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Comment by rgbrenner | Hacker News Reader

I think this depends on the industry (as PG speculated). It works in software and other industries with healthy margins. But in industries with slim margins, you see more cutthroat behavior.

I don't think it's a coincidence that Amazon (for ex) has poor working conditions. Retail has always been a slim-margin business, and most of the companies in it are accused of very similar poor behavior. (I don't mean to pick on Amazon, but it's a recent example. And I know some will say AWS is ok.. but AWS likely has much higher margins than the retail side.. so it does't really change my point.)

Take any industry.. and the chances are the profit margin is a good indicator of the working conditions.

This isn't to mean that those who start retail (or similar low margin) business are mean people.. but I think the lack of profits necessitates cost control and a focus on efficiency... which leads to poor working conditions (since good working conditions cost money) and decisions people will interpret as mean.

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In fact if you look at the history of once hot new industries (automobiles, airlines) you tend to see early cutthroat but fun to work for beginnings, followed by periods of fewer competitors, glamour and even more (if different) fun (think airline pilot/stewardess in the 1960s) followed by more competition, decreasing margins and the jobs kind of sucking. I've done no research on this whatsoever so will likely be shown counterexamples shortly.

Airlines may be a bad example, because they were operating for decades under price control, and most of the airlines never recovered from that mindset. The Amtrak syndrome...

Not just price control, regulation protected them from competitors in multiple ways until the late 1970s. I still think its' a good example. The point is you go through a golden age when everything is easy, competition is minimal to gentlemanly, for whatever combination of reasons

I recently read Zero to One, the Blake Masters / Peter Thiel manifesto (of sorts).

One of the interesting points he makes there is to come down on the side of monopoly. I interpreted it as a one-sided position, but I think they were putting forward this one-sided position to stand in contrast to the typical one-sided view of monopoly you often hear -- namely the other side.

Most people are anti-monopoly. Competition s good! But low-margin businesses are like starved animals that will eat your face off to survive. A low-margin business chases out "nice" founders and executives -- they simply don't make it in that environment. You really do have to be an asshole to extract margin from nothing, because part of the way you do that is by squeezing people including your employees. In tight low-margin industries nice people finish last.

Monopolies -- or at least companies in industries with margins and pricing power like software -- can afford to be nice. They can afford to pay higher salaries, be more tolerant of mistakes, give better benefits, have looser schedules, etc. Obviously there are exceptions as people will be people, but on average these industries tend to be nicer places.

Nicer founders and executives can also make it in these industries, and in fact might have an advantage. People want to work with them.

Monopoly like most other things in economics and ecology is a paradox. You (economically speaking) want your employer or company to be a monopoly, but not others. That's because for others you are a customer, so you want them to be subject to brutal competition.

But there's a dark side to monopolies too, namely that they get lazy. The ideal is probably to have some monopoly and pricing power around, but not too much. Like most things in living systems the optimum is somewhere in between and the edges are both pathological.

Hm. A monopoly doesn't have to worry about losing business nor employees to the competition. They can squeeze both for the last drop of blood.

ATT was a monopoly for years. They underpaid, charged for pathetic service, and were inefficient to the nth power. Maybe there was cash to be milked by individuals somewhere in all that. Probably executives. But I'm not sure the rank and file had it cushy.

> Hm. A monopoly doesn't have to worry about losing business nor employees to the competition. They can squeeze both for the last drop of blood.

But then again, they also don't have to worry about competition undercutting them. So it's more likely that they'll stop exploiting their employees at some point, if only because the CEO has conscience. But add in some fierce competition, and silly things like conscience have to go out of the window.

Right, sure, the competition part. But we have no real conclusion we can make about the monopoly part. They may be kind. They may not. And there's definitely still pressure on them to profit. So I'm thinking, not.

Except the stockholders never gain a conscience, and the CEO is beholden to them, so there's no incentive to stop behaving like a sociopath and stop exploiting employees. Time and again evidence has shown that rich companies are never satisfied with being rich; they always want more.

