cash today for a startup lottery ticket, say no. This is especially important early in your career given the time value of money. An extra $10k/year in the first five years of your career, properly saved, could add north of $600k to your retirement when you get to that stage in life. That's an almost-certain payoff against a roll of the dice on a sliver of ever-diluted equity.
  - L_Rahman 12y ago
    Excellent point and I will heed your advice. I'm well aware that: a. Startup equity is a lottery b. As an early employee and the accompanying biases, I'm especially ill equipped to judge it's value. With that in mind, I'm negotiating salary first. Equity with a vesting schedule is something I would treat purely as an incentive for continuing to stay with the company and not as a replacement for salary.
    - thruflo 12y ago
      This sounds very sensible. I would note though that equity % points are much easier to negotiate early on. If you have an opportunity to secure options at a low valuation now, even with a great big cliff / vesting term, take them in case the company is a success and use the cliff / vesting to persuade the current owners that it's a win win.
  - yitchelle 12y ago
    > That's an almost-certain payoff against a roll of the dice on a sliver of ever-diluted equity. This is excellent advice. Cold hard cash is much, much better than a bet of the startup you are working for will take off.
  - IkmoIkmo 12y ago
    Great insights, can definitely recommend not taking big equity gambles in your earlier years. Although perhaps north of $600k is a bit too optimistic, you'd need a solid 6.4% inflation & fee free ROI on that. In any case it's important to look at it in 'today's dollars'. For example, the S&P 500 did 20x in the past 40 years (roughly the length of a solid full-time professional career), so $10k could have turned into $400k if following that index. But in the 80s inflation went up to 15% causing devaluation, that 1975 dollar is worth about $4.5 today, meaning that $10k turned into perhaps 9x more purchasing power. Of course that's before all the fees get involved. Even if you'd get $600k by your retirement age, it likely will be the equivalent of less than $200k today. But yeah 6% per year isn't crazy. If you manage to scrape together $50k in your fund by age 25 and work until 65, 500k is very doable, north of 600k perhaps optimistic but who knows what we can expect. Perhaps we'll see gigantic returns once we get 4 billion people on cheap mobile computing, free wifi in the sky, access to modern education, 3d printers, drone deliveries, digital money and a graphene industry haha. But historically speaking $600k is tricky! Either way, doesn't change the fact this is great advise.
- davidw 12y ago
  > How do I ask for equity and how much should I ask for as the first hire (technical employee of a non-technical founder)? That may not be a bad deal, but there are some warning flags that it raises: * What does the non-tech guy bring to the table? Do they have hard evidence of their ability to make a company successful? * This is well worth your time to read: http://jacquesmattheij.com/first-employee-or-cofounder http://jacquesmattheij.com/first-employee-or-cofounder
- evanmoran 12y ago
  Also remember that the first non-founder employee is the least desirable position to be in. Usually you have very similar risk to the founders with _significantly_ less equity. Don't take the job unless you get market rates or significant equity (10%+). If they already have funding the former is much more likely, if not then latter makes sense considering the stage -- you're effectively a founder, even if you're not leadership.
brador 12y ago
If consulting is making $30k/week/job then why keep running the personal businesses? Why not take the consulting and branch it out, and drop everything else as a distraction?
- oskarth 12y ago
  (a) Money isn't everything. (b) Over a long time horizon, selling a product is more profitable. EDIT: It's non-trivial to go from consulting to product development as part of the same business. It's often easier to use the money from consulting to start afresh.
  - brador 12y ago
    That's what I meant by branching out. Productize the consulting, so he doesn't need to be there.
- Axsuul 12y ago
  Maybe his passion is to build something. I think we all get stuck initially chasing the dough but eventually realize it's not what we want.
- patio11 12y ago
  Because I enjoyed running the software business more than I enjoyed running the consultancy. Partly that is for difficult-to-explain personal reasons (I feel the sense of satisfaction with operating a software company that some people feel when painting things). Partly it is because of reasons which are endemic to consultancies, even successful consultancies. Feel free to ask if you're curious. I also have a quirky relationship to money as a goal. Rather little would change about my life if my salary increased by $800k. My hobbies would remain books, video games, taking my wife and daughter on walks, and posting too much on HN.
  - bcg1 12y ago
    Not snark... serious question... its not clear to me what sort of services anyone could offer for 30k per week... what sort of thing commands that kind of price tag?
simonebrunozzi 12y ago
I am in support too. The problem is that most companies take implicit advantage of data obfuscation. Some people would ask to be paid more if they only knew. It is great for employees, but not all companies are ready to do that, and I would guess most would not surive the moment of truth.
marktangotango 12y ago
>> Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake I had a phone screen with an HR drone once (Cerner Inc. to be exact \waves) part way thru she asked me my current salary. I declined to provide that information. She replied "we can't continue without that information". I replied, I'm sorry, but I won't discuss salary at this point. She said, "good bye" and that was all. I had a job so was not desperate at the time. I was still shocked at how abrupt it was.
- ashark 12y ago
  I've never really gotten over the shock of discovering that anyone asks this, let alone that it's common (especially for larger companies). Add it to the list of things in business that seem to me to be inappropriate/rude/immoral, I suppose.
  - rev_bird 12y ago
    I originally wasn't really very against these kinds of questions, until someone pointed out that they're basically asking how much a different company values different work you're doing for different ends, to help them determine how desperate you are for doing their totally unrelated work. I got much more resistant after that.
  - switch007 12y ago
    Imbalance of power fuelled by a recession = more inappropriate/rude/immoral behaviour to take advantage of the situation. They know they can say "tell us your previous salary, or else". What's worse is that they will ask your references to confirm, and they'll likely happily tell them. If you lied, it won't go down well. As if there wasn't enough crap to fight against in your career.. ugh. EDIT: I forgot about employment contracts that prohibit you from disclosing your previous salary. Yes, they exist.
    - lsaferite 12y ago
error54 12y ago
I found this spreadsheet[1] to be pretty interesting. Obviously it's anonymous so take the data with a grain of salt. 1- https://docs.google.com/spreadsheets/d/1F9e8DrWv5_rx3il0r2SgE3TO0usN_uEWq46d0R3M73w/edit#gid=0 https://docs.google.com/spreadsheets/d/1F9e8DrWv5_rx3il0r2Sg...
tikhonj 12y ago
I've always found the taboo about discussing salaries weird. In my experience, it's almost nonexistant among Russian immigrants to the US—at least the ones my family knows—and yet hasn't caused any real problems. Sure, there are issues of status and perceived worth around salary—but hiding the numbers doesn't help. People still know your job title, understand your company and see your lifestyle. That's more than enough! Numbers only matter if you want to talk about relatively small differences—ones that matter far more for salary negotiation and evaluating a position than they do for cocktail party Now, perhaps I'm just being simplistic, but the way I see it is genuinely simple: markets are about transferring information. To do this well, participants have to know what the prices are elsewhere. An arbitrary cultural taboo around the prices does nothing but impede the flow of information. The fact that it's asymmetric just makes it doubly worse. Transparent salaries are about as capitalistic and idea as can be. Unfortunately, by character, I'm also unlikely to take my own advice: I fear awkwardness disproportionately. Just one more reason why I deeply dislike arbitrary social rules.
Todd 12y ago
I always appreciate your transparency and believe that you're helping drive our industry forward. I often search for ideas on how to help within my area of influence. The closest I've found is Stack Exchange's salary matrix, and the related approach at Fog Creek. I think publishing salaries has several benefits. For one thing, it removes the used car salesman approach to hiring. One result, which is more important, is that it can help eliminate wage disparity due to differences of gender or level of negotiating skills. It can also help prevent the corrosive effects that can occur if people do find out actual numbers (the morale-sapping that you discuss). The problem with this approach, and one I'm trying to figure out is, what about the non-developer jobs? Assumedly, each group gets their own matrix. But if the admins can browse the matrices of the other groups, like the development team's, then there can be a similar corrosive effect. One option is to only discuss the salary matrix within your group and with HR. But then we're back to a different version of the tired old story. (Don't discuss the matrix outside of your group!) This leads me to believe that it's best to be completely open. It might also serve as an incentive for people to make an effort to grow into different areas. Any ideas appreciated.
- ljoshua 12y ago
  At the firm that I work at everything is in the open, even between groups, and it works very well. It is a formula-based compensation given your department (basically consultants and back-office) and stated level. With that, I know or can calculate exactly how much my manager makes, how much an entry level HR employee makes, and how much the CEO makes. I love it because it removes any problem with politics or shadowy discussions, and I know what I can expect when a promotion comes. The only downside is that it leaves the firm with little leverage when it comes to compensation: I can't simply get a bump without a promotion, nor are there extra bonuses that can be given out either for hiring or retaining. (This has its benefits as well however.)
  - Todd 12y ago
    That's enlightening and encouraging. A formula-based/matrix approach might make it more acceptable because it isn't personal. One thing I haven't seen is how to handle COLA. I'm sure that can also be added as an additional factor, though.
kmf 12y ago
Posts like this, and the #talkpay on Twitter, is the kind of stuff I would've loved to have a couple years ago, starting in the industry. Here's hoping this sparks a conversation across the industry between employees and managers on salary over the next couple months.
calcsam 12y ago
"Salaries are not just internally transparent at Japanese megacorps but so predictable that any middle-class adult in central Japan can accurately predict my salary history. I mention this partly to say that salary transparency by itself does not guarantee happy outcomes for employees." Yes. Salaries at Buffer might be transparent but also quite low.
- dkrich 12y ago
  Yeah, I actually prefer a lack of transparency. I fully recognize the right of others to discuss salaries openly and support their ability to do so. However, I think aside from benefiting companies, a lack of transparency around salaries benefits those who are good at negotiating, whereas complete transparency helps those who are not good at negotiating. If for example, you know company X's highest paid software developer makes $110k, and the lowest makes $90k, (and such a narrow banded salary range is probably likely if everyone knows exactly what everyone else earns), you probably aren't going to get them to pay you far north of $110k simply because that would carry the likely result of increasing everyone else's salary since they now know you are making more than they are and they want a salary increase too. But the lack of transparency should really go both ways, ideally if you want to get the best terms. That is, if you can inflate your previous salary or not disclose it at all while asking for a number significantly above it you are in a much better position than laying bare your entire earnings history.
  - chralieboy 12y ago
    >> However, I think aside from benefiting companies, a lack of transparency around salaries benefits those who are good at negotiating, whereas complete transparency helps those who are not good at negotiating. This is exactly why salaries _should_ be transparent. Skill at negotiating salaries, unless you are an agent, is not a relevant skill. If you are an engineer, for example, the company should not be rewarding or penalizing you for your salary negotiation skills.
    - dkrich 12y ago
