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Comment by markonthewall | Hacker News Reader

I love the US and California, the tech scene is amazing and I was lucky to met such talented and friendly people in about every place I worked... from very large tech cos to "garage" startups.

Which is why it pains me to see that so many engineers get stuck with such ridiculous salaries (relative to the value and wealth they provide and create). Problem is that some salaries are seemingly high compared to what the average worker does in the country but ridiculously to what they would look like if engineers were allowed to capture a greater (that is a >0.01%) percentage of the added value they CREATE.

Most, from the freshly out-of-school to the senior engineer with glowing reviews are getting scammed because they get paid just enough to live a comfortable life but not nearly enough to what they are worth and what they would need to consolidate their place in the upper middle class.

I had one company acquired by a large tech co. Probably going to start another one soon, I won't commit the same mistake twice... engineers need their fair share. They are the one creating things, they are the one on the front line and we should not get satiated by the crumbles we are left with.

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What about the linesmen who provide the power for your computers?

What about the road workers who make it possible for you to get to work?

What about the African miners who dig up the rare earths for your components to run your computer?

What about the guys soldering all this crap together?

I bet you'd say the road worker creates hardly any value, but in reality the economy just ceases to function without roads. Or sewage. Or power lines. Or gas stations powered by truck drivers. Or a million other things.

Developers create a portion of a valuable system, they're not water-walking god-kings. I know, I'm one of them--and my code is probably faster and more reliable than a very large proportion of that created in the rest of the industry, but I don't kid myself thinking I'm doing it all by myself or creating something that has a stand-alone value and operates outside of a larger system; we're all cogs and together we make an amazing machine.

I'm glad I can watch Silicon Valley on TV instead of having to live around those characters. Delusions are detrimental.

Supply/demand. There's a much larger supply of people capable of building roads vs. those capable of developing a system. And the monetary difference between an average road and a really great road is not nearly as much as the difference between an average system and a really great system.

You're right about the value of teams being greater than an individual contributor, but the ability to work within a team is a valuable skill just like any other.

> the monetary difference between an average road and a really great road is not nearly as much as the difference between an average system and a really great system.

Pick another profession then. How about customer support? The difference between an average support person and a really great one can be millions of dollars of revenue. But they are paid peanuts because it's women's work, not like the manly engineering which obviously creates more value... nevermind that novice engineers often create negative value by creating liabilities that can cost the company millions, while still getting paid more than the highest paid customer support people.

The truth is, you are just assuming the people making the roads have nothing to offer in terms of outstanding value, because that's your preconceived notion. You already decided they were worth less than you, even though you never bothered to check. Never bothered to measure. Never bothered to ask.

If you really believed in your value, you wouldn't be afraid of a system where people are paid what they are worth to the company. Instead you hide behind "market rates" because market rates are good to you. But markets are flawed, we've seen it over and over. There's a lot of money in rigging markets, and the salary market is no exception.

> But they are paid peanuts because it's women's work, not like the manly engineering which obviously creates more value

Cherry-picking one profession to claim low salaries are because of gender is absurd. The world is an unfair place if you can't cope with the fact that a large majority of jobs will pay "peanuts". If tomorrow there is an infinite supply of highly qualified programmers, surely programmers would be paid low wages too but the truth is that there never will be - there is a lot of valuable software left to be created, to be maintained and we won't hit saturation any time soon.

> Cherry-picking one profession to claim low salaries are because of gender is absurd.

Community/support roles are still widely considered "soft skills", and thanks to a century or two of patriarchy, are indeed considered womens' work. (This is, needless to say, bullshit.)

You seem to be implying that there is an "infinite supply of highly qualified" community/support folks; hence the low wages. There is not.

The difference between an average and a great customer support is not millions of dollars in revenue. You are thinking about the difference between a terrible and a great customer, and with 1 in a million scenario.

There are some situations where great customer support brings the company tremendous value and opportunity. But these situations are so rare and few that investing in great customer support (for high price) is not worthwhile. An average person should do.

If good customer support is really bringing in value, then they should be able to negotiate for more pay. If they leave, the company should see losses.

But that never happens.

Reinforcing this, B2B customer support is vastly different than consumer-facing customer support.

Screwing up B2B support genuinely can cost millions in a single incident, which is why service level agreements and reliability standards exist. Compare that to the service level of your average help line (somewhere between "maybe if you're lucky" and "go die"). And of course, entities like ISPs don't count in the first place when they're immune to competition.

There are customer support reps making six figures. They tend to go by names like "service engineer", and actively solve problems the customer can't, rather than just guiding someone through a reboot process. In extreme cases, customer support is the development team - if your business is worth enough you'll end up talking to someone who actually made the broken product.

As you pointed out, it's not an accident that the companies with useless, call-center customer support are the ones not worried about losing a consumer or two.

Of course it is. Everyone remembers getting shitty offshore technical support from company X then a few years later you're the engineer making recommendations or the CTO signing off POs and you think "I will never deal with X again".

I've got my list, I bet everyone reading this can think of their own X's too...

Of course it is.

What do you mean by it? That the difference between great and average technical support is worth millions of dollars in revenue?

Everyone remembers getting shitty offshore technical support

This seems hardly generalizable, but beyond that, I agree with you. Shitty tech support is never excusable.

Pay for average or above-average tech support. Those you can train in less than a month.

Don't break your back paying for "great" tech support. This is a silly directive, because it's so obvious once you are in the shoes of an executive, having to recognize tradeoffs in every decision. Unless your company is large enough where the tradeoffs make sense, paying for stellar tech support is an inane investment.

You can say a lot to the leader as a follower, but once you start leading, you must dance around the intricacies of decisionmaking.

EDIT: Not quite sure, but your assertion based on the so-called "list" of shitty tech support seems to be a case of selection bias.

There were probably many cases of reasonable tech support, but you haven't made a list of them :P

"The difference between an average support person and a really great one can be millions of dollars of revenue. But they are paid peanuts because it's women's work, not like the manly engineering which obviously creates more value... nevermind that novice engineers often create negative value by creating liabilities that can cost the company millions, while still getting paid more than the highest paid customer support people."

Spent a few years doing community management / customer support. This is _100% correct_. Oh, the stories I could tell. The role is critically important, and terribly, horribly underpaid. I went back to web development because, even with a 3-year gap in my resume and taking a non-senior role, I was still able to make 50% more.

I think I would actually enjoy doing customer support. Maybe this pay gap doesn't exist for companies hiring "Customer Success Engineers"?

Well paid customer support people are called salesmen in a solutions focused company.