Exactly, but only for publicly listed companies.

Private investors still want profit, but hopefully they'd be more interested (because of their larger stakes on average) in less rapacious approaches.

Although, now that I think about it, the key metric here is probably growth. As long as a company is growing, if growth >> margin to be reclaimed by being an ass, growth wins. But when growth =< that margin... there's always going to be pressure (aka Google).

>they'll stop exploiting their employees at some point

So far as I know there is absolutely no evidence that this has ever happened. The evidence is all on the opposite side - monopolies become monsters to their workers, to their communities, to their political systems, and to their customers.

The only people they don't become monsters to are their owners and shareholders.

The most beneficial monopolies are Fordist, because they realise that you need to pay workers enough to grease the wheels of consumption. But the motivation there is still exploitative - it's just pragmatically exploitative, rather than ideologically exploitative.

"Maybe there was cash to be milked by individuals somewhere in all that."

Like Bell Labs.

They created a ton. Transistors, solar cells, lasers, satellites, cell phones, LEDs, UNIX and C all came out of that monopoly. That's an unparalleled track record of technical innovation.

With a great deal of government subsidies and grants. Left to own devices, private companies don't do theoretical, long-tail R&D, and you can see this in the fate of Bell Labs under the tutelage of Alcatel-Lucent. Its staff was cut 90% and their projects were subordinated to narrow, short-term commercial objectives with a 3-5 year go-to-market horizon.

Such an environment does not churn out transistors, fibre optics and TCP/IP.

I'm not sure I'd call "monopoly" in economy a paradox - after all, it's the very carrot you hang in front of every participant! Market economy basically works by telling everyone to play a zero-sum game and collecting the side effects.

But getting back to your main point, I really like how Yvain summarized it[0]. One quote from the essay:

"Imagine a capitalist in a cutthroat industry. He employs workers in a sweatshop to sew garments, which he sells at minimal profit. Maybe he would like to pay his workers more, or give them nicer working conditions. But he can’t, because that would raise the price of his products and he would be outcompeted by his cheaper rivals and go bankrupt. Maybe many of his rivals are nice people who would like to pay their workers more, but unless they have some kind of ironclad guarantee that none of them are going to defect by undercutting their prices they can’t do it.

Like the rats, who gradually lose all values except sheer competition, so companies in an economic environment of sufficiently intense competition are forced to abandon all values except optimizing-for-profit or else be outcompeted by companies that optimized for profit better and so can sell the same service at a lower price."

(There's more of that, CTRL+F for "under the bus")

The post is very long, but it's golden.

[0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/

Maybe this scenario would work better if it included a significant minority of the workers who took night school machine class, and then took jobs as machinist for a significant raise, leaving a shortage of workers willing to accept sweatshop salaries.

The Yvain example only works when there is an unlimited supply of untrained labor, who can't be replaced with more productive but higher trained workers, or automation.

> The Yvain example only works when there is an unlimited supply of untrained labor, who can't be replaced with more productive but higher trained workers, or automation.

You'll find plenty of low skilled people most anywhere in the world, even in first world nations due to welcoming immigration policies.

" The Yvain example only works when there is an unlimited supply of untrained labor, who can't be replaced with more productive but higher trained workers, or automation."

Isn't this the actual situation for manufacturing workers right now, until we run out of places with desperately poor people?

>who took night school machine class

Even large cushy Silicon Valley tech companies would say that if you have the time and energy left for night school, you're not giving 100% at work, not a team player, not a culture fit, etc.

I can't imagine why sweatshop workers would be allowed a day so short that they had time for eduction, absent regulation or unions.

The term is monopolistic competition. If you can extract monopoly-like power by not being the only company, but simply the best one, or the one that most closely fits your customers' needs, then you can afford to treat your people well and do right by the community. It's only when you're doing the exact same thing as everyone else that you have to join the race to the bottom.