      I disagree. If engineers are notoriously bad at negotiating (which we probably are), the solution is to improve that skill, not to seek to avoid negotiating in any form or fashion. The idea that you can willfully eschew any responsibility for asking for what you want (which is really what a negotiation is) and still get it, is both self-defeating and naive. The reason lawyers/agents/salespeople are good at negotiating is not merely that their job requires it, it's because they have developed that skill.
meraku 12y ago
Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake Completely agree with this, though I made a mistake that was even worse than this. A friend hired me a couple of years ago to join his small company as the first developer, during which I disclosed my salary and also mentioned that I was willing to take a pay cut (as I wasn't happy where I was, and he was a tiny company still finding his footing). Fortunately, he matched my salary, so I didn't end up making less money as such, though it also didn't take into account of the value that I brought to the business, being the only developer on the team. As a result, it certainly feels like I've sabotaged myself, where I should be making more than I am, with the only solution being to find better compensated employment elsewhere despite being reasonably with my current role.
dkrich 12y ago
Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake I used to believe in this adamantly, however recently I think it requires a bit of refinement. First, it depends on where you are presently. If you are in a job you really don't enjoy or are not performing well in, for whatever reason, your top priority is finding a job that better utilizes your talents. A lot of people believe that once you start a job at a certain rate of pay, you can't negotiate it up significantly because you will always be anchored to that initial amount. That isn't really true. Once you start if you perform well you become a valuable asset, and companies don't like to lose valuable assets. One option is to find another company that will offer you the amount you want to make and take it back to your company and ask them to match it. Very often they will and without much argument. However the important thing is to start. Now if you are in a job you enjoy and have no real desire to leave except pay, then you definitely should not disclose your salary, as you have a powerful negotiating position as you really don't need to move. However if the company is really pressing you to give them a number and won't move you on unless you do, it's okay to tell them the number if you are up-front and steadfast in that you are looking for amount $X which could be 1.5x, 2x, or any multiple of what you are presently earning. If they claim they can't match it then move on. Finally, never negotiate salary with a recruiter before meeting with the hiring manager. Many times (certainly not always) recruiters do not know much about the job requirements besides what was written by the hiring team in a bulleted list. They don't have the authority to grant salary requests, but in many cases hiring managers do. I have had several job offers come in well above what the recruiter told me the job paid. No matter what you are told the salary range is, if a team really wants you, they will pay to get you.
icedchai 12y ago
It would be interesting to see networth along with the salary numbers.
- grecy 12y ago
  Why? to find out if people with a higher salary have a higher networth? I don't think it would be very useful, because you'd get people on low(er) salaries who are great at saving/investing and have a high networth, and visa versa
  - icedchai 12y ago
    Because I think it's what you save, not what you make, that matters.
- patio11 12y ago
  That would involve a whole lot of making stuff up, since valuations for privately held tech companies dominate my net worth at for the last ~8 years. They only time you know know what they're worth is when they are sold. The liabilities side of the balance sheet is less complicated: I owed $22k in student loans at graduation, paid that off, incurred a fair bit of debt back in ~2013 (raided the 2012 tax fund to pay for my wedding and then 2013 ended up being radically less lucrative than expected), and anticipate paying it off this year.
  - wonderthrowaway 12y ago
    At the end of the day, I have to believe you mentally calculate this net worth line (say, with a conservative 1x ARR on the investments) if you're to the point of talking to accountants about becoming an accredited investor. Although props if you are conservative enough not to even entertain the thought of counting unhatched chickens. That's responsible, disciplined behavior. The kind that gives you the confidence to go launch Starfighter...
icedchai 12y ago
It would be interesting to see networth along with the salary numbers.
angersock 12y ago
I'm all for transparency, but it is easy to get weird results from the current range of "small startup bootstrapping" to "valley darling throwing money" to "high salary with no equity" to "<insert odd thing here>". I'd love to have a notion of what the real work rates and long-term rewards our for our industry, but it's so hard. Also, I note that nobody here is sticking their username next to their salary and equity stakes. :P
- jacquesm 12y ago
  It's a function of company size. You can get North of $300K + options from the larger valley companies if you're good at what you're doing (though they will attempt to lowball you and they definitely discourage you from sharing that bit of info with your colleagues), somewhat less than that at smaller companies (but if there are options involved you'll get a larger chunk of a (much) smaller pie). At even smaller companies you can be co-founder with substantial risk and associated rewards if it works out well. It's basically a risk management issue, if you don't want a lot of risk and a reasonably high pay with a potential upside you can't beat the giants, if your needs are small and you can deal with the occasional loss it may pay off to gamble.
throwaway90000 12y ago
> (Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake, particularly in the years of your career where natural growth in capabilities/experience/the market/etc causes you to bring vastly more to the table with each new job.) This is terrible advice. If a prospective employer asks how much you are making, respond with your desired salary at minimum. If they are serious, the negotiation point will be that plus whatever raise you claim to be looking for. If they want paystubs, you seriously don't want to work for them, because no professional should suffer that indignity and they're probably turning away great people as it is. I've only had one company ever ask for paystubs in my career and I got a weird vibe from them early on anyway.
- tptacek 12y ago
  If you tell HR "I won't tell you what I made last job, but I'll tell you what I want to make", then you're basically following most of Patrick's advice. If you can lie convincingly, lying might be an effective negotiating strategy. Lying convincingly here generally involves you knowing as much about the job market as employers do, though, and that tends not to be the case: employers talk to 10 people for every 1 hire they make, and so they get a pretty good snapshot not just of the field at large, but of what other people at your current firm make. Lying unconvincingly is a very poor strategy. It broadcasts both naivete and insecurity to your counterparty, both of which are exploitable characteristics.
  - radicalbyte 12y ago
    In the current market you don't need to lie: just get multiple offers. Also, you can use recruiters to your advantage. Give them much higher salary demands (i.e. 20-50% higher than your current wage). They'll come back to you if they find someone willing to pay. If they question you, then the reason you're expensive is your specialist skill-set.
- nemo44x 12y ago
  Exactly right. Who would ever tell a prospective employer what they are really making? I'd agree you should tell them a number close to what you expect to make if you switch companies. You'll possibly get an offer that exceeds you original goals. It's important to go into these things prepared and well researched.
pipermerriam 12y ago
I wrote a small application a while back to allow a team to figure out what their average salary was without exposing individual salaries. Seems relevant. https://are-we-being-underpaid.herokuapp.com/ https://are-we-being-underpaid.herokuapp.com/ It generates unique URLS for each participant and stores almost nothing on the server. Only a party that was actively monitoring web traffic has enough information to divine someone's salary. No tracking of emails, salaries, etc. Source code here https://github.com/pipermerriam/am-i-underpaid https://github.com/pipermerriam/am-i-underpaid
- qzcx 12y ago
  Very cool. This looks like a solid answer to a simple question that many people would like answered. Now if only I could think up good side projects like this to do. : )
- ncza 12y ago
  This is great! Thanks for caring so much about privacy.
- h0w412d 12y ago
  This is a great idea. I wish I had known about it years ago!
learnstats2 12y ago
Something which I think is only hinted at here: negotiating pay requires a willingness to lose the job if the negotiation doesn't go well. If hirer has an equally good candidate or consultant who quotes a lower rate: you're out of the running. Even if you're better, you have to be better value according to the employer's own assessment. There are few employers who are price insensitive and you have to be in an overwhelmingly lucky or privileged position to find them.
- freyr 12y ago
  > negotiating pay requires a willingness to lose the job if the negotiation doesn't go well. That's why, if possible, you negotiate when you already have another offer. I negotiated a +50% annual pay raise at my last job because I was completely willing to walk away for another job. I also got the raise because I was playing an important part in a high value project at that time. I felt a bit guilty about the possibility of leaving the project in the lurch, or negotiating when my value was at its highest. I thought it would lead to resentment from my managers if they thought I was strong-arming them. But they agreed to the rate, and never showed resentment. Every successful business person or trader knows to sell high, but sometimes the rest of us forget. > If hirer has an equally good candidate or consultant who quotes a lower rate: you're out of the running. If you can easily be replaced by a new hire or a consultant, you don't deserve the higher salary.
  - rokhayakebe 12y ago
    I felt a bit guilty about the possibility of leaving the project in the lurch You shouldn't and you did well. Whenever you have a position of strength and the business can afford it, you should exercise it. Simple. This is business.
  - jacquesm 12y ago
    Negotiating without a BATNA is like jumping out of a perfectly good plane without a parachute.
    - zo1 12y ago
keeran 12y ago
The problem I have with this #talkpay thing is that it assumes everyone I connect with is in our lucrative echo chamber. I'd feel like a asshole talking about my income as a contract developer knowing I have followers who are really struggling to find work / decent pay outside of technology. Conferences, tech meetups etc I'm usually the first to be championing developer solidarity and pushing the message that we can and should all be demanding more money, everywhere else I try and keep it low profile to not rub peoples noses in it.
- BSousa 12y ago
  I fully agree with that sentiment. I have a lot of non-tech folks ask me about money (when they ask me what I do and if it pays well) and I always try to avoid giving numbers and go with a more generic 'I can't complain, things are ok/good'. I earn a lot (and I mean a lot) compared to non-tech folks where I live: 20x difference in some cases. I had a friend recently in a conversation mentioning that buying X (one of those cheap android tablets for kids) as a birthday present was 3 days worth of her work. In my case, it is less than 1.5 hours of my work. I'm very happy for earning these values, and I try to give back when I can, pick up the bill here and there (enough to help, but not enough for people to resent it) but I know we developers are quite lucky with the luck of the draw we got in this little slice of time and IMO, we should be more considerate of others in these cases.
  - saryant 12y ago
    I feel the same way as a 2012 college graduate. Most of my college friends are still unemployed or working in marginal work (temps, office admins, phone support). On top of that, most are buried in student loans (private college) whereas I had parents able to pick up the tab. More than one has turned to webcam porn to make money while I'm charging $$$ as a software contractor. I post photos on Facebook from Tokyo or Berlin and sometimes wonder if I'm pissing off my friends.
    - BSousa 12y ago