In this age of metrics and micromanagement it is rare, but in olden times key vendor salespeople were really an asset to past employers.

Unlike support people, they are a revenue center, so when they say "This needs to be fixed or it puts $X in quarterly revenue at risk", it gets fixed.

I can train someone in less than a month to be a world class customer support agent. Assuming they have the temperament, the job requires no scarce skills. I can train a person to work on a crew pouring concrete in a day. Comparing road crews to software engineering is a false equivalence. Mining in Africa is certainly hard work, but I could staff a mine with eager workers in an hour.

If one feels that income inequality among the professions is a problem, one should change professions. There's nothing stopping anyone right? However if we do acknowledge that there are barriers to entry, then we have just proven the point as to why a guy pouring asphalt is paid less than a person writing APIs. Marxist theory has every profession being equal. Yet, why, in the Soviet Union were nuclear scientists rewarded differently than the shop clerk at Moscow's GUM department store? Why were Soviet ballerinas treated like relative royalty while the people running electricity to the Bolshoi treated far worse?

Because of scarcity. Gold is worth more than sand. Though without sand, you wouldn't have concrete. I can't believe we're still having economic discussions where scarcity seems to be a novel (and controversial) concept. Marxism fails every time it has been tried because it fails to recognize scarcity.

Well said.

Supply vs. demand explains so much of this world. Some people either don't grok the concept, or refuse to believe it applies everywhere.

It hurts our emotions when we think about a miner in Africa (working 120 hour workweeks, wiping the sweat off his brow, with five mouths to feed) getting paid hundred times less than a software engineer fresh out of college working four hours a day, sitting in ergonomic chairs and getting in massage pods as a "break."

But pain is not value. Sorry. This is not a utopia. Don't make decisions thinking the world is a utopia. Have a correct mapping of the world, and then do something about it.

Don't skip the first step.

Don't bring gender into this.

You can't say highly technical fields are comparable to customer support.

Do you think the receptionists in hospitals should earn the same as doctors?

> Don't bring gender into this.

Gender was already in this.

The article starts with "In a groundbreaking effort to close the wage gap between men and women..." I do see what you were getting at but my guess (based on karma and skimming previous comments) is that the gender comment was sarcastic. I could be wrong though.

Serious? There's more to customer support than picking up a phone. I've worked with some very intelligent customer support people who know the product as well as the engineers.

Assuming people should pay what things are worth to them is complete and utter bullshit and isn't how economics work.

Do you realize how much water is worth to you? You cannot live without it, but you aren't going to send your water company $100/gallon for it because there is a massive supply of it.

The same applies to paying people to do things. Nobody is going to pay more than what the price is for the skills they are looking for. To expect otherwise or lament the fact that's it's not happening shows a very basic misunderstanding of economics.

You can't use supply and demand to defend low pay for some jobs while saying other jobs aren't paid enough, it's the same mechanism.

> And the monetary difference between an average road and a really great road is not nearly as much as the difference between an average system and a really great system.

I used to drive over the I-35W bridge, twice per day, on my way to work and back.

Feel free to keep talking about how there's not much difference between roads, but I'm not going to be listening.

Our economy pays differently for different jobs for exactly one reason; scarcity.

The best road workers in the world, they do what? The best miner? Now, the best coder? Some coders should be paid like the best road worker. Few road workers should be paid like the best coders, because there's just too many ready replacements who would do the work for less.

Coding is becoming that way, but far from it currently. Our best invention is the one that puts us totally out of work.

It's not just scarcity. That ignores half the equation (demand).

Poop popsicles are extremely rare (I have yet to see one). But their price would be essentially $0, if/when they exist.

Scarcity is supply below demand, not just low supply. Scarcity implies a shortage, and shortage implies too little, not just low supply, right?

More supply than demand only exists for 'free' or 'public' goods. If there are costs of production, nobody (except government) will want to supply more than is demanded, as they will be giving the product away (or paying people) to get rid of it. Garbage is an instance of supply > demand.

Just in case you don't know how close you are to be wrong...

https://en.wikipedia.org/wiki/Artist%27s_Shit

... truth is stranger than fiction!

Hahahaha, wow. Amazing.

Try building a road system with just road workers, and no civil engineers or systems and operations analysts, and all this entails.

Or pay the house painter what you pay a software engineer, and see how many people paint their house themselves, or with less frequency. House painters would be priced out of the market, and more homeowners would fall, and/or have crappier paint jobs.

That is supply and demand in a nutshell, and how markets value a skill or talent you have to offer with obvious exceptions.

Won't the same argument for supply and demand work in this case too? (Engineer salaries)

Less people are ready to fill the engineer positions.

Or rather: less people are qualified to fill engineer positions.

All of those guys already got paid by the time you sit down at your desk.

The wealth that the GP is talking about is the incremental wealth created by the engineers under consideration. They're taking publicly available things and putting them together in a new way to create something more valuable than the cost of parts and labour.

Yeah, I suppose it would be interesting to look at the value multipliers throughout the supply chain to see if they are even or uneven. There is a difference between value of input goods and a value of output products, and workers capture some percentage of that difference as pay.. For instance, if someone who takes raw metals at $1/unit and processes them into component-ready materials at $2 per unit and are paid $0.50/unit, they're capturing 50% of the value they have created. A programmer takes software and hardware components that have some intrinsic value (perhaps not, difficult to reason about here) and processes them into software and hardware or services that have a greater intrinsic value. At large tech companies, the programmer might get a salary of $1XX,XXX, but the company might making a profit on the services that programmer created of $5XX,XXX, which only capturing 20% of the value added. I guess what I wonder is: should everyone in the pipeline for goods creation capture the same percentage of what the inherent value they've created? Or is it the nature of markets to differentiate based on scarcity of labor at each stage?

You could be charitable and read OP as making the case that labor in general should capture a greater portion of corporate profits than it does now. I'm sympathetic to your comment, but I think you're barking up the wrong tree.

Coding is definitely higher value for sure, just as driver who operates a berry picking machine can deliver more value than a migrant individually picking berries.

Why a migrate rather than say someone who picks berries by hand? Vice did a story comparison on this and actually migrate workers worked harder and picked more fruit than Americans pulled from temp agency. But in your comparison, the machine would be of higher value, the operator would be of little value since it does not take extensive skill to operate - much less skill than someone working on power lines for example. It's all based upon geographic demand.

Anybody can pick cherries by hand, but a bad machine operator could damage it and cause losses to your farm.

If you'd do it for free it is probably not real work and you don't deserve to get paid - writers, musicians, hackers, politicians. (runs :)

You have a prejudice against Silicon Valley / California.