It gets complicated when competitors start trying to do the things that you do, and that's what prevents you from getting lazy. Monopolistic competitors can never just do the same thing they've always done because points of differentiation can disappear practically overnight. But what they do have is a head start, and if they continue to innovate, they can maintain their lead over other players. An important factor for innovation is attracting and keeping top talent, and you don't get that by treating your employees badly, or being viewed by the public as "evil."

"But in industries with slim margins, you see more cutthroat behavior."

Absolutely. Not to mention in business and industries which are being operated by typically older people who have families and are in fear of losing their job or their business or their house (which is often collateral for loans). It's easy to be a relaxed nice guy if you are a tenured University prof with an office of dusty books. Or a startup guy who has multiple plan b's. [1] A bit harder if you've got outstanding accounts receivable as well as aggravating customers and cutthroat competitors. And the type of run of the mill mediocre people that you typically get to work for you if you are not a "startup".

[1] And let's just put it right on the table here. Anyone who gets a large amount of funding and fails gets their ticket punched and gets another try either working for another startup or perhaps raising for another idea. And actually the larger the failure (and visibility) it's typically good for the next thing someone will do. Edit: Failure in traditional business is failure. It's a negative plain and simple. You end up working for someone in their lackluster business and since you may have lost some of your assets you can't even typically start a new business (and your friends and family are not going to give you an additional money, nor will you be able to get bank loans..)

Multiple plan b's, sadly with a correlation of their go-bust probability of 1 in a scenario of economic stress, unless they are really diversified.

>I don't think it's a coincidence that Amazon (for ex) has poor working conditions.

I just spent a year and a half working for Amazon, and the recent reports about working conditions were, as far as I could tell, either fabrications, or things that hadn't happened for years.

Working there was great. Yes, I was in the AWS tree, but I also had contact with people in the Retail tree, and didn't perceive any differences there.

Low-wage jobs like fulfillment...I don't know. I'm a developer.

Oh, and did I mention the pay was great? Hard to complain, really.

Pay was great? Really? Maybe it's true for Seattle. I've done an internship at AWS couple years back and I chose not to return for fulltime, while two of my colleagues did. We're all in california and they both left Amazon before this summer. Why? Maybe because they're paid 20% less than I do? And one of them told me most people in his office only got 3% raise in salary each year.

Cost of living is substantially higher in Silicon Valley/CA than in WA state (maybe not Seattle itself, but in general). So it's natural to have differences in pay. In reality, you and your friends probably made around the same amount after all living expenses were paid, etc...

Basically $60K (or whatever salary) isn't $60K everywhere, it's relative. It's a reason why some "put their time in" working in SV, then move to Nebraska or something for a comfortable living.

Are you carefully reading my comment? I said we are all in California, one of them is in Amazon Irvine while the other is in Amazon Palo Alto. And before you make any further guess, I'm in Redwood City not San Francisco. So there's no reason they should be paid 20% less. In addition, this is just one year after we all graduated, if we keep the same growth rate for 5 years they're going to make 40% less than me. It's just not competitive at all.

Plural of anecdote is not data, right? ;)

As someone who competes against them for talent, and having seen dozens of examples from different parts of their business, Amazon is an extremely competitive employer on the tech side for experienced employees. They typically pay nicely above market

Geography arguments for salary discrepancies aren't compelling. Equal pay for equal work. My work won't be any different if I do it from DC or Des Moines.

I understand where you're coming from (and I counteracted an apparent downvote of your comment), but I don't think you're entirely right. Mostly, maybe, but not entirely.

There is a value in having good people work in the same room. I think it's overvalued, but it's not zero.

And if companies want to hire a top engineer in the Bay Area, they're simply going to have to pay more than if they want to hire an engineer in Des Moines: Competition for good local employees is much higher, and higher competition for fewer resources means that the rate for those resources will go up.