      Sorry for the late reply. I don't think you should stop posting photos from your trips just because you are 'afraid' you will be pissing off your friends. They can always unfollow you (or whatever FB allows you to do, I'm not big on social networks) if they find it 'offensive'. I just think it is a balancing act between sharing parts of your life, and sharing absolute numbers or boasting. Anyone that knows me for more than 5 minutes, knows I'm doing well (I live in a nice place, in a very expensive area for example and I don't hide this), but at the same time, I avoid letting (outside of very close friends) people know how well exactly. I never talk about money or salaries or what not. That doesn't mean I won't invite them over for dinner/a swim in the pool just in case I 'piss them off'.
hkmurakami 12y ago
One thing I have noticed is that while "wage information" (including equity grants) are taboo and "net worth" is also taboo, "wealth management strategies" (and at times philosophies) are not nearly as taboo amongst the wealthier folks, perhaps because the conversation revolves around relative, rather than absolute, numbers.
skizm 12y ago
If people knew everyone's salaries there would always be discontent. There will be people making less thinking that are better/more experience/worth more than person B making $X more than them.
- tomp 12y ago
  I think it's reasonable to believe that the employer should have a good answer to the question "why is s/he making more than me, what does s/he do better?"
  - icebraining 12y ago
    Yes, but let's not be naive enough to assume that people would be satisfied even with a good answer.
    - TheOtherHobbes 12y ago
      Or naive enough to assume that there is a good answer beyond "You're not a good negotiator so of course we're taking advantage."
    - tomp 12y ago
      Well, a good answer would be "because s/he is familiar with codebases A, B and C and has skills X, Y, Z", and I would expect the employer to follow-up with a raise if the employee in question also learns all of the above.
- _delirium 12y ago
  I think that relates in part to how big the disparities are. If people are making mostly similar amounts of income, risk of discontent may not be as big an issue. For a large-scale example, Norway makes the annual income of the entire population public information, and yet the country isn't erupting in discontent. Of course other elements of culture (whether national or company culture) are involved as well.
- fredkbloggs 12y ago
  There's always going to be discontent no matter what. If someone thinks they're worth more, you can either agree and pay them more or disagree and they can leave. That's how a market works. Your employees almost certainly already know more or less what they're all getting anyway, and most of them are probably unhappy about it. They keep showing up and doing the work because it beats the alternative for them.
calibraxis 12y ago
For anyone curious about the real roots of #talkpay, software developer Lauren Voswinkel kicked it off on Model View Culture: https://modelviewculture.com/news/lets-talk-about-pay https://modelviewculture.com/news/lets-talk-about-pay (Background: http://www.theguardian.com/us-news/2015/may/01/talkpay-hashtag-twitter-worker-wages-titles-lauren-voswinkel http://www.theguardian.com/us-news/2015/may/01/talkpay-hasht...) So basically, a software dev announced a Twitter campaign on a Silicon Valley startup's website. Naturally, it only hits Hacker "News" when some white man placates fellow uninformed ideologues with "I’m honestly troubled by joining a Marxist movement on May Day". (Translating #talkpay into market theology — is this analogous to how Soviet commissars made bold ideas safe for consumption?) BTW: May 1st commemorates the Chicago Haymarket affair, where workers went on strike for the 8-hour day. And four anarchists were martyred by the state via hanging.
- ricardobeat 12y ago
  He links to the MVC article literally in the sixth word of the post. Patrick McKenzie is a very known figure on HN and runs several technology business. I'm sorry but there is nothing about gender or skin color here.
- RIP 12y ago
  @Calibraxis see my comment: https://news.ycombinator.com/item?id=9475883 https://news.ycombinator.com/item?id=9475883 Today with all the shrill American feminism, other women have been denied a voice in this debate and nobody from outside America is posting in that twitter hashtag or blogging about how they are suffering WIT while earning >90k dollars per year.
moron4hire 12y ago
When they ask me what my previous salary was, I tell them it doesn't matter because I won't accept an offer based on it.
MyNameIsMK 12y ago
@Patio11, I met you once on a trip to Tokyo. When/why did you decide to live in Tokyo other than the fact that your wife is Japanese? Any takeaways in terms of culture and operating a SaaS business from that region? Thanks.
- Elepsis 12y ago
  Did you by chance have the opportunity to read his post about doing business in Japan late last year? http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/ http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/ It's not specific to the questions you ask, but it might answer some of them.
- patio11 12y ago
  We live in Tokyo, as opposed to Ogaki, because a) my wife did not enjoy living in Ogaki due to social isolation and b) we recently greeted a daughter in October and were worried about the sociocultural implications of her growing up in Ogaki. We live in Japan, as opposed to the US, mostly because I've been there for my entire adult life and kind of enjoy it. We might at some time decide to split our time between the US and Japan. I wrote a long blog post about doing business in Japan which talks about running a SaaS company here in more depth than I can reasonably go into in a comment: http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/ http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/
evanpw 12y ago
Objection 1: In most of the instances I'm aware of (please comment if you know of counterexamples), salary transparency only happens in places where compensation is based on a few obvious parameters like years of experience and job title, with little room for individual variation. In cases where there's a large variation in productivity between employees with the same role, it's not going to be possible to pay them commensurately in a system with fully transparent salaries. So this seems to only really make sense in roles where individual contributions are too tied up with group performance to disentangle, or where they're very hard to measure. Objection 2: To the extent that perceived relative pay is the variable that actually matters for determining how happy someone is with their compensation (ask someone in NYC versus someone in Mumbai with the same cost-of-living-adjusted salary how rich they each feel), then releasing salary information can be welfare-reducing even if it does cause salaries to rise in general. This is one of the strongest arguments opposing income inequality: the existence of very rich people makes everyone worse off by making them _feel_ poorer. Related hypothetical question: If every worker were paid exactly proportional to their actual productivity, how much would the standard deviation of labor earnings increase? (http://econlog.econlib.org/archives/2015/04/meritocracy_ble.html http://econlog.econlib.org/archives/2015/04/meritocracy_ble....)
- lifeisstillgood 12y ago
  Objection to objection 2 - are you seriously suggesting that basic market functions like price transparency will be a bad thing because it will make well paid people feel less well paid? They can cry all the way to the bank. Paying people proportional to their productivity is one measure - paying relative to marginal contribution is probably more accurate - so a CEO of 100,000 people who manages to get them all to work 1% harder has made quite a valuable contribution. Edit: this presupposes the PR / in house magazine publisher is not really Responsable ...
interesting_att 12y ago
There has been a recent trend in tech discussions to have greater transparency in compensation, and more importantly, removing negotiation from employment procedure (see recent changes at Reddit). I fear that this move would dramatically hurt startups, who need all the flexibility they can get. Moreover, this move could dramatically kill any form of cohesiveness in startups. Lastly, this move would de-emphasize the importance the skill of negotiation, which would be a detriment to the company. To those who don't know, most large companies already have a structured pay table. Try working at AT&T or McDonalds, and you can probably predict where your salary will be in the next 5-10 years. Real negotiation for most people in most positions mainly happens in small firms and startups. Lack of salary negotiation will only scare away well qualified candidates who don't fit some arbitrarily made rubric (which will almost always back out to years worked, which is a terrible standard). Imagine if by paying 20k extra, you can get one of those mythical "10x rockstar" engineers. Would you remove your ability to hire him? By opening up everyone's salaries, it will only hurt the startup culture, as it will only make people dislike each other. I often found engineers and business development people devalue each others work, in large part because neither party can understand the work of the other. Imagine them knowing each others salaries! Each side can find a justification on why they are being under-compensated while the other over-compensated. Startups need cohesiveness to survive. Lastly negotiation is a valuable skill in the workplace. Interviews reward people who can handle stress and negotiate. Imagine a shipping date is imposed upon you, and not all the features can be included. You're going to want a leader on the engineering team to negotiate with the strategy makers to find an equitable solution. De-emphasizing negotiation is de-emphasizing a critical human skill.
- derefr 12y ago
  Publicizing salary just requires, as a prerequisite, publicizing the objective value each employee is adding to the company. Which requires everyone agreeing on an objective standard for calculating that value. Once you have that, kbowing salary isn't nearly as scary. On the other hand, once you have that, people will start actually thinking of their peers in terms of being high- or low-ROI...
  - dylanjermiah 12y ago
Dewie3 12y ago
> The movement is rather Marxist in character, but this capitalist encourages you to [...] > I’m not a Marxist — Yes, you said that in the opening sentence... Americans are very defensive about coming off as "Marxist"/"socialist".
- nailer 12y ago
  Healthy marxism and healthy capitalism actually look pretty similar. A free market for people, aware of their market value and able to move between employers without artificial restriction looks a whole lot like the proletariat seizing the means of production.
- aptwebapps 12y ago
  American politicians are, for very good reasons, defensive about coming off as Socialist (except Bernie Sanders). Coming off as Marxist is completely out of the picture. But 'patio11 is not a politician and I expect his language reflects strength of feeling more than anything else.
  - Dewie3 12y ago
    > But 'patio11 is not a politician and I expect his language reflects strength of feeling more than anything else. Yeah... strength of feeling of being perceived as "un-American".
    - aptwebapps 12y ago
      If I meant that I wouldn't have bothered commenting as that is what you were saying in the first place.
ochoseis 12y ago
Interesting use of the term Rack Rate in the article -- I had to google it: The published, full price for a room in a hotel that has not been pre-booked [1] [1] http://en.wiktionary.org/wiki/rack_rate http://en.wiktionary.org/wiki/rack_rate
- to3m 12y ago
  "the official or advertised price of a hotel room, on which a discount is usually negotiable."
  - bdcravens 12y ago
    Look on the door in the room, and it'll show the rate, which is typically far greater than what you paid (typically 2-3x)
- calebm 12y ago
  "Rake Rate" is a pretty standard term in consulting.
- chrisbennet 12y ago
  I had never heard of that phrase before either - and I'm a consultant. ;-)
AdrianRossouw 12y ago
for the longest time i was kind of unnerved by how quickly previous employers said yes during negotiation, so I pushed my price up much higher hoping to have a better footing. so far they've all said yes to what I considered very high.
FLUX-YOU 12y ago
Those rates make me go wat. I make $20/hr. :( But can we apply this to the skills we'll need for starfighters.io? It's very easy to point to money (or even companies) lost by data breaches and say "I can help you prevent this", but the money you save may be whatever they pay for breach insurance or it may be literally everything they own. Case studies and deliverable targets (+millions of dollars from SEO and stuff) are really great when they're positive, but how do you negotiate this when you're selling protection against income loss?
- czbond 12y ago
  Part of my background was doing and selling security engagements. Up until a few years ago, it was difficult to get senior leaders to wrap their head around security being anything but a cost center - even though it was always framed as "savings". That has changed in the past year alone. CiSO's are still hounded daily about security products which will "save money / prevent theft" - but the risk to the business is now clear to leaders without security background. I still believe the adage [paraphrased] "People don't pay for the prevention, they pay for the cure"
- zerr 12y ago