Aside from that, I think one key point you failed to observe is that the engineers are often the biggest producer of innovation and invention in the production process. Software engineering is not manual labor, instead a heightened level of mental focus and ingenuity is required to perform the job.

I think I might have a prejudice against manual labor.

Major difference is trainable skills versus innate talent. The number of people who can be trained/educated to perform the tasks you described above are pretty large. The number of people who can write elegant, concise code is a pretty small pool.

It's also important to distinguish between day-day coders who write CRUD apps (trainable skill), and developers who develop platforms that others build on.

Another way of looking at this - by providing significant rewards to top-end developers (and top end developers should be starting around $500K, and be making north of $1mm with 5-6 years of experience in their chosen vertical), you encourage outstanding individuals who might chose another field where they might be more richly rewarded (Law, Finance, ...) to put their skills to good use in programming.

And that's the crux of the matter - I don't believe we should provide outsized rewards to developers with exceptional talent because they deserve the extra money - I think everyone who works a 40-hour week deserves a comfortable, stress free life. I believe we should provide outsized rewards to developers with exceptional talent so as to ensure efficient allocation of capital and labor, resulting in economies with increased productivity, and greater rewards for everyone interlinked in that economy.

From that perspective - I guess I agree with you, we are all cogs working together to make this amazing machine -I just want to make sure the right cogs are allocated to the right machine.

There is nothing unique or special about being a programmer.

Programmers think they are undervalued and should get more. But guess what, nurses think they should get more as well because they are saving lives. Soldiers think they should get more for making us all safe. Police think they should get more for reducing the level of crime in society which benefits us all. Teachers think they should get more because they are educating the next generation of wealth creators. Everyone thinks they should get a little more of the pie.

How do you resolve this? (Hint: supply and demand)

Couple points - I didn't say there is anything unique or special about being a programmer from a skill perspective. Almost everyone who can graduate from high school can be taught to program, and put together useful applications. I tried to call that out when describing the difference between a day-day CRUD developer and platform developer.

But there is a distinct hierarchy of developers who can, for example, instinctively comprehend pointer-to-pointer data structures, or have walked through and mostly understand AoCP, or heck, can (quickly) write concise elegant code like this: http://www.cs.princeton.edu/courses/archive/spr09/cos333/bea....

One key difference between programming and teaching/soldiering/policing, is leverage. A single 100x teacher/soldier/police officer is limited in the impact they can have on the world, whereas a single 100x developer can write a platform/system that is used by 100s of millions of people.

I'd disagree about the 100x something-other-than-a-coder having a limited impact.

I'd call Florence Nightingale a 100x nurse, or maybe a 10,000x nurse, for the impact she had on the world:

https://en.wikipedia.org/wiki/Florence_Nightingale#Statistic...

Now we're talking about heroic icons. There are thousands, or maybe 10s of thousands of 100x developers. There is only one Florence Nightingale, Steve Jobs, Donald Knuth, Michelangelo, Einstein, etc...

I certainly agree that the spread in productivity between the best and mediocre seems to be huge in software development compared to most other industries. In fact, I cannot think of another one quite like it off the top of my head.

We do have certain other advantages though. We can create a start-up and potentially make a huge amount of money. This is a realistic possibility for a substantial percentage of good developers. Much fewer people from other industries have that kind of chance.

  > There is nothing unique or special about being a programmer.

Really? Take 1000 programmers and try to teach them skills nurses have. How many will be able to do the job well enought to be able to work at the hospitals? Now take 1000 nurses and try to teach them skills programmers have. Is the number suitable for profession work at sowftware companies be the same, as in the first case?

You can claim, that there is nothing unique or special in being theoretical physicist. But is that really true?

Huh?

I’m in no way mentally prepared to be a nurse. That is something I suspect I would never ever be able to do. That has to do with skills (especially hard to learn skills, like interacting with people properly), it also has to do with being emotionally ready to do such a job. Especially a job like being a nurse is in my estimation not something you can just teach. You need people who are prepared, ready and willing to do the job.

I think very, very few of those 1,000 programmers would be ready to work in hospitals. I would not at all be surprised if you could find more great programmers among 1,000 nurses than you can find great nurses among 1,000 programmers. To me being a nurse is an extremely demanding job.

I am a developer and have a very close friend who is a nurse. I am pretty sure I could teach her enough to do an entry level web dev job within 2-3 months, whereas there is no way I would be mentally or emotionally prepared to deal with working life as a 'real' nurse within that short amount of time, if ever.

I couldn't agree with you more that nursing is a tough job that deserves excellent pay (though out here in SF, registered nurses do earn more, at the median, than software application developers, though this is a bit unusual and not the case in most areas). It would take a tremendous amount of time, training, and effort to turn a software developer into a registered nurse, no doubt.

I am pretty bummed to hear a developer speak so dismissively of what it takes to be developer. I'm not sure what you mean about an "entry level" web job, of course - if "entry level" entails no background or skills, then I suppose I could prepare someone in no time at all.

However - and I fully acknowledge this is just anecdote - after 15+ years in the field, I have yet to see the mythical simple CRUD app. I came into this field after a major in math with a CS emphasis and a MS in Industrial Engineering, during which I wrote a lot of code for various numerical analysis problems. I've written apps that need to build and solve linear programs with a few million variables and communicate results to analysis within one minute, which we felt was the maximum amount of time anyone would wait for an interactive tool designed to explore multiple supply chain scenarios. It is hardly a work of genius, but these were real CS and math problems, with a dose of programming optimization.

In many ways, those projects were considerably easier than the "CRUD" projects I've been on. Seriously. You have to gather business requirements from people who do understand their business, but aren't accustomed to explaining it in a way that works within the strict confines of computer code. You often have to work with existing code bases, deciding how much customization you can get away with before forking yourself into a maintenance hell (and you have to deal with that maintenance hell). You have to integrate with many different data sources, back and forth, over networks, many of which are obscure, poorly documented, and poorly maintained. You are pressured to provide estimates and deadlines for systems that you have no idea about (how long will it take me to alter a code base for an existing application to integrate with a data source that I haven't studied yet? Uh, a week?). You have to weave through existing data structures, code bases that involve intricate logic, uncover magic documents that nobody told you about, interview and talk to business analysts, test, design UIs or work with UI people... and often encounter an (at best) irritated look when you didn't meet your "estimates" that turned into deadlines.

I maintain that even the "simple CRUD" projects are difficult, stressful, and require a very high level of logic, coding ability, and the ability to communicate will with people at many levels of an organization.