If you're a senior developer in the Bay Area right now making less than $115k, you're not trying hard to get a raise. If you're in Des Moines making $115k, you're in the long tail; the 90th percentile is $108k. [1] The MEDIAN in San Francisco is $115k. [2]

And that doesn't even fully capture the state of the industry, because there are a few employers who go well beyond the median. Most senior engineers I know who are working at one of: Facebook, Google, Amazon, Microsoft, or Twitter, earn over $200k (total compensation, counting stock grants), and many earn closer to $500k.

Des Moines doesn't have major campuses of any of the above employers (correct me if I'm wrong), so the increased salary pressure from the high rolling Internet companies isn't affecting the local market.

Would love it if more big companies would hire remote workers; it would "spread the money" around the country more evenly, they could probably find developers for less, and it would reduce the amount of greenhouse gasses wasted on commuting.

But until they do, a significant fraction of the best developers will congregate in the Bay Area, where they can potentially pull in $500k/year instead of a pathetic $95k. Because good developers are worth that much in value to the company, and any good developer making less than $120k is being exploited.

Even in Des Moines.

[1] http://swz.salary.com/SalaryWizard/Software-Engineer-III-Sal...

[2] http://swz.salary.com/SalaryWizard/Software-Engineer-III-Sal...

I agree with you on this part. But maybe not completely remote. Last year, my company open a dev center in midwest just beside a high rank university. The result is pretty positive. There's great supply of high quality college new grads and we can spend 20% less than bringing them to the bay area. And the living cost there is at least 50% lower so they're obviously happy with it. An even better part is that in the bay area every week (if not every day) there gonna be some recruiter contacting you for different positions while there's really not much competition beside the university in midwest. The only issue we're having now is that we have a hard time to hire "real" senior engineer who can lead the team. But if all you need is some application level work, I think it's a good bet.

That's a nice thought, but this country's economic system is the market. The market price of various kinds of work is absolutely dependent on geography.

I don't think you want this, either. The gravy train in Silicon Valley would halt instantly if the jobs were all remote and engineers in low-cost-of-living countries had an equal shot at them.

I was an SDE III, and I had some hard-to-find skills. I'm also a crazy awesome developer who they decided they REALLY wanted to come in full time after I'd done a few months of contract work. Total comp was comfortably past $250k/year, counting signing bonus and stock.

I was based in Seattle, though I worked from remote. I was told I could have made Principal within a year if I were willing to move to Seattle. Which I wasn't.

Working remotely might've been a factor in your Amazon experience.

Granted. It actually got me out of the evil mandatory "on-call" experience.

Someone on my team actually quit without notice three days after he was first forced to go through an on-call week. So I don't want to sugar-coat it: It was everyone's least favorite activity.

> I was an SDE III, and I had some hard-to-find skills.

Mind highlighting what those "hard-to-find" skills were?

In my case, Android NDK (C/C++ development) and low-level video streaming.

Offtopic and anecdotal but two people I knew at Amazon quit shortly after joining. One developer, after being at Amazon Music for 3 months and expected to work 80 hour work weeks, was asked by his boss to come in on the weekend to finish something up, that was the final straw for him.

My own experience was anecdotal, so not a problem.

Obviously there ARE still sections of Amazon that are broken. Others have suggested as much in comments as well.

Sorry your friends had such bad experiences. Hope they found a better employer.

I personally know three people whose stories are much closer to the NYT pieces than your comments, and they've all only left within the past three years, with the most recent exit being about five months ago. I know two others (in Seattle, it's easy to know many people with an Amazon work history) who had a fine experience, one of whom that still works there. I've interviewed for two positions there myself, one that I declined and one that I did not receive an offer for; one was presented as exceptionally competitive, with the HR rep dancing around a few of the NYT-style topics, and one that seemed much more typical and collaborative.

No, I've not worked there, but all of the evidence at my disposal (your comment included), leads me to believe your Amazon experience is highly dependent on where your work group sits in the Amazon network. To shrug off the stories as potential fabrications seems as intellectually dishonest as assuming the stories of extreme treatment are commonplace.