  Been there - started with $10/hr many years ago. Back then I didn't realize that all it takes to triple or quadruple my income would be as simple as asking for it - seriously. Although, it was always parallel to changing clients. So go for it, find a new client and ask 3-figure. Oh, and yes, I live in a poor country...
yason 12y ago
Meanwhile, in Finland, you could just tell the company that: "If you really want to know, then please visit the tax authorities' office and look up my previous year's taxable income from their public terminals."
fmela 12y ago
As a wise person once told me: people don't get paid what they are worth, they get paid what they can negotiate.
meritt 12y ago
If the #1 rule everyone should know is 'Never Talk to Police', #2 should be 'Never Reveal Your Salary'.
mallyvai 12y ago
Patrick's got a ton of great insight into salary negotiations, and this post is no exception. Everybody (especially engineers) - needs to get comfortable talking about compensation and wages in safe spaces. This shouldn't come from a sense of ego, but from a much more humble and sincere sense of information-sharing. The people who are hurt the most by keeping compensation info secret are precisely the ones that need the information the most - folks from low income backgrounds, people worried about making more than their parents, etc. As a practical tip, one thing I encourage everybody who's a client to model their equity grant in a simple excel spreadsheet. You need to know * your strike price * preferred share price * company valuation * total # shares outstanding As a rule of thumb you can assume your shares are "diluted" (that is your total % ownership relative to valuation) will decrease anywhere on the order of 15%-40%) after each funding round depending on company's performance. Plotting this beforehand, along with where you believe the company will end up, will give you a great sense of what your equity is worth. [Source: I founded http://OfferLetter.io http://OfferLetter.io - We help engineers and other tech workers get what they're worth. If you're interested in free data, you should join Offer Drive (http://offerletter.io/drive.html http://offerletter.io/drive.html to learn if you're paid fairly]
beambot 12y ago
> I recently sold my first SaaS business, Bingo Card Creator. Patrick, was that already well known? Do you have any plans to discuss that experience?
Omnipresent 12y ago
>$20k a week! is astonishing. What kind of consulting service are you providing for the clients for that sum of money!?
- minot 12y ago
  I think the context is that OP is very conversant with both Japanese and US corporate/startup culture. That can't hurt.
  - jpatokal 12y ago
    No, he does (did) software marketing: https://training.kalzumeus.com/newsletters/archive/consulting_1 https://training.kalzumeus.com/newsletters/archive/consultin... Japanese startup culture would be a terrible niche to try to make any money in.
ivan_ah 12y ago
The part about 2X total lifetime of business earnings made me think of a good Serbian saying (could be Montenegrin, not sure): when negotiating on price, a good deal is when you're ashamed of your offer.
arbuge 12y ago
>>The business is modestly successful. I have a particular number in mind for it, which I’d be crazy to quote publicly prior to selling it, for the same reason that you’d be crazy to quote your desired salary in a salary negotiation. If a buyer pitches me on 2X my desired number I will, naturally, say “That’s an interesting number. If you were offer insert 2.2X here I think we’d have a deal.” No buyer will pitch 2X if they know what X is, though. There is sufficient information there for a buyer to calibrate to some extent what X is from the author's response, assuming (a) the offer is reasonably close to 2X and (b) the author displays no unreasonably nonlinear discontinuities in emotional state as the offering price is varied.
- TheCoelacanth 12y ago
  Presumably he would do the same if pitched 3X or 4X
AndrewKemendo 12y ago
Hmm. We just ask people how much they want to make and give them as much time as they need to respond. If it's higher than we can pay, then we say sorry we can't pay that. If it's way lower than we would expect we usually tell them that we wouldn't expect to pay less than X for their skills and experience. This has worked great so far because if someone came back with a really low number and we just took it, then a month later they will realize they undershot and then they feel awkward about bringing it up - so, best to avoid that. My ethos is: Pay people enough for them to not think about money. If you are only working for me for the pay then it's probably not going to be a great working relationship. They are better off going to work at megacorp where they can sham.
- zerr 12y ago
  On the other hand, when someone states much more than you can afford - don't you think to just pass on this candidate, because she might feel unhappy even if she accepts the offer? Also, to follow Patrick's advice - if someone doesn't give the answer but instead asks the same question to you - "what's the budget/range for this role? ", do you answer honestly?
  - AndrewKemendo 12y ago
    For the first question, no. That has happened twice and they both seemed upset but weren't going to budge. As for the second question, yes I always say what our budget is if asked.
Roy78 12y ago
As someone who works for the government and makes almost more than 50% less than those in the private sector doing the same thing (according to national studies for my profession at my level) this is depressing. I don't know, in the back of my mind I want to launch my own startup and get out of where I am now. My equal co-worker just left a month ago and is making 5x what she was making (in a senior capacity to myself) really makes me question myself. Although, I am getting by just fine and living 10 minutes from work is hard to let go.
- NonEUCitizen 12y ago
  Don't you get a very nice risk-free pension (defined-benefit)? Most of private industry has switched to 401K (defined-contribution).
  - Roy78 12y ago
    Well in theory yes, but who knows. I still have a roth and 457 IRA just in case. My state has repeatedly declined cost of living increases for retired state workers for several years now. The gains in the pension system have steadily been above 10% but that has not stopped the state from putting its hands in its pension funds (I am in Louisiana).
paulhauggis 12y ago
Talking about your salary as an employee will eventually take away your negotiating power. If everyone knew everyone's salary, salary would be minimized to the lowest possible market rate, so nobody gets upset.
- paulhauggis 12y ago
  It's the truth. If you look at countries like Sweden and Denmark where salaries and tax returns are public information, most salaries are all the same.
  - alkonaut 12y ago
    That's not really because of the tax rates being equal, there are many other reasons. For example, higher education is free, and labor organization is very high. This keeps blue-collar pay closer to white collar, flattening pay structures.
    - maaku 12y ago
      He didn't say anything about tax rates. What he said was that tax returns are public information, meaning you or I can look up anyone's income.
      - alkonaut 12y ago
        Yes. And I argued that in order to claim that this is what flattens structures rather than the many other factors, you need a control sample that has Scandinavian labor market structure (High tax, free higher education, single payer healthcare) BUT with non-public income. I'm not sure such a country exists.
RIP 12y ago
https://twitter.com/CHOBITCOIN/status/594238763880075264 https://twitter.com/CHOBITCOIN/status/594238763880075264 claims MCV co-founder started the talkpay hashtag and she was racist. Notice how only Silicon Valley Americans are participating in the twitter hashtag. This hashtag will only help the shrill feminists, not the women who toil away in hardware factories in China and the outsourcing firms in India.
- jacalata 12y ago
  So what did you do today to solve those problems? Why do people in Pittsburgh count as "Silicon Valley" to you anyway?
retrogradeorbit 12y ago
It's like no one has every heard of a salary survey, and thinks the only way to get that information is for everyone to reveal their pay! Just go buy a salary survey! The information will be far more detailed than just random salary tweets from people in different roles, with different capabilities and different experiences in different cities in different countries. Hey, someone doing my job in San Fran gets $200k! I'm going to go and ask my employer for that! A quick check of a salary survey might sober me up. Also a salary survey is far more potent data to present in a salary negotiation to convince people to pay you what you want, rather than "Someone on twitter said...".
morpheous 12y ago
As someone about to start doing some consulting work, your advice couldn't have come a t a more fortuitous time. Thank you!
jsumrall 12y ago
It's a great article, but does anyone know where I can find similar information about pay in Europe? The Netherlands specifically, where I live.
ransom1538 12y ago
Posting your company salaries does a few things: 1) It promotes mediocrity. 2) Creates a political cesspool. 3) Ties the hands of hiring team. 1 - Excellent people want to go places where they can make more. When excellent people learn about public salary postings the first thing they will worry about is the perception of other employees. I suspect they will just avoid conflict and work somewhere else. Really think about the current open salary systems: state governments, federal systems (cia, fbi..), school teachers, college systems, military.. 2 - Will you help the "next" person above your salary grade? Why? Your goal is to be higher than he/she - so this promotes extremely bad behavior. This is how yahoo is setup. People will be trained to create little moats to protect power, inflate budgets, hide data, hurt other employees. 3 - Really want that new hire? Well, now you have no negotiation power. If you pay this employee salary X. Anyone who gets less than X (Call this Y) will be pushed down in the employee chain. So now, instead you want to minimize Y. Sublimity, you will hire less and less capable people to avoid conflict with the current team.
- eellpp 12y ago
  > Excellent people want to go places where they can make more The issue with engineers is that we don't do that and are bad at negotiations. Once at job people rarely look out unless they realise that they are grossly underpaid. This may be true for other job profiles like sale/biz-dev etc where the day to day jobs hone their skills for best deal extraction.
  - ransom1538 12y ago
    You are totally correct. They avoid conflict. If engineers are told at the interview - "Your salary will be this, it will be posted online for all the other employees to see" I suspect the engineer to not be there Monday.
- sdenton4 12y ago
  1. Government and schools sit under enormous political pressure to keep salaries low, as part of a larger agenda to 'drown it in a bathtub'. This pressure keeps school salaries so low relative to the amount of responsibility and regulation that one has to be a bit crazy to choose teaching as a profession. Universities get to take their choice of the PhD students they produce; their hiring problems are more a problem of funding than worker supply. And the military I know little about. 2. Businesses need to ensure that their workers are focused on product quality over internal politics. That's a failure of culture, full stop. These internal politics, if not focused on individual salaries, can instead focus on project head count, building fiefdoms, etc. In short, if you fail to manage internal politics, you'll have these problems regardless of whether employees know what they're getting paid. 3. Yeah, capitalism's a bitch, huh? Funny how all of the 'power of free markets' rhetoric dries up as soon as it's turned back around... Somewhat more seriously, this mainly shows that you need to peg employee salaries to a minimum of market rates, so that they aren't unhappy when that new market-rate hire comes on, and then go above this minimum based on performance. It's not that hard.
ransom1538 12y ago
Posting your company salaries does a few things: 1) It promotes mediocrity. 2) Creates a political cesspool. 3) Ties the hands of hiring team. 1 - Excellent people want to go places where they can make more. When excellent people learn about public salary postings the first thing they will worry about is the perception of other employees. I suspect they will just avoid conflict and work somewhere else. Really think about the current open salary systems: state governments, federal systems (cia, fbi..), school teachers, college systems, military.. 2 - Will you help the "next" person above your salary grade? Why? Your goal is to be higher than he/she - so this promotes extremely bad behavior. This is how yahoo is setup. People will be trained to create little moats to protect power, inflate budgets, hide data, hurt other employees. 3 - Really want that new hire? Well, now you have no negotiation power. If you pay this employee salary X. Anyone who gets less than X (Call this Y) will be pushed down in the employee chain. So now, instead you want to minimize Y. Sublimity, you will hire less and less capable people to avoid conflict with the current team.