If you truly believe that web dev is simple, of course you have every right to make that point. You shouldn't back of from saying what you think is the truth just because the truth is harmful to the reputation of developers.

What pains me is that I absolutely don't agree with you, I think it's a really hard job, and I think we developers really hurt ourselves when we trivialize our jobs this way.

> How many will be able to do the job well enought to be able to work at the hospitals?

None of them, because programmers hate working with people so they'd all quit.

That's why labor policy is so important. The guy digging proverbial ditches does indeed deserve more, but the market has been distorted by large corporations who lobby for lax enforcement of immigration law. On the other end of the spectrum engineers and programmers probably deserve more but the market has been distorted by large corporations who have lobbied for massive numbers of H1Bs or colluded with each other to keep poaching/salaries down in the valley.

> The guy digging proverbial ditches does indeed deserve more

How do you know? Do you have some kind of special formula to determine what people deserve to be paid? Otherwise, it's just subjective.

Because I have a basic understanding of supply and demand. I even explained how supply of labor was being distorted in my post at both the higher and lower ends of the job market. I think the more appropriate question is how do you not know?

>The guy digging proverbial ditches does indeed deserve more, but the market has been distorted by large corporations who lobby for lax enforcement of immigration law.

Do gravediggers get paid relatively more than other kinds of jobs in countries where there is essentially no immigration for economic reasons? I doubt it.

> The number of people who can write elegant, concise code is a pretty small pool

Ah yes, those people are making the world a better place by constructing elegant hierarchies for maximum code reuse and extensibility.

In order for this to happen programmers have to:

(1) Stop shaming each other for being "greedy" when they actually ask for what they merit. I can't tell you how many times on HN and elsewhere I've run into extremely defeatist attitude about this implying that we should be happy just to have jobs in the field. As long as these folks are around shaming fellow engineers for asking for more money they will drag everyone else down and other folks will laugh their way to the bank at engineers' expense. It needs to end.

Edit: See other replies to this post for great examples of this. Just because you get paid more than a lot of other folks, does that mean you're getting paid commensurate to the value you actually create?

(2) To justify these asks programmers must shift from doing things like chasing the latest JavaScript trend to focusing on delivering business value first and foremost. Every programmer hire is a gamble that might pay off big time or might end your business with crushing technical debt and poor decisions. Until programmers as a whole demand that each other focus on delivering business value first and foremost the shiny new tech chasers will, just like the shamers above, drag the salaries available for everyone down due to their own poor decision making.

The chasers will only drag your salary down, if the business can't distinguish you from them when hiring. Luckily, it's pretty easy for you to signal that you are not a chaser.

Getting paid more than other folks mostly means you are better at interviewing and negotiations. (Or, if you are a lifer, that you are good at your company's promotion process. If your company is sane, that might even imply something about how well you work.)

I don't think shaming or not makes a difference. It's just irrelevant. (Or are people really going to ask for less in their next negotiations because someone on the Internet 'shamed' them? Really?)

It's not just the Internet, it's real life too. If salaries are low across the board at $COMPANY it's an easy wedge for the management to use. "We couldn't give you more because then you would be making more than your coworkers. Do you feel like you really deserve more? You should be happy to have what you do already." If your coworkers are also too meek to ask for raises it's bad news for all the engineers. Pressure matters.

"We couldn't give you more because then you would be making more than your coworkers. Do you feel like you really deserve more? You should be happy to have what you do already."

The answer is to call their bluff and tell them that yes, you do feel like you deserve more. You may or may not add that you feel like your coworkers also deserve more. You can't negotiate your coworkers' salary for them. You're only in a position to negotiate your own.

In my case I have been fighting for my colleagues salary too, since they're "linked" by company policy.

It works because even though he's not asking for more money I can tell them what the cost of replacing us is, and I can tell them if one of us leaves the other is more than likely to follow.

Yes. And that's why every employee should spend some low amount of background effort constantly interviewing elsewhere. First, to get a feeler for what the rest of the market is doing. Second, to take a better offer if available. Third, even a committed lifer needs to keep the interviewing skills sharp, in case of layoffs or bankruptcy.

You do realize that it costs companies more to continually hire. If you add real value to a company, from my experience most non-global companies see and understand that. However, in many cases the engineer is mediocre in their job (regardless of actual skill) and still expects a company to increase their pay. In a generation of people that feel something is owed to them, unfortunately the mediocre engineer covers 80% of the talent pool.

These things aren't mutually exclusive. If it takes 10 devs 3 months to ship a Java EE app that requires 2 full time SREs to keep running, vs. 2 devs, 3 months and a part time SRE to ship something built with ShinyNewTech, then you better believe that's delivering business value.

ShinyNewTech bites people when they aren't intentional about introducing it and haven't done an accurate cost/benefit analysis. If you've done that analysis, and it really is a big difference in cost to market & cost of operation, then you're leaving money on the table by not taking that route. This happens all the time.

The cost of rejecting new stuff because the status quo seems to be working well enough is massive, especially because the status quo at most software shops is room-on-fire-this-is-fine.jpg

A good engineer certainly should know when to bite on new technology if it will deliver legitimate value but a FAR more common story in this industry is that whole stacks get rewritten for the new hotness with very little actual tangible gain to show for it. Opportunity cost of jumping at new tech when you shouldn't is much higher than the opportunity cost of the opposite.

Actually JavaEE isn't too bad.

JavaEE programmers might be a legitimate concern though ;-)

It helps to try to price yourself out of 2/3-3/4 of the cold approaches you get from recruiters. If you want to make more, ask for it. If you're in a position, even if you don't like it, there's no harm to keeping your options open, or asking for 5-10% more than you are currently making. You might be surprised. Also, if you outright ask what the pay range is, more often than not, they'll tell you. That gives you some indicator of what to ask for.

Also bearing in mind where you stand on the skills ladder as part of that factoring.

Wait a minute, it is straight up crazy to suggest that most engineers get paid less than 0.01% of the value they create. If you make $100,000/year, in order for that to be 0.01% of the value you create, you'd need to create $1 billion in value.

You're off by like dead minimum two orders of magnitude, and probably more than three.

It's an interesting question to look at job and calculate how much value it would need to create per day or per hour to "outperform" the salary. Certainly it's a good benchmark in cases like this, where lone engineers are obviously not producing large-multiples of the value of their entire company.

At a guess most engineers are getting paid >10% of their value created, and some jobs (a crappy CEO, perhaps?) are getting paid >100% of that value. In fact, I'm not even sure that >100% of value means anything is wrong if someone is undertaking a high-risk job.

Turning that around, a CEO is paid 100mil/yr, is he creating more than that in value?