People who are treated well by systems will generally defend those systems, even if it means rationalizing acts of injustice or cruelty happening just next door.

At the very least, how much a person is willing to question the hand that feeds them can reveal the strength of their character to others.

Ouch. I deny that my comment has anything to do with strength of character.

I was treated well, and everyone who I had contact with over my 18 months was similarly treated well (with the exception of forcing client developers to go "on call" for server issues that our team knew NOTHING about...that was cruel and unusual, but even that didn't require 80 hour weeks, just the occasional 2am pager beep).

Our branch of the org chart was happier (according to internal surveys) than Amazon at large, but those internal surveys absolutely didn't paint a picture of tons of unhappy people.

That said, I'm sure there are bad managers at Amazon, just as I had an awesome manager. There are just too many people there for them all to be perfect. But the picture from where I stood was honestly as positive as I described.

So don't throw around aspersions of my character when you don't know my situation, or what I observed.

ASIDE from the fact that I DID leave Amazon and sold all of my stock, so it's more like "the hand that fed me for a while."

Hypothesis: People will lie on internal surveys more often if they feel either nothing will be done or an honest response could be used against them. I wouldn't put too much stock in the results of those surveys.

Anecdotal support for hypothesis: Have been told firsthand by several people that they lie on these types of surveys and don't think results are truly anonymous.

I'd love to see a broad study of this across companies, conducted by a third-party organization with no affiliation to any company studied.

In general, I'd estimate anything below 4 (on a 1-to-5 scale) on those surveys could indicate a problem. What if "3/neutral" really means, "This actually sucks but I'm not willing to tell you that because I don't trust you"?

I doubt there are many internal surveys showing "tons of unhappy people" unless employees a.) have no fear of company reprisal, for whatever reason; or b.) have entirely given up on the company and are in open rebellion.

>how much a person is willing to question the hand that feeds them can reveal the strength of their character to others.

Careful! You are straying into fundamental attribution error territory. Those who bite the hand that feeds them may be in a better position to do so or feel more encouraged by the people they know.

https://en.wikipedia.org/wiki/Fundamental_attribution_error

True. I did not mean to say there is a direct correlation (thus the "can reveal") more that criticizing what one perceives as unjust, despite whatever benefits they receive from it, is often noble (strong character). Or at least noble if that person is fully aware of the consequences of speaking out in what they view as the truth.

Note, I believe that Noble does not always equal smart, where smart equals maximizing good, corporeal outcomes for one's self.

The inverse can happen very much though where people that complain the loudest were the exception to an otherwise fine place. What does seem to matter is the percentage and degree of the complaints, and the only way to get the real numbers is with a compulsory, anonymized employee survey.

Agreed. My comment was a response to a supposedly cruel organization vis-a-vis a person's morality, so it did not take into account the inverse as you have supplied.

I believe that once the percentage and degree of complaints meet a certain threshold of systemic cruelty, then my strength of character argument might (might) apply.

It probably also depends on who your manager is - often the biggest determinant of the work environment. A great manager will defend you from corporate b.s., bureaucracy and politics without you even knowing they are doing it.

I know many highly-competent individual engineering contributors and managers who quit Amazon (Lab126, mobile app store, CreateSpace) and found the NYT story accurate to varying degrees. Several of them were absolutely miserable. One was reasonably content, but still underpaid.

> I just spent a year and a half working for Amazon, and the recent reports about working conditions were, as far as I could tell, either fabrications, or things that hadn't happened for years.

Amazon employs roughly 150,000 people. It's pretty arrogant of you to assume that everyone else must be lying just because the bad things didn't happen within sight of your department.

Margins are probably not the main factor. Even in spaces with large margins, if the market is winner-take-all, then bad behavior from founders can make the difference. Think Uber playing dirty tricks on Lyft. It's not about margins, it's about building a monopoly and eliminating the competition.