650 points by craigkerstiens 12y ago

I wonder if you could have all interviewers fill out a brief survey and give the results candidates for reference - e.g. checkboxes of: * This interviewer is comfortable talking about their salary * This interviewer is comfortable talking about diversity and equality efforts * This interviewer is comfortable talking about the visa and immigration process * This interviewer had children during employ and is comfortable talking about the process As an interviewee, knowing that I could ask direct questions instead of skirting around issues due to trying to be sensitive would drastically improve the experience.

L_Rahman 12y ago

As a recent graduate about to go into his first ever salary negotiation, I'm really grateful for the perspective this provides. My dad was a taxi driver (now drives for Uber) and my mother a stay-at-home mom. I was raised with the notion of earning enough to support myself. Anything beyond that is something I'm expected to figure out myself. Posts such as these are very helpful. A question though: 1. If I've had conversations in quarterly reviews that involved numbers but nothing was ever formalized, are those numbers open to renegotiation in a formal conversation? 2. How do I ask for equity and how much should I ask for as the first hire (technical employee of a non-technical founder)? Edit: I'm aware the user who posted this is not the author, but I'm hoping patio11 or someone else comfortable offering negotiation advice will stop by the comments section.

benmanns 12y ago
For 2, if a reasonable salary is $X, and the company offers you $X-$Y, you're essentially investing $Y per year into the company (at worse terms than actual investors). How much equity do/did investors want for $Y?
- codingdave 12y ago
  It isn't that simple - investments and their returns have risks built in, and people expect more return for more risk. If you are an employee, you are not risking your own money, you are just losing some opportunities for cash. This lost opportunity does work into the equation, but not at the same risk level as an investor because if the company tanks, the investors lose every dime... But the employee still got paid the whole time. I do agree that for negotiation purposes, considering pay below market value is a good point for discussion. But don't get offended if it is not weighted as heavily as people who actually wrote checks.
  - rfrey 12y ago
    > if the company tanks, the investors lose every dime If you choose a $90k job + equity over a $130k job, and the company tanks 2 years later, you've lost every dime of that 80k. It's a bit different since your "investment" consists of 24 tranches, but that's more than balanced by the vesting schedule which gives you nothing for a year (despite accepting your investment immediately), and takes it all away if you stop investing.
  - thedufer 12y ago
    > are not risking your own money, you are just losing some opportunities for cash Those are exactly the same thing. Pretending otherwise is asking startups to rob you.
  - tomp 12y ago
    Actually, as an employee, you're actually risking more, as your total wealth is (most likely) significantly less than an investor's, so according to the economic theory of diminishing marginal utility of income, $10k/year is a significantly greater loss for an employee.
  - MagicWishMonkey 12y ago
    Opportunity cost, how does it work? http://en.wikipedia.org/wiki/Opportunity_cost http://en.wikipedia.org/wiki/Opportunity_cost
saryant 12y ago
Re 2), you should make sure your salary is at market-level and more or less ignore equity. Chances are you'll be let go or the company will collapse before it's worth anything. If you have a reasonable salary, equity is just a cherry on top, but if an employer tries to get you to trade cash today for a startup lottery ticket, say no. This is especially important early in your career given the time value of money. An extra $10k/year in the first five years of your career, properly saved, could add north of $600k to your retirement when you get to that stage in life. That's an almost-certain payoff against a roll of the dice on a sliver of ever-diluted equity.
- L_Rahman 12y ago
  Excellent point and I will heed your advice. I'm well aware that: a. Startup equity is a lottery b. As an early employee and the accompanying biases, I'm especially ill equipped to judge it's value. With that in mind, I'm negotiating salary first. Equity with a vesting schedule is something I would treat purely as an incentive for continuing to stay with the company and not as a replacement for salary.
  - thruflo 12y ago
    This sounds very sensible. I would note though that equity % points are much easier to negotiate early on. If you have an opportunity to secure options at a low valuation now, even with a great big cliff / vesting term, take them in case the company is a success and use the cliff / vesting to persuade the current owners that it's a win win.
- yitchelle 12y ago
  > That's an almost-certain payoff against a roll of the dice on a sliver of ever-diluted equity. This is excellent advice. Cold hard cash is much, much better than a bet of the startup you are working for will take off.
- IkmoIkmo 12y ago
  Great insights, can definitely recommend not taking big equity gambles in your earlier years. Although perhaps north of $600k is a bit too optimistic, you'd need a solid 6.4% inflation & fee free ROI on that. In any case it's important to look at it in 'today's dollars'. For example, the S&P 500 did 20x in the past 40 years (roughly the length of a solid full-time professional career), so $10k could have turned into $400k if following that index. But in the 80s inflation went up to 15% causing devaluation, that 1975 dollar is worth about $4.5 today, meaning that $10k turned into perhaps 9x more purchasing power. Of course that's before all the fees get involved. Even if you'd get $600k by your retirement age, it likely will be the equivalent of less than $200k today. But yeah 6% per year isn't crazy. If you manage to scrape together $50k in your fund by age 25 and work until 65, 500k is very doable, north of 600k perhaps optimistic but who knows what we can expect. Perhaps we'll see gigantic returns once we get 4 billion people on cheap mobile computing, free wifi in the sky, access to modern education, 3d printers, drone deliveries, digital money and a graphene industry haha. But historically speaking $600k is tricky! Either way, doesn't change the fact this is great advise.
davidw 12y ago
> How do I ask for equity and how much should I ask for as the first hire (technical employee of a non-technical founder)? That may not be a bad deal, but there are some warning flags that it raises: * What does the non-tech guy bring to the table? Do they have hard evidence of their ability to make a company successful? * This is well worth your time to read: http://jacquesmattheij.com/first-employee-or-cofounder http://jacquesmattheij.com/first-employee-or-cofounder
evanmoran 12y ago
Also remember that the first non-founder employee is the least desirable position to be in. Usually you have very similar risk to the founders with _significantly_ less equity. Don't take the job unless you get market rates or significant equity (10%+). If they already have funding the former is much more likely, if not then latter makes sense considering the stage -- you're effectively a founder, even if you're not leadership.

brador 12y ago

If consulting is making $30k/week/job then why keep running the personal businesses? Why not take the consulting and branch it out, and drop everything else as a distraction?

oskarth 12y ago
(a) Money isn't everything. (b) Over a long time horizon, selling a product is more profitable. EDIT: It's non-trivial to go from consulting to product development as part of the same business. It's often easier to use the money from consulting to start afresh.
- brador 12y ago
  That's what I meant by branching out. Productize the consulting, so he doesn't need to be there.
Axsuul 12y ago
Maybe his passion is to build something. I think we all get stuck initially chasing the dough but eventually realize it's not what we want.
patio11 12y ago
Because I enjoyed running the software business more than I enjoyed running the consultancy. Partly that is for difficult-to-explain personal reasons (I feel the sense of satisfaction with operating a software company that some people feel when painting things). Partly it is because of reasons which are endemic to consultancies, even successful consultancies. Feel free to ask if you're curious. I also have a quirky relationship to money as a goal. Rather little would change about my life if my salary increased by $800k. My hobbies would remain books, video games, taking my wife and daughter on walks, and posting too much on HN.
- bcg1 12y ago
  Not snark... serious question... its not clear to me what sort of services anyone could offer for 30k per week... what sort of thing commands that kind of price tag?

simonebrunozzi 12y ago

I am in support too. The problem is that most companies take implicit advantage of data obfuscation. Some people would ask to be paid more if they only knew. It is great for employees, but not all companies are ready to do that, and I would guess most would not surive the moment of truth.

marktangotango 12y ago

>> Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake I had a phone screen with an HR drone once (Cerner Inc. to be exact \waves) part way thru she asked me my current salary. I declined to provide that information. She replied "we can't continue without that information". I replied, I'm sorry, but I won't discuss salary at this point. She said, "good bye" and that was all. I had a job so was not desperate at the time. I was still shocked at how abrupt it was.

ashark 12y ago
I've never really gotten over the shock of discovering that anyone asks this, let alone that it's common (especially for larger companies). Add it to the list of things in business that seem to me to be inappropriate/rude/immoral, I suppose.
- rev_bird 12y ago
  I originally wasn't really very against these kinds of questions, until someone pointed out that they're basically asking how much a different company values different work you're doing for different ends, to help them determine how desperate you are for doing their totally unrelated work. I got much more resistant after that.
- switch007 12y ago
  Imbalance of power fuelled by a recession = more inappropriate/rude/immoral behaviour to take advantage of the situation. They know they can say "tell us your previous salary, or else". What's worse is that they will ask your references to confirm, and they'll likely happily tell them. If you lied, it won't go down well. As if there wasn't enough crap to fight against in your career.. ugh. EDIT: I forgot about employment contracts that prohibit you from disclosing your previous salary. Yes, they exist.
  - lsaferite 12y ago

error54 12y ago

I found this spreadsheet[1] to be pretty interesting. Obviously it's anonymous so take the data with a grain of salt. 1- https://docs.google.com/spreadsheets/d/1F9e8DrWv5_rx3il0r2SgE3TO0usN_uEWq46d0R3M73w/edit#gid=0 https://docs.google.com/spreadsheets/d/1F9e8DrWv5_rx3il0r2Sg...

tikhonj 12y ago

I've always found the taboo about discussing salaries weird. In my experience, it's almost nonexistant among Russian immigrants to the US—at least the ones my family knows—and yet hasn't caused any real problems. Sure, there are issues of status and perceived worth around salary—but hiding the numbers doesn't help. People still know your job title, understand your company and see your lifestyle. That's more than enough! Numbers only matter if you want to talk about relatively small differences—ones that matter far more for salary negotiation and evaluating a position than they do for cocktail party Now, perhaps I'm just being simplistic, but the way I see it is genuinely simple: markets are about transferring information. To do this well, participants have to know what the prices are elsewhere. An arbitrary cultural taboo around the prices does nothing but impede the flow of information. The fact that it's asymmetric just makes it doubly worse. Transparent salaries are about as capitalistic and idea as can be. Unfortunately, by character, I'm also unlikely to take my own advice: I fear awkwardness disproportionately. Just one more reason why I deeply dislike arbitrary social rules.