Developers are just another means—we're not wizards. We are a commodity, and if you don't recognize that you're in for a hard midlife crisis. Do you really expect to make any money without taking the risk of deciding what to build? How it's constructed is a (admittedly time-consuming and distracting) detail—only a small aspect of the company's value.

Risk and comfort are tradeoffs. If you want to live without risk, you'll have to be satisfied with whatever salary you can negotiate as a commodity.

A startup might make lots of money, but most never succeed. As a regular dev in an established company, I expect to make a lot, my goal is $400k a year in total comp, but I might only break 300k this year. I'm not the VP, I'm not a director. I'm an experienced dev in Seattle, I hope for $200k in stock, 200k in salary + bonus. I have 20 years of experience.

As many people have said, you don't have to do your own startup to make a lot of money at the big companies. In Seattle, your average 10 year experience google employee is making $200k salary + bonus, and then at least $100k in stock. Amazon, Msft, Facebook pay comparably.

But a good engineer will have a say in what to build, not only how to build it. Otherwise all dev work could just be outsourced. IMO, the role of a good engineer is to deeply understand the business/domain to provide good insight in regards to what to build.

I think that everyone believes part of their job should include deciding both what they do and how they do it. I think it's pretty rare for non-managers in any field to have the latter, and extremely rare for any non-managers to have the former.

I'm not sure why you believe engineers would be uniquely entitled to make decisions about what they're building. Even in a classical engineering job (building a bridge) they don't get to go "nope, this is a bad idea let's not build it." At best they can say "this is what it'll take to do what you want, is it worth it to you?"

Really, deciding what to do is literally the only job top management even has. It's not often shared with the people doing the work.

I think the distinction between "what" and "how" is a matter of perspective. The "what" is definitely the domain of management (even if decisions are made with engineering input), but where the "what" ends and becomes "how" is fluid.

To use your bridge example, the "what" is "build a bridge" and the "how" is type of bridge, where beams go, etc.

That could just as easily be reframed as a more general "what" of "increase traffic capacity from A to B". The "how" might be a bridge, or it might be a new road that routes around the lake, a tunnel, or some other solution.

You could also frame it as more specific "what" of "build a suspension bridge" where the "how" no longer includes as many decisions.

You'd see the same distinction form between a micromanager and a hands-off manager. The former leaving almost all of the decision making in the "what" and the latter leaving almost all of it in the "how".

This is actually why so many organizations that are good at shipping other kinds of products suck at software: the distinction between "what to build" and "how to build it" is very squishy, and on a complex enough project the distinction is nonexistent.

A complete specification could just be executed. It is the program.

> Otherwise all dev work could just be outsourced.

The value of American engineers is their ability to a) speak english well, b) show up at the office, and c) swallow large amounts of debt for college to ease hiring. So I'm not sure how outsourcing plays into this at all.

I have never before heard of someone expressing a desire to hire a product manager/marketer/sales/brand strategist/designer because they're a good engineer. It actually shocked me you would consider skills involved related at all. I would not expect this from an engineer, and it would make hiring one immensely difficult. That's more the type of skill that leads to starting your own company.

> I have never before heard of someone expressing a desire to hire a product manager/marketer/sales/brand strategist/designer because they're a good engineer.

Hmm, I'd heard that hiring product managers that were excellent engineers is very common in the Valley. Not as an exception, but as a "preferred" qualification.

Hopefully they have some ability to manage a product, too. :) That's a skill that engineering helps inform, but a good engineer does not imply anything like time management, market knowledge, people skills, translating between designers and engineers, etc etc.

"I have never before heard of someone expressing a desire to hire a product manager/marketer/sales/brand strategist/designer because they're a good engineer."

I have. They don't have to be amazing engineers, but a background with some engineer knowledge is always a big plus.

Well, sure. But it's not their engineering talent alone that got them the job—hopefully that is not sufficient. The main reason it helps is to understand obstacles, time management, and communication, not because their job is engineering. Regardless, coding is certainly not a directly useful skill.

There's a common saying "Nobody ever gets rich working for someone else". I am not sure how much that is backed up by any statistics but the Bay Area and employees of unicorns or Google/Apple/Amazon/Microsoft/... may be outliers to this adage.

Anyway the point I am trying to make is that as an engineer you either have the choice of working for an employer and living an albeit comfortable life (without any risk) or going it alone or starting your own venture with all its associated risk/reward profile.

You have already indicated that you believe in this adage and took the necessary steps to increasing your worth and would continue to take the same approach in future.

What somebody is worth is what the market is willing to pay for them either in salary or by investing in their venture.

This adage is used mostly by snake oil salesmen slinging get-rich-quick schemes. Working for somebody else is probably the best way to get rich. Putting a qualification here, rich is not filthy rich, but affluent to comfortably rich.

Uh, no. This adage is very very true. Sure, you can get a comfortable six figure salary, but that is by no stretch of the imagination "affluent".

I'm defining rich as making 7 figures a year. I think that's a pretty fair assessment. You'll never get that working for someone else (especially as an engineer), barring extenuating circumstances. High equity employee #1 or co-founder is the way to go.

High risk, high reward.

A 7 figure annual income is setting the affluent definition very high.

You can work at Google for a decade and end up a multi-millionaire, with enough money to retire to most places in the US.

From your other comment, it seems like you haven't done the analysis on this. Top companies are routinely paying $200k-300k these days. That's enough to save a million dollars over a decade even if you have a family.

You're very likely talking about the top 0.1% employees at the top 0.1% of companies.

Every time salary is discussed on HN, inevitably someone brings up this "fact" that engineers are "routinely" making $200K or $300K or $400K or whatever other ridiculous figure. Given average Bay Area software engineer compensation being between $100K and $140K depending on your source, even at $200K we're probably talking at least 1 or 2 standard deviations from the mean. But there's no fighting HN anecdotes. There's always someone here who knows That Guy At Google Who Makes $300K or That Buddy's Roommate That Gets $400K Straight Out Of School At Facebook, and suddenly this turns into "everyone must be earning that much." Come on.

Yes. It is surely possible to work at Google for a decade and end up a multi-millionaire. It's possible to bowl 300, too, and hit 3 hole-in-ones in a row. It's astronomically more likely most people who work at Google or any other software engineering role for a decade will not end up multi-millionaires. Pretending otherwise grossly overstates the (admittedly okay) lifestyles and salaries most tech folks enjoy.

In support of your argument, I would be surprised if the key engineers in large companies (ex: Jeff Dean, Peter Norvig, Yann LeCun, Andrew Ng, ...) aren't earning 7 figure annual incomes, especially after stock incentives are taken into consideration. They all work for someone else.