I've always said that if I was in another industry, I'd be out of business a long, long time back. The traditional brick and mortar business people I know have to be ruthless. They negotiate like they'll run out of money tomorrow and never leave cash on the table. And they can't understand why I won't haggle or force my employees to work longer hours.

The tech industry is heavily insulated from what passes for 'normal practice' in most businesses.

Or, heavily insulated from the threadbare margins and intense competition in most lines of trade. :-)

The tech industry certainly has competition, but the juicy margins make it much less of an "issue".

That was precisely my point. :)

Although on the surface this sounds plausible and I definitely think it explains why some companies have poor working conditions or psychopathic bosses. I don't think it necessarily explains why some have good. At least not in the context that pg is talking about.

Many startups don't have any margins at all. They might have growth but they are fundamentally unprofitable.

Instead I believe it's more to do with the fact that they are funded and don't have to worry about margins to begin with. (They might have to worry about growth though)

Totally. For businesses that scale well (= tech startups) it's safe to be nice without jeopardizing much. It's a lot easier to give software away for free in hope of a future return than it is, lets say, a car.

The easier it is to give away your product, the nicer you can probably afford to be and possibly, the more scalable your business is?

More traditional businesses, who depend on production facilities, supply chains, etc. have higher overhead costs and will not be in the position as often to give stuff away for free.

Also known as Sayre's Law (https://en.wikipedia.org/wiki/Sayre%27s_law)

What about Zappos? Isn't that a counterexample ?

Companies choose their profit margin. Amazon, at one point, had to decide to become like Nordstrom or like Walmart. They chose the Walmart route.. which is a focus on lowering prices (and therefore low margin).

Zappos may be in retail, but they are not low margin. Their gross margins (revenue - cogs) are roughly 35%. Compare that to Nordstrom - 37.5%. And coincidentally, Nordstrom also has a reputation for good working conditions.

Costco has a gross margin of ~13%, and is reputed to have very good working conditions.

The paid membership component makes that tough to compare, but I've also heard they take good care of employees

Would you rather work at Costco, or at Amazon?

I would rather work as a retail employee at Costco than as a warehouse employee at Amazon. But I'd probably rather work at the job I'm most qualified for at Amazon than at Costco, because it would be better for my resume and presumably have more interesting technical work.

Trader Joe's seems to as well, and that's with razor thin grocery store margins. Employees are always so happy and helpful there. It's like night and day compared to places like... Safeway.

Gross margins don't really mean a lot where wage bills are a high percentage of costs. Think Starbucks or MacDonalds or many other fast-food places.

Amazon's biggest regret is probably connvincing people they have the lowest prices. It has led to this Walmart comparison that they likely hate.

Best value: virtually always. Lowest price: not as often as you think.

Isn't Zappos fully owned by Amazon now?

It is, but it's still in Vegas and it looks like the original CEO has pretty good control over the company. My friend had interview there back in college and they seems kinda over-obsessed with "culture fit". I mean when most companies talking about culture fit that basically equals to "we wanna hire nice people", but Zappos seems has really restricting rules on that part.

Anecdotally, I don't agree with the hypothesis that culture fit means they want to hire nice people. I've worked in a few places where people needed to be, for example, tough, tricky, bitchy, to survive.

I think part of the reason I got my job is because I euphemistically referred to "successfully implementing technical solutions in a complex political environment", and everybody knew exactly what I was talking about.

I don't think that would (necessarily) change it's business strategy or it's margins.

Was Amazon in a low-margin industry when they were a startup? I don't even remember what their initial market was -- selling old books or something like that. Did they even foresee what they would become?

Yes. Amazon was low margin from the beginning. They started as a book retailer. Here's their annual report from '97: http://www.slideshare.net/matthbrody/amazon-annual-report-19...

Their gross profit margin (sales - cogs) was 19%. For comparison, Walmart is 20-25%

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