Todd 12y ago

I always appreciate your transparency and believe that you're helping drive our industry forward. I often search for ideas on how to help within my area of influence. The closest I've found is Stack Exchange's salary matrix, and the related approach at Fog Creek. I think publishing salaries has several benefits. For one thing, it removes the used car salesman approach to hiring. One result, which is more important, is that it can help eliminate wage disparity due to differences of gender or level of negotiating skills. It can also help prevent the corrosive effects that can occur if people do find out actual numbers (the morale-sapping that you discuss). The problem with this approach, and one I'm trying to figure out is, what about the non-developer jobs? Assumedly, each group gets their own matrix. But if the admins can browse the matrices of the other groups, like the development team's, then there can be a similar corrosive effect. One option is to only discuss the salary matrix within your group and with HR. But then we're back to a different version of the tired old story. (Don't discuss the matrix outside of your group!) This leads me to believe that it's best to be completely open. It might also serve as an incentive for people to make an effort to grow into different areas. Any ideas appreciated.

ljoshua 12y ago
At the firm that I work at everything is in the open, even between groups, and it works very well. It is a formula-based compensation given your department (basically consultants and back-office) and stated level. With that, I know or can calculate exactly how much my manager makes, how much an entry level HR employee makes, and how much the CEO makes. I love it because it removes any problem with politics or shadowy discussions, and I know what I can expect when a promotion comes. The only downside is that it leaves the firm with little leverage when it comes to compensation: I can't simply get a bump without a promotion, nor are there extra bonuses that can be given out either for hiring or retaining. (This has its benefits as well however.)
- Todd 12y ago
  That's enlightening and encouraging. A formula-based/matrix approach might make it more acceptable because it isn't personal. One thing I haven't seen is how to handle COLA. I'm sure that can also be added as an additional factor, though.

kmf 12y ago

Posts like this, and the #talkpay on Twitter, is the kind of stuff I would've loved to have a couple years ago, starting in the industry. Here's hoping this sparks a conversation across the industry between employees and managers on salary over the next couple months.

calcsam 12y ago

"Salaries are not just internally transparent at Japanese megacorps but so predictable that any middle-class adult in central Japan can accurately predict my salary history. I mention this partly to say that salary transparency by itself does not guarantee happy outcomes for employees." Yes. Salaries at Buffer might be transparent but also quite low.

dkrich 12y ago
Yeah, I actually prefer a lack of transparency. I fully recognize the right of others to discuss salaries openly and support their ability to do so. However, I think aside from benefiting companies, a lack of transparency around salaries benefits those who are good at negotiating, whereas complete transparency helps those who are not good at negotiating. If for example, you know company X's highest paid software developer makes $110k, and the lowest makes $90k, (and such a narrow banded salary range is probably likely if everyone knows exactly what everyone else earns), you probably aren't going to get them to pay you far north of $110k simply because that would carry the likely result of increasing everyone else's salary since they now know you are making more than they are and they want a salary increase too. But the lack of transparency should really go both ways, ideally if you want to get the best terms. That is, if you can inflate your previous salary or not disclose it at all while asking for a number significantly above it you are in a much better position than laying bare your entire earnings history.
- chralieboy 12y ago
  >> However, I think aside from benefiting companies, a lack of transparency around salaries benefits those who are good at negotiating, whereas complete transparency helps those who are not good at negotiating. This is exactly why salaries _should_ be transparent. Skill at negotiating salaries, unless you are an agent, is not a relevant skill. If you are an engineer, for example, the company should not be rewarding or penalizing you for your salary negotiation skills.
  - dkrich 12y ago
    I disagree. If engineers are notoriously bad at negotiating (which we probably are), the solution is to improve that skill, not to seek to avoid negotiating in any form or fashion. The idea that you can willfully eschew any responsibility for asking for what you want (which is really what a negotiation is) and still get it, is both self-defeating and naive. The reason lawyers/agents/salespeople are good at negotiating is not merely that their job requires it, it's because they have developed that skill.

meraku 12y ago

dkrich 12y ago

Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake I used to believe in this adamantly, however recently I think it requires a bit of refinement. First, it depends on where you are presently. If you are in a job you really don't enjoy or are not performing well in, for whatever reason, your top priority is finding a job that better utilizes your talents. A lot of people believe that once you start a job at a certain rate of pay, you can't negotiate it up significantly because you will always be anchored to that initial amount. That isn't really true. Once you start if you perform well you become a valuable asset, and companies don't like to lose valuable assets. One option is to find another company that will offer you the amount you want to make and take it back to your company and ask them to match it. Very often they will and without much argument. However the important thing is to start. Now if you are in a job you enjoy and have no real desire to leave except pay, then you definitely should not disclose your salary, as you have a powerful negotiating position as you really don't need to move. However if the company is really pressing you to give them a number and won't move you on unless you do, it's okay to tell them the number if you are up-front and steadfast in that you are looking for amount $X which could be 1.5x, 2x, or any multiple of what you are presently earning. If they claim they can't match it then move on. Finally, never negotiate salary with a recruiter before meeting with the hiring manager. Many times (certainly not always) recruiters do not know much about the job requirements besides what was written by the hiring team in a bulleted list. They don't have the authority to grant salary requests, but in many cases hiring managers do. I have had several job offers come in well above what the recruiter told me the job paid. No matter what you are told the salary range is, if a team really wants you, they will pay to get you.

icedchai 12y ago

It would be interesting to see networth along with the salary numbers.

grecy 12y ago
Why? to find out if people with a higher salary have a higher networth? I don't think it would be very useful, because you'd get people on low(er) salaries who are great at saving/investing and have a high networth, and visa versa
- icedchai 12y ago
  Because I think it's what you save, not what you make, that matters.
patio11 12y ago
That would involve a whole lot of making stuff up, since valuations for privately held tech companies dominate my net worth at for the last ~8 years. They only time you know know what they're worth is when they are sold. The liabilities side of the balance sheet is less complicated: I owed $22k in student loans at graduation, paid that off, incurred a fair bit of debt back in ~2013 (raided the 2012 tax fund to pay for my wedding and then 2013 ended up being radically less lucrative than expected), and anticipate paying it off this year.
- wonderthrowaway 12y ago
  At the end of the day, I have to believe you mentally calculate this net worth line (say, with a conservative 1x ARR on the investments) if you're to the point of talking to accountants about becoming an accredited investor. Although props if you are conservative enough not to even entertain the thought of counting unhatched chickens. That's responsible, disciplined behavior. The kind that gives you the confidence to go launch Starfighter...

icedchai 12y ago

It would be interesting to see networth along with the salary numbers.

angersock 12y ago

I'm all for transparency, but it is easy to get weird results from the current range of "small startup bootstrapping" to "valley darling throwing money" to "high salary with no equity" to "<insert odd thing here>". I'd love to have a notion of what the real work rates and long-term rewards our for our industry, but it's so hard. Also, I note that nobody here is sticking their username next to their salary and equity stakes. :P

jacquesm 12y ago
It's a function of company size. You can get North of $300K + options from the larger valley companies if you're good at what you're doing (though they will attempt to lowball you and they definitely discourage you from sharing that bit of info with your colleagues), somewhat less than that at smaller companies (but if there are options involved you'll get a larger chunk of a (much) smaller pie). At even smaller companies you can be co-founder with substantial risk and associated rewards if it works out well. It's basically a risk management issue, if you don't want a lot of risk and a reasonably high pay with a potential upside you can't beat the giants, if your needs are small and you can deal with the occasional loss it may pay off to gamble.

throwaway90000 12y ago

> (Most important takeaway about salary negotiation, by the way: disclosing a previous salary is almost always against your interests because it pegs your new salary to that plus 5% rather than your value to the new firm minus a discount, which is a brutal mistake, particularly in the years of your career where natural growth in capabilities/experience/the market/etc causes you to bring vastly more to the table with each new job.) This is terrible advice. If a prospective employer asks how much you are making, respond with your desired salary at minimum. If they are serious, the negotiation point will be that plus whatever raise you claim to be looking for. If they want paystubs, you seriously don't want to work for them, because no professional should suffer that indignity and they're probably turning away great people as it is. I've only had one company ever ask for paystubs in my career and I got a weird vibe from them early on anyway.

tptacek 12y ago
If you tell HR "I won't tell you what I made last job, but I'll tell you what I want to make", then you're basically following most of Patrick's advice. If you can lie convincingly, lying might be an effective negotiating strategy. Lying convincingly here generally involves you knowing as much about the job market as employers do, though, and that tends not to be the case: employers talk to 10 people for every 1 hire they make, and so they get a pretty good snapshot not just of the field at large, but of what other people at your current firm make. Lying unconvincingly is a very poor strategy. It broadcasts both naivete and insecurity to your counterparty, both of which are exploitable characteristics.
- radicalbyte 12y ago
  In the current market you don't need to lie: just get multiple offers. Also, you can use recruiters to your advantage. Give them much higher salary demands (i.e. 20-50% higher than your current wage). They'll come back to you if they find someone willing to pay. If they question you, then the reason you're expensive is your specialist skill-set.
nemo44x 12y ago
Exactly right. Who would ever tell a prospective employer what they are really making? I'd agree you should tell them a number close to what you expect to make if you switch companies. You'll possibly get an offer that exceeds you original goals. It's important to go into these things prepared and well researched.

pipermerriam 12y ago

I wrote a small application a while back to allow a team to figure out what their average salary was without exposing individual salaries. Seems relevant. https://are-we-being-underpaid.herokuapp.com/ https://are-we-being-underpaid.herokuapp.com/ It generates unique URLS for each participant and stores almost nothing on the server. Only a party that was actively monitoring web traffic has enough information to divine someone's salary. No tracking of emails, salaries, etc. Source code here https://github.com/pipermerriam/am-i-underpaid https://github.com/pipermerriam/am-i-underpaid

qzcx 12y ago
Very cool. This looks like a solid answer to a simple question that many people would like answered. Now if only I could think up good side projects like this to do. : )
ncza 12y ago
This is great! Thanks for caring so much about privacy.
h0w412d 12y ago
This is a great idea. I wish I had known about it years ago!

learnstats2 12y ago

Something which I think is only hinted at here: negotiating pay requires a willingness to lose the job if the negotiation doesn't go well. If hirer has an equally good candidate or consultant who quotes a lower rate: you're out of the running. Even if you're better, you have to be better value according to the employer's own assessment. There are few employers who are price insensitive and you have to be in an overwhelmingly lucky or privileged position to find them.

freyr 12y ago
> negotiating pay requires a willingness to lose the job if the negotiation doesn't go well. That's why, if possible, you negotiate when you already have another offer. I negotiated a +50% annual pay raise at my last job because I was completely willing to walk away for another job. I also got the raise because I was playing an important part in a high value project at that time. I felt a bit guilty about the possibility of leaving the project in the lurch, or negotiating when my value was at its highest. I thought it would lead to resentment from my managers if they thought I was strong-arming them. But they agreed to the rate, and never showed resentment. Every successful business person or trader knows to sell high, but sometimes the rest of us forget. > If hirer has an equally good candidate or consultant who quotes a lower rate: you're out of the running. If you can easily be replaced by a new hire or a consultant, you don't deserve the higher salary.
- rokhayakebe 12y ago
  I felt a bit guilty about the possibility of leaving the project in the lurch You shouldn't and you did well. Whenever you have a position of strength and the business can afford it, you should exercise it. Simple. This is business.
- jacquesm 12y ago
  Negotiating without a BATNA is like jumping out of a perfectly good plane without a parachute.
  - zo1 12y ago

keeran 12y ago

The problem I have with this #talkpay thing is that it assumes everyone I connect with is in our lucrative echo chamber. I'd feel like a asshole talking about my income as a contract developer knowing I have followers who are really struggling to find work / decent pay outside of technology. Conferences, tech meetups etc I'm usually the first to be championing developer solidarity and pushing the message that we can and should all be demanding more money, everywhere else I try and keep it low profile to not rub peoples noses in it.