>Top companies are routinely paying $200k-300k these days

Yup, all four of them - Apple, Facebook, Google, Netflix.

</sarcasm>

$200k-$300k in places like San Francisco and Menlo Park. Clearly, you don't understand how cost of living works. Also, to make that much, you need to be at around a level of SDE3/tech lead, which is by no means easy (a decade of making low six-figures & some political panache). See this top answer on Quora, for a pretty detailed analysis: https://www.quora.com/Will-I-be-able-to-become-a-millionaire...

You might be able to become a millionaire in 25 years assuming a frugal lifestyle and no big life event costs, but that's optimistic.

Have you seen the thing about how there are no rich Americans?[1] No matter how big my house and expensive my car, I'm not rich, heavens no, that guy over there has a bigger house and a shinier car, he's rich. And of course he'll tell you the same thing.

$200k/year is most definitely rich by the standards of most of America. If you think that's silly, hang out with someone who makes $30,000 a year and think about how much $200,000 would change their lives.

[1]http://www.slate.com/blogs/moneybox/2015/03/03/how_americans...

You will get affluent in 10-20 years. That's my point. You get rich slowly, not quickly.

And wealth is not defined by how much money you make, but by how much money you have.

You will probably not become a millionaire unless you have no family, you never get laid off/let go, and your salary scales with inflation.

There are other considerations as well, including cost of living (most high salary jobs are in high-cost areas), liabilities (debt), and so forth. If you want to get rich (again, 7-figure range), this just doesn't seem like a good bet to make.

My personal slant on things is that even if you do become a millionaire, let's say in your 60s, who cares? The point is to get rich while you can still enjoy your money. There's no virtue in being buried with your treasure.

   >but affluent to comfortably rich.

What does that even mean? It's kind of rare that someone will pay you enough money that you can live off your investments.

>as an engineer you either have the choice

I don't feel like I do. I cannot afford to battle patent trolls when something I produce somehow infringes on their "intellectual properties." There has been some progress, given the Alice vs CLS Bank decision, but there's still lots of patents flying around out there like this one (https://www.google.com/patents/EP2973038A1) where Google attempts to patent "Classifying resources using a deep network." Given that there's a very real threat of bankruptcy for even trying to start my own venture, I plod along at my position which is automating thousands out of their jobs while I make a minuscule fraction of what those people were once paid.

There is a tremendous amount of risk to go it alone, especially when the alternative is so comfortable and risk free. By all definition you would be crazy to go it alone. The statistics seem to point in that direction.

But then again the reward profile if you are in that 10% to 5% that succeed and have the stomach to continue for the long haul is huge.

I personally am a victim of the 'Analysis Paralysis' that your are alluding to and understand the hesitancy in taking the first step. There is plenty of risk out there and its good to be wary, but if you never take that first step you will never know what your future could be.

Maybe its better to try and fail than never to have tried at all.

Time is not on your side and none of us are getting any younger. (Sorry for all the cliches).

>the alternative is so comfortable and risk free

I've seen people with a decade of experience on the job "disappeared" and there's little more than an email to the staff telling us they are gone, effective immediately. I don't consider that comfortable or risk free. Especially true if one is in charge of systems, because of stories about loose cannons like

https://news.ycombinator.com/item?id=12179637

>Maybe its better to try and fail than never to have tried at all.

I hear this sentiment mostly from upper middle class people who can fall back on family if they fail. I don't meet a lot of people who have experienced true financial ruin, recovered, and are willing to risk going back. A lot of us are as hungry as any entrepreneur. We simply don't have the safety nets. I don't know your case. Maybe you're as "financially independent" as I am, but advice like that sounds condescending in such a context. Of course they'll walk the tightrope. They've got a net.

https://news.ycombinator.com/item?id=10979926

You don't start a company because you might get sued for infringing on something with an idea you don't even have yet? Okay...

> I plod along at my position which is automating thousands out of their jobs while I make a minuscule fraction of what those people were once paid.

If you were paid the salary of all those you automated out of a job, there'd be zero incentive for anyone to buy your product.

I'm replying here but I'm trying to reply to the entire thread.

- So you are talking about how much value we create and that we should receive more of it.

- Then someone else mentions a lot of other professions that do that too: create a lot of value.

- Now the discussion does a 180, forgetting completely the first topic: value. Now it's about supply and demand.

Pick your measuring stick people.

You either trust that markets work best and then you are paid exactly what you deserve, because you are free to change jobs and ask for more.

Or you don't and think that a better system should be in place, but then it should apply to everybody, not just software developers, right?

This is really difficult to quantify, I imagine. Sure, engineers can create very valuable things. They can also create totally useless things (I am one, and I've made my own share of 'useless' features).

I don't really see why singling out engineers is really terribly helpful in saying how much they're worth. An engineer can create great value, but if no one is selling it, is it worth much? A company without a direction can have great engineers but crater without good leaders. Without accountants, the money would be in shambles. Without IT, nothing would get done in a larger company. Without designers, user experience would likely suck so bad as to get in the way of the product.

It's hard to say that engineers necessarily deserve a larger slice of the pie. As it stands, we/they're paid quite handsomely. But I think to try to make it out to be something almost mythical seems unfair to everyone else.

Look at Apple, for instance. Without Steve Jobs, it almost certainly wouldn't be what it is today. Steve Wozniak is by all accounts an excellent engineer, but without Jobs' vision and drive, Apple wouldn't ever have taken off. Of the two of them, Jobs was the much more "valuable" by that measure.

Though I'm not sufficiently familiar w/ Jobs / Woz careers -- I like what you're getting at. I would say that just like there are 10x engineers, there's 10x Product managers / CEOs (really, just 10x people in general). They are few and far between (or, I've never met one) -- but if you got one, I can't imagine its possible to overpay them.

Except it's hard to identify the 10x'ers, unless you do it after the fact (i.e , too late).

If it was true that the output of engineering alone was creating that value, then it stands to reason that dissatisfied engineers could simply leave and capture something closer to 100% of that value.

The reality, though, is that businesses themselves enable substantially all of the value they create through engineering. Google can't drive billions in revenue without engineers, that's true. But the Mets can't play in Shea Stadium without the janitors cleaning up after games, too.

Sorry, but this is straight up proletariat bull. You get hired, you get paid. If it doesn't pan out, you go somewhere else. You have 0 risk and a guaranteed career. And sorry, but 100k for a javascript "engineer" is more than the "fair share" in my opinion, but it's a market, so it is what it is.

You say proletariat like it's a bad thing.

Of all the social goals that we have (curing cancer, hunger, war, etc.), it amazes me that we haven't added 'work' to that list. Maybe like 5% of people that I know enjoy work more than 50% of the time (and it's probably not 'work' at that point).

Work sucks - we should eradicate it and let people spend their short time on Earth doing what they enjoy. Many of our ancestors worked hard so that we could have better. I hope that I can work so that my descendents (and your descendents) won't have to.

And, for the people down-voting, I'd love to know why. Send me a message if you don't want to say publicly. The anthropologist in me genuinely wants to know.

I can't understand how anyone would be for work ('they call it work for a reason, right?'). The only reasons I can imagine are 1) inflexible ideology, 2) sadism, or 3) love of power hierarchies.

I enjoy my work. If I go more than a week or two without doing some paid programming, I start to feel listless.

I'm lucky enough to get paid well as a freelancer, so I can work as much as I want from wherever I want. Even if I could retire tomorrow, I would still continue to do similar work to what I'm doing now.

Ok, got it - it's probably semantics then. When I say 'work', I mean doing something other than what you enjoy. If you love it, it's not work, in common vernacular.

Working as an employee is not without risk. There is the risk that you'll invest 10% or 50% of your productive lifespan in an employer who squanders it all and leaves you jobless without notice instead of an employer who puts your abilities to good use and recognizes the value that you create. The risk is partially mitigated by receiving a paycheck during those wasted years regardless of the employer's competence.

> invest 10% or 50% of your productive lifespan ... and leaves you jobless

If you are not an equity holder, that sentence makes no sense. In a standard employment arrangement, you are selling your time for your salary. The job is not your property; it was created by your employer.

Also, you got paid for that 10-50% of your productive lifespan. What else are you expecting?

As an employee, your time and skills are your personal capital (your means of production). The way you invest that capital has risk like any other investment.

Again, this is partially mitigated by salary. But as an employee, you probably don't expect to earn your negotiated starting salary for the next 40 years. You enter the relationship expecting some form of advancement, bonus, or other rewards in relation to your performance over time. Those expected returns don't manifest when the employer turns out to be a bad employer. Employers are not the only ones taking risks.

Returns to your productive capital being less than expected is quite different than being jobless. Though that is the worst-case outcome.

Asking about those advancement opportunities up front is very important during the interview stage. Getting it in your contract is even more important.

I agree that the employee takes risks when choosing an employer. I was confused about the scope of upside expectations.

And software developers are different from literally any other kind of employee in this regard... how?

At a company, devs and come and go and they are just people working in a job. The difference is that at this time in history, there's a huge shortage of us. A company can hire as many secretaries as they need, and its a lot easier to hire directors and vps. But if you can't hire enough devs, a company that builds software isn't going to be able to do anything. The acute shortage is the difference.

If there was a big shortage of say people with business skills, then they'd be worth more, or sales. Good sales and biz dev is always valuable. But there's not really a shortage of them, in the same way that there is in software.

To give an example, I worked at a startup. We had millions to pay salaries. We were paying 150-200k in salary. We couldn't ever grow over 5. We wanted to hire about 20 more. We had plents of designers, office managers, and leaders. Devs were far more valuable than a new hire in those other areas, because we were short. I left after a while, we couldn't ever hire anyone to work on a group I was supposed to lead.

Yes, I find it quite ironic that one of the most privileged groups on the planet is suddenly supporting an essentially communist argument of wage theft, as soon as there's even a slight possibility of them being underpaid. Apparently they are also entitled to unprecedented upward mobility.

I sincerely doubt many software developers here spend any sleepless nights wondering what it would have been like had they been in another field or profession, which are just as much victims of wage theft as supposedly these engineers are.

Why shouldn't everyone care about getting paid as much as absolutely possible (i.e. the only meaningful definition of "not underpaid")?

It's a somewhat free market, shouldn't we all be striving to maximize our take? Or are you suggesting that the central planning committee should be handing out salary guides?

Compared to say being a surgeon? or a lawer some one on here mentioned that a transplant surgeon can make over $15M.

I work in software myself but come on, it's fair to say that being a surgeon is way less trivial and far riskier than being a programmer.

And what will the programmers who automate surgical procedures make?

true but 30 or 40 times the average programmer? and I am say this as some one who is a transplant list in the UK

Can you tell me the reason behind you thinking that "100k for a JavaScript engeneer is more than the "fair share"? And why you highlight the word "engeneer"?

Because we're not actually engineers.

https://www.nspe.org/resources/licensure/what-pe

Although there does appear to be a PE exam for software: http://ncees.org/wp-content/uploads/2015/07/SWE-Apr-2013.pdf

Having a PE license is by no means the definition of being an engineer. And if it was it would be a very narrow one. I work at an aerospace company, most of my peers with advanced degrees in mechanical, aerospace and electrical don't hold a PE and don't need it. Are those not engineers? I have a degree in aerospace by currently write software exclusively, am I not an engineer either?

Specific to the US

No, we're not "professional engineers," which means we cannot testify in court as an expert in our field, and have limitations for what we can consult on based on the licensing requirements of your state.

However, the title of "engineer" can be conferred upon an individual by an employer, during the term of their employment.

And to be fair, PE's have to take two licensing exams, the FE, then the PE.

We on the other hand, have to take an "exam" everytime we show up for an in person interview.

PE of course is a special term for that single accreditation agency. We can call ourselves whatever we want. The PE types have sued people in some places for calling themselves software "engineers" but they've pretty much given up on that. The work I do is engineering, I'm a professional.

Sorry, but the NSPE has no say on the definition of what an "engineer" is or isn't.

I mean, they say so as much:

> "What makes a PE different from an engineer?"

They're talking about a specific type of certification, not what an engineer is or isn't.

Because you can achieve high proficiency rather quickly. Contrast this with engineers who optimize compliers who need much deeper and broader knowledge to make decisions in their day to day work, yet have the same comp. How is this fair? Again, it's a market and it is what it is.

I think there is a flaw in your logic here. You are saying "you can achieve high proficiency rather quickly", but at the same time you are saying that "it's market and it's what it is". Since it's a market - it means there is a high demand in those "JavaScript engineers", and if it's so easy to become proficient then what prevents those "engineers who optimize compilers" to become proficient in JavaScript and compete in that market? Maybe it's not that easy to become somebody who can manage to bring enough value by "just" being a "JavaScript engeneer" for whom employees can pay 100k+ wages?

>and if it's so easy to become proficient then what prevents those "engineers who optimize compilers" to become proficient in JavaScript and compete in that market?