BSousa 12y ago
I fully agree with that sentiment. I have a lot of non-tech folks ask me about money (when they ask me what I do and if it pays well) and I always try to avoid giving numbers and go with a more generic 'I can't complain, things are ok/good'. I earn a lot (and I mean a lot) compared to non-tech folks where I live: 20x difference in some cases. I had a friend recently in a conversation mentioning that buying X (one of those cheap android tablets for kids) as a birthday present was 3 days worth of her work. In my case, it is less than 1.5 hours of my work. I'm very happy for earning these values, and I try to give back when I can, pick up the bill here and there (enough to help, but not enough for people to resent it) but I know we developers are quite lucky with the luck of the draw we got in this little slice of time and IMO, we should be more considerate of others in these cases.
- saryant 12y ago
  I feel the same way as a 2012 college graduate. Most of my college friends are still unemployed or working in marginal work (temps, office admins, phone support). On top of that, most are buried in student loans (private college) whereas I had parents able to pick up the tab. More than one has turned to webcam porn to make money while I'm charging $$$ as a software contractor. I post photos on Facebook from Tokyo or Berlin and sometimes wonder if I'm pissing off my friends.
  - BSousa 12y ago
    Sorry for the late reply. I don't think you should stop posting photos from your trips just because you are 'afraid' you will be pissing off your friends. They can always unfollow you (or whatever FB allows you to do, I'm not big on social networks) if they find it 'offensive'. I just think it is a balancing act between sharing parts of your life, and sharing absolute numbers or boasting. Anyone that knows me for more than 5 minutes, knows I'm doing well (I live in a nice place, in a very expensive area for example and I don't hide this), but at the same time, I avoid letting (outside of very close friends) people know how well exactly. I never talk about money or salaries or what not. That doesn't mean I won't invite them over for dinner/a swim in the pool just in case I 'piss them off'.

hkmurakami 12y ago

One thing I have noticed is that while "wage information" (including equity grants) are taboo and "net worth" is also taboo, "wealth management strategies" (and at times philosophies) are not nearly as taboo amongst the wealthier folks, perhaps because the conversation revolves around relative, rather than absolute, numbers.

skizm 12y ago

If people knew everyone's salaries there would always be discontent. There will be people making less thinking that are better/more experience/worth more than person B making $X more than them.

tomp 12y ago
I think it's reasonable to believe that the employer should have a good answer to the question "why is s/he making more than me, what does s/he do better?"
- icebraining 12y ago
  Yes, but let's not be naive enough to assume that people would be satisfied even with a good answer.
  - TheOtherHobbes 12y ago
    Or naive enough to assume that there is a good answer beyond "You're not a good negotiator so of course we're taking advantage."
  - tomp 12y ago
    Well, a good answer would be "because s/he is familiar with codebases A, B and C and has skills X, Y, Z", and I would expect the employer to follow-up with a raise if the employee in question also learns all of the above.
_delirium 12y ago
I think that relates in part to how big the disparities are. If people are making mostly similar amounts of income, risk of discontent may not be as big an issue. For a large-scale example, Norway makes the annual income of the entire population public information, and yet the country isn't erupting in discontent. Of course other elements of culture (whether national or company culture) are involved as well.
fredkbloggs 12y ago
There's always going to be discontent no matter what. If someone thinks they're worth more, you can either agree and pay them more or disagree and they can leave. That's how a market works. Your employees almost certainly already know more or less what they're all getting anyway, and most of them are probably unhappy about it. They keep showing up and doing the work because it beats the alternative for them.

calibraxis 12y ago

For anyone curious about the real roots of #talkpay, software developer Lauren Voswinkel kicked it off on Model View Culture: https://modelviewculture.com/news/lets-talk-about-pay https://modelviewculture.com/news/lets-talk-about-pay (Background: http://www.theguardian.com/us-news/2015/may/01/talkpay-hashtag-twitter-worker-wages-titles-lauren-voswinkel http://www.theguardian.com/us-news/2015/may/01/talkpay-hasht...) So basically, a software dev announced a Twitter campaign on a Silicon Valley startup's website. Naturally, it only hits Hacker "News" when some white man placates fellow uninformed ideologues with "I’m honestly troubled by joining a Marxist movement on May Day". (Translating #talkpay into market theology — is this analogous to how Soviet commissars made bold ideas safe for consumption?) BTW: May 1st commemorates the Chicago Haymarket affair, where workers went on strike for the 8-hour day. And four anarchists were martyred by the state via hanging.

ricardobeat 12y ago
He links to the MVC article literally in the sixth word of the post. Patrick McKenzie is a very known figure on HN and runs several technology business. I'm sorry but there is nothing about gender or skin color here.
RIP 12y ago
@Calibraxis see my comment: https://news.ycombinator.com/item?id=9475883 https://news.ycombinator.com/item?id=9475883 Today with all the shrill American feminism, other women have been denied a voice in this debate and nobody from outside America is posting in that twitter hashtag or blogging about how they are suffering WIT while earning >90k dollars per year.

moron4hire 12y ago

When they ask me what my previous salary was, I tell them it doesn't matter because I won't accept an offer based on it.

MyNameIsMK 12y ago

@Patio11, I met you once on a trip to Tokyo. When/why did you decide to live in Tokyo other than the fact that your wife is Japanese? Any takeaways in terms of culture and operating a SaaS business from that region? Thanks.

Elepsis 12y ago
Did you by chance have the opportunity to read his post about doing business in Japan late last year? http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/ http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/ It's not specific to the questions you ask, but it might answer some of them.
patio11 12y ago
We live in Tokyo, as opposed to Ogaki, because a) my wife did not enjoy living in Ogaki due to social isolation and b) we recently greeted a daughter in October and were worried about the sociocultural implications of her growing up in Ogaki. We live in Japan, as opposed to the US, mostly because I've been there for my entire adult life and kind of enjoy it. We might at some time decide to split our time between the US and Japan. I wrote a long blog post about doing business in Japan which talks about running a SaaS company here in more depth than I can reasonably go into in a comment: http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/ http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/

evanpw 12y ago

Objection 1: In most of the instances I'm aware of (please comment if you know of counterexamples), salary transparency only happens in places where compensation is based on a few obvious parameters like years of experience and job title, with little room for individual variation. In cases where there's a large variation in productivity between employees with the same role, it's not going to be possible to pay them commensurately in a system with fully transparent salaries. So this seems to only really make sense in roles where individual contributions are too tied up with group performance to disentangle, or where they're very hard to measure. Objection 2: To the extent that perceived relative pay is the variable that actually matters for determining how happy someone is with their compensation (ask someone in NYC versus someone in Mumbai with the same cost-of-living-adjusted salary how rich they each feel), then releasing salary information can be welfare-reducing even if it does cause salaries to rise in general. This is one of the strongest arguments opposing income inequality: the existence of very rich people makes everyone worse off by making them _feel_ poorer. Related hypothetical question: If every worker were paid exactly proportional to their actual productivity, how much would the standard deviation of labor earnings increase? (http://econlog.econlib.org/archives/2015/04/meritocracy_ble.html http://econlog.econlib.org/archives/2015/04/meritocracy_ble....)

lifeisstillgood 12y ago
Objection to objection 2 - are you seriously suggesting that basic market functions like price transparency will be a bad thing because it will make well paid people feel less well paid? They can cry all the way to the bank. Paying people proportional to their productivity is one measure - paying relative to marginal contribution is probably more accurate - so a CEO of 100,000 people who manages to get them all to work 1% harder has made quite a valuable contribution. Edit: this presupposes the PR / in house magazine publisher is not really Responsable ...

interesting_att 12y ago

There has been a recent trend in tech discussions to have greater transparency in compensation, and more importantly, removing negotiation from employment procedure (see recent changes at Reddit). I fear that this move would dramatically hurt startups, who need all the flexibility they can get. Moreover, this move could dramatically kill any form of cohesiveness in startups. Lastly, this move would de-emphasize the importance the skill of negotiation, which would be a detriment to the company. To those who don't know, most large companies already have a structured pay table. Try working at AT&T or McDonalds, and you can probably predict where your salary will be in the next 5-10 years. Real negotiation for most people in most positions mainly happens in small firms and startups. Lack of salary negotiation will only scare away well qualified candidates who don't fit some arbitrarily made rubric (which will almost always back out to years worked, which is a terrible standard). Imagine if by paying 20k extra, you can get one of those mythical "10x rockstar" engineers. Would you remove your ability to hire him? By opening up everyone's salaries, it will only hurt the startup culture, as it will only make people dislike each other. I often found engineers and business development people devalue each others work, in large part because neither party can understand the work of the other. Imagine them knowing each others salaries! Each side can find a justification on why they are being under-compensated while the other over-compensated. Startups need cohesiveness to survive. Lastly negotiation is a valuable skill in the workplace. Interviews reward people who can handle stress and negotiate. Imagine a shipping date is imposed upon you, and not all the features can be included. You're going to want a leader on the engineering team to negotiate with the strategy makers to find an equitable solution. De-emphasizing negotiation is de-emphasizing a critical human skill.

derefr 12y ago
Publicizing salary just requires, as a prerequisite, publicizing the objective value each employee is adding to the company. Which requires everyone agreeing on an objective standard for calculating that value. Once you have that, kbowing salary isn't nearly as scary. On the other hand, once you have that, people will start actually thinking of their peers in terms of being high- or low-ROI...
- dylanjermiah 12y ago

Dewie3 12y ago

> The movement is rather Marxist in character, but this capitalist encourages you to [...] > I’m not a Marxist — Yes, you said that in the opening sentence... Americans are very defensive about coming off as "Marxist"/"socialist".

nailer 12y ago
Healthy marxism and healthy capitalism actually look pretty similar. A free market for people, aware of their market value and able to move between employers without artificial restriction looks a whole lot like the proletariat seizing the means of production.
aptwebapps 12y ago
American politicians are, for very good reasons, defensive about coming off as Socialist (except Bernie Sanders). Coming off as Marxist is completely out of the picture. But 'patio11 is not a politician and I expect his language reflects strength of feeling more than anything else.
- Dewie3 12y ago
  > But 'patio11 is not a politician and I expect his language reflects strength of feeling more than anything else. Yeah... strength of feeling of being perceived as "un-American".
  - aptwebapps 12y ago
    If I meant that I wouldn't have bothered commenting as that is what you were saying in the first place.

ochoseis 12y ago

Interesting use of the term Rack Rate in the article -- I had to google it: The published, full price for a room in a hotel that has not been pre-booked [1] [1] http://en.wiktionary.org/wiki/rack_rate http://en.wiktionary.org/wiki/rack_rate

to3m 12y ago
"the official or advertised price of a hotel room, on which a discount is usually negotiable."
- bdcravens 12y ago
  Look on the door in the room, and it'll show the rate, which is typically far greater than what you paid (typically 2-3x)
calebm 12y ago
"Rake Rate" is a pretty standard term in consulting.
chrisbennet 12y ago
I had never heard of that phrase before either - and I'm a consultant. ;-)

AdrianRossouw 12y ago

for the longest time i was kind of unnerved by how quickly previous employers said yes during negotiation, so I pushed my price up much higher hoping to have a better footing. so far they've all said yes to what I considered very high.