Because money is not the only motivator for someone to work. And besides that, from a macro perspective the "free market" is simplistic propaganda. I don't know why people keep bringing it up. Nothing in the real world works that way. Real world is messy, arbitrary, impractical and irrational decisions are made every single day by all human beings. Normal human beings don't sit down and try to "optimize" some cost function in their life/work.

True, but it doesn't work like that in many parts of the world. I personally know Javascript engineers working for 20k just for geographical reasons and, like GP said, they should all smarten up imo.

Prices for goods and services are determined by supply and demand, not by what, "in your opinion", is "fair".

His point is that supply and demand has dictated that engineers who create $1.5M in value are worth approximately $100k. It works both ways.

Exactly my point.

Yes... but only on paper!

I hardly think underpaid engineers are the main problem with our economy. We could start by looking at, oh I dunno, teachers?

Underpaid relative to what? Oklahoma pays teachers crap, yet for every open position there are fully credentialed applicants willing to accept that salary.

I wish everyone could make a million dollars a year, but as of yet the only fair way to set value for labor is a free market.

You're trained in something because you love it. You really want to do it, and you went to school for it, have experience in it. Someone gives you a choice -- you can do this for $XX/year or you can starve. The labor market is not as "free" as free-marketers make it out to be. I made a mid-career switch from social work to coding in part because of compensation, but it wasn't a friction-free switch. Also, my point was in response to the above poster who claimed that engineers were getting a fraction of what they deserved. By your metric, programmers are also getting what the market values them at. But by OPs metrics, I maintain that teachers create a lot more value than someone building another ad-tracker.

If you're doing it because you love it, then you should consider that joy/satisfaction as part of the comp package. A lot (most?) high-paying jobs are high-paying because people don't love doing them and they involve a lot of sacrifice. That's why they call it 'compensation'.

Then maybe we should have a reverse auction for jobs? I can pretty much guarantee you'll need to pay more for someone to work in a mine than to push pencils in an office, for example.

https://en.wikipedia.org/wiki/Participatory_economics#Balanc...

> A lot (most?) high-paying jobs are high-paying because people don't love doing them

That must be why call-center workers are all on six figures?

Seriously, the people who least like their jobs are not the high-wagers, but the minimum-wagers.

Why not raise all deserving boats?

Sorry but the above poster does not handle parallel operations yet, come back for v2.

I think you're unfairly discounting the essential work done by other people in any business. While we engineer-types are tempted to look down upon sales, marketing, legal, HR, and leadership as do-nothing fluff, those roles can be just as crucial to a business's success as an engineer's. Pay is determined by the supply and demand of labor in the market.

Most professions you are referring to are unionized and defend their interests as a group, if you wait for C-execs to increase salaries of its information workers you might wait a long... long time. They have a board of shareholders to respond to and that is just not in their interest.

I am actually quite surprised at the devotion of some people here for their masters. It does provide a beautiful illustration of La Boetie's speech on "Voluntary servitude".

I mean, c'mon, this isn't the McCarthy era anymore... people should not get thrown off because you pronounce the word unions. Ordoliberalism like applied in Germany where I worked a couple years provides a quite elegant framework to allow a local form of union so the workers' right can be defended while not impending innovation and regular market dynamics.

> Most professions you are referring to are unionized and defend their interests as a group

Where on earth did you get that assumption?

Most marketers, lawyers, HR people, or managers are not unionized.

Unions work well for commodity labor, not professionals with a huge variation in pay and value.

>if you wait for C-execs to increase salaries of its information workers you might wait a long... long time.

Actually, you wouldn't wait very long at all, since pay for software engineers is at all-time highs. If you're good (and even if you're not), you can come out of college into a six-figure job in the valley.

I know people who work at Boeing and have to follow union rules. I want no part of that racket. Keeping track of every single minute worked is mandatory and working extra time beyond the allowed maximum can get you fired. It becomes a way for the mediocre and complacent to pull the excellent and ambitious down to their level. The union has repeatedly shot themselves in the foot by forcing outrageous demands on Boeing. Guess what the company is doing in response? Moving more and more operations to South Carolina and China.

There's no place for unions in software, a field of highly-paid knowledge workers that have recruiters emailing them weekly.

>Ordoliberalism like applied in Germany where I worked a couple years provides a quite elegant framework to allow a local form of union so the workers' right can be defended while not impending innovation and regular market dynamics.

The United States is wealthier, more dynamic, and has a lower cost of living than Germany. Why exactly should we copy their model?

yep the ragged trousered philanthropists lives on.

Economic theory mumbo jumbo is a red herring. It's all about risk. You "pay" a premium for an FTE position where you get paid every two weeks, get someone to deal with your benefits and pay your taxes.

If you create $1M of value, that's fine, but the check for that value may not arrive for a year -- or ever. But you still get paid. Engineers always talk about the money they save or value they create, but most of the savings are fixing mistakes and the value usually cannot be attributed to specific people.

If you want to get paid what you're "worth", you need to be at risk. Either work for yourself or work a gig where you get paid directly for outcomes like a salesman.

I think you are creating false equivalencies. There is a huge difference between the risk and commitment that an entrepreneur brings to a venture when compared to any other employee.

Now, if an employee (engineer or not) participates with similar exposure they definitely deserve more than a salary.

Maybe you haven't had a solid failure yet. I have. I lost everything once. And by that I mean everything: home, cars, furniture, even the last penny in my bank account. Everything.

My employees got laid off and found new jobs. Their lives continued (something I was happy to see, BTW). For me it was a nightmare that lasted a few years until I was able to get back on my feet (through entrepreneurship, again).

Everything in business in business isn't rosy. Businesses like Facebook that go from dorm to rocketship with hardly any struggle are pink unicorns. Most ventures have to slog it out and struggle, sometimes for years, before they succeed (and most fail). In this context, paying market rates --which means "only as much as you have to"-- is the fiduciary responsibility of the entrepreneur/CEO. Over-paying because of some unconventional criteria of fairness (that happens to be false) is simply irresponsible.

Because of this and other experiences I am very sensitive to this idea that everyone is equal (in terms of salaries, responsibility, exposure, risk, etc.). That's not the case at all.

> engineers need their fair share. They are the one creating things, they are the one on the front line and we should not get satiated by the crumbles we are left with.

This, 10x and especially for programmers coming for 2nd/3rd world countries, whom are even more unaware of the value they're creating and settle with way less. Obviously, it's easy to say this and it often doesn't help you get your foot in the door when you ask for 3x the average dev salary around you at an interview. Key is to keep re-negotiating after you've proven your value, then iterate until