FLUX-YOU 12y ago

Those rates make me go wat. I make $20/hr. :( But can we apply this to the skills we'll need for starfighters.io? It's very easy to point to money (or even companies) lost by data breaches and say "I can help you prevent this", but the money you save may be whatever they pay for breach insurance or it may be literally everything they own. Case studies and deliverable targets (+millions of dollars from SEO and stuff) are really great when they're positive, but how do you negotiate this when you're selling protection against income loss?

czbond 12y ago
Part of my background was doing and selling security engagements. Up until a few years ago, it was difficult to get senior leaders to wrap their head around security being anything but a cost center - even though it was always framed as "savings". That has changed in the past year alone. CiSO's are still hounded daily about security products which will "save money / prevent theft" - but the risk to the business is now clear to leaders without security background. I still believe the adage [paraphrased] "People don't pay for the prevention, they pay for the cure"
zerr 12y ago
Been there - started with $10/hr many years ago. Back then I didn't realize that all it takes to triple or quadruple my income would be as simple as asking for it - seriously. Although, it was always parallel to changing clients. So go for it, find a new client and ask 3-figure. Oh, and yes, I live in a poor country...

yason 12y ago

Meanwhile, in Finland, you could just tell the company that: "If you really want to know, then please visit the tax authorities' office and look up my previous year's taxable income from their public terminals."

fmela 12y ago

As a wise person once told me: people don't get paid what they are worth, they get paid what they can negotiate.

meritt 12y ago

If the #1 rule everyone should know is 'Never Talk to Police', #2 should be 'Never Reveal Your Salary'.

mallyvai 12y ago

Patrick's got a ton of great insight into salary negotiations, and this post is no exception. Everybody (especially engineers) - needs to get comfortable talking about compensation and wages in safe spaces. This shouldn't come from a sense of ego, but from a much more humble and sincere sense of information-sharing. The people who are hurt the most by keeping compensation info secret are precisely the ones that need the information the most - folks from low income backgrounds, people worried about making more than their parents, etc. As a practical tip, one thing I encourage everybody who's a client to model their equity grant in a simple excel spreadsheet. You need to know * your strike price * preferred share price * company valuation * total # shares outstanding As a rule of thumb you can assume your shares are "diluted" (that is your total % ownership relative to valuation) will decrease anywhere on the order of 15%-40%) after each funding round depending on company's performance. Plotting this beforehand, along with where you believe the company will end up, will give you a great sense of what your equity is worth. [Source: I founded http://OfferLetter.io http://OfferLetter.io - We help engineers and other tech workers get what they're worth. If you're interested in free data, you should join Offer Drive (http://offerletter.io/drive.html http://offerletter.io/drive.html to learn if you're paid fairly]

beambot 12y ago

> I recently sold my first SaaS business, Bingo Card Creator. Patrick, was that already well known? Do you have any plans to discuss that experience?

Omnipresent 12y ago

>$20k a week! is astonishing. What kind of consulting service are you providing for the clients for that sum of money!?

minot 12y ago
I think the context is that OP is very conversant with both Japanese and US corporate/startup culture. That can't hurt.
- jpatokal 12y ago
  No, he does (did) software marketing: https://training.kalzumeus.com/newsletters/archive/consulting_1 https://training.kalzumeus.com/newsletters/archive/consultin... Japanese startup culture would be a terrible niche to try to make any money in.

ivan_ah 12y ago

The part about 2X total lifetime of business earnings made me think of a good Serbian saying (could be Montenegrin, not sure): when negotiating on price, a good deal is when you're ashamed of your offer.

arbuge 12y ago

>>The business is modestly successful. I have a particular number in mind for it, which I’d be crazy to quote publicly prior to selling it, for the same reason that you’d be crazy to quote your desired salary in a salary negotiation. If a buyer pitches me on 2X my desired number I will, naturally, say “That’s an interesting number. If you were offer insert 2.2X here I think we’d have a deal.” No buyer will pitch 2X if they know what X is, though. There is sufficient information there for a buyer to calibrate to some extent what X is from the author's response, assuming (a) the offer is reasonably close to 2X and (b) the author displays no unreasonably nonlinear discontinuities in emotional state as the offering price is varied.

TheCoelacanth 12y ago
Presumably he would do the same if pitched 3X or 4X

AndrewKemendo 12y ago

Hmm. We just ask people how much they want to make and give them as much time as they need to respond. If it's higher than we can pay, then we say sorry we can't pay that. If it's way lower than we would expect we usually tell them that we wouldn't expect to pay less than X for their skills and experience. This has worked great so far because if someone came back with a really low number and we just took it, then a month later they will realize they undershot and then they feel awkward about bringing it up - so, best to avoid that. My ethos is: Pay people enough for them to not think about money. If you are only working for me for the pay then it's probably not going to be a great working relationship. They are better off going to work at megacorp where they can sham.

zerr 12y ago
On the other hand, when someone states much more than you can afford - don't you think to just pass on this candidate, because she might feel unhappy even if she accepts the offer? Also, to follow Patrick's advice - if someone doesn't give the answer but instead asks the same question to you - "what's the budget/range for this role? ", do you answer honestly?
- AndrewKemendo 12y ago
  For the first question, no. That has happened twice and they both seemed upset but weren't going to budge. As for the second question, yes I always say what our budget is if asked.

Roy78 12y ago

As someone who works for the government and makes almost more than 50% less than those in the private sector doing the same thing (according to national studies for my profession at my level) this is depressing. I don't know, in the back of my mind I want to launch my own startup and get out of where I am now. My equal co-worker just left a month ago and is making 5x what she was making (in a senior capacity to myself) really makes me question myself. Although, I am getting by just fine and living 10 minutes from work is hard to let go.

NonEUCitizen 12y ago
Don't you get a very nice risk-free pension (defined-benefit)? Most of private industry has switched to 401K (defined-contribution).
- Roy78 12y ago
  Well in theory yes, but who knows. I still have a roth and 457 IRA just in case. My state has repeatedly declined cost of living increases for retired state workers for several years now. The gains in the pension system have steadily been above 10% but that has not stopped the state from putting its hands in its pension funds (I am in Louisiana).

paulhauggis 12y ago

Talking about your salary as an employee will eventually take away your negotiating power. If everyone knew everyone's salary, salary would be minimized to the lowest possible market rate, so nobody gets upset.

paulhauggis 12y ago
It's the truth. If you look at countries like Sweden and Denmark where salaries and tax returns are public information, most salaries are all the same.
- alkonaut 12y ago
  That's not really because of the tax rates being equal, there are many other reasons. For example, higher education is free, and labor organization is very high. This keeps blue-collar pay closer to white collar, flattening pay structures.
  - maaku 12y ago
    He didn't say anything about tax rates. What he said was that tax returns are public information, meaning you or I can look up anyone's income.
    - alkonaut 12y ago
      Yes. And I argued that in order to claim that this is what flattens structures rather than the many other factors, you need a control sample that has Scandinavian labor market structure (High tax, free higher education, single payer healthcare) BUT with non-public income. I'm not sure such a country exists.

RIP 12y ago

https://twitter.com/CHOBITCOIN/status/594238763880075264 https://twitter.com/CHOBITCOIN/status/594238763880075264 claims MCV co-founder started the talkpay hashtag and she was racist. Notice how only Silicon Valley Americans are participating in the twitter hashtag. This hashtag will only help the shrill feminists, not the women who toil away in hardware factories in China and the outsourcing firms in India.

jacalata 12y ago
So what did you do today to solve those problems? Why do people in Pittsburgh count as "Silicon Valley" to you anyway?

retrogradeorbit 12y ago

It's like no one has every heard of a salary survey, and thinks the only way to get that information is for everyone to reveal their pay! Just go buy a salary survey! The information will be far more detailed than just random salary tweets from people in different roles, with different capabilities and different experiences in different cities in different countries. Hey, someone doing my job in San Fran gets $200k! I'm going to go and ask my employer for that! A quick check of a salary survey might sober me up. Also a salary survey is far more potent data to present in a salary negotiation to convince people to pay you what you want, rather than "Someone on twitter said...".

morpheous 12y ago

As someone about to start doing some consulting work, your advice couldn't have come a t a more fortuitous time. Thank you!

jsumrall 12y ago

It's a great article, but does anyone know where I can find similar information about pay in Europe? The Netherlands specifically, where I live.

ransom1538 12y ago

Posting your company salaries does a few things: 1) It promotes mediocrity. 2) Creates a political cesspool. 3) Ties the hands of hiring team. 1 - Excellent people want to go places where they can make more. When excellent people learn about public salary postings the first thing they will worry about is the perception of other employees. I suspect they will just avoid conflict and work somewhere else. Really think about the current open salary systems: state governments, federal systems (cia, fbi..), school teachers, college systems, military.. 2 - Will you help the "next" person above your salary grade? Why? Your goal is to be higher than he/she - so this promotes extremely bad behavior. This is how yahoo is setup. People will be trained to create little moats to protect power, inflate budgets, hide data, hurt other employees. 3 - Really want that new hire? Well, now you have no negotiation power. If you pay this employee salary X. Anyone who gets less than X (Call this Y) will be pushed down in the employee chain. So now, instead you want to minimize Y. Sublimity, you will hire less and less capable people to avoid conflict with the current team.

eellpp 12y ago
> Excellent people want to go places where they can make more The issue with engineers is that we don't do that and are bad at negotiations. Once at job people rarely look out unless they realise that they are grossly underpaid. This may be true for other job profiles like sale/biz-dev etc where the day to day jobs hone their skills for best deal extraction.
- ransom1538 12y ago
  You are totally correct. They avoid conflict. If engineers are told at the interview - "Your salary will be this, it will be posted online for all the other employees to see" I suspect the engineer to not be there Monday.
sdenton4 12y ago
1. Government and schools sit under enormous political pressure to keep salaries low, as part of a larger agenda to 'drown it in a bathtub'. This pressure keeps school salaries so low relative to the amount of responsibility and regulation that one has to be a bit crazy to choose teaching as a profession. Universities get to take their choice of the PhD students they produce; their hiring problems are more a problem of funding than worker supply. And the military I know little about. 2. Businesses need to ensure that their workers are focused on product quality over internal politics. That's a failure of culture, full stop. These internal politics, if not focused on individual salaries, can instead focus on project head count, building fiefdoms, etc. In short, if you fail to manage internal politics, you'll have these problems regardless of whether employees know what they're getting paid. 3. Yeah, capitalism's a bitch, huh? Funny how all of the 'power of free markets' rhetoric dries up as soon as it's turned back around... Somewhat more seriously, this mainly shows that you need to peg employee salaries to a minimum of market rates, so that they aren't unhappy when that new market-rate hire comes on, and then go above this minimum based on performance. It's not that hard.

ransom1538 12y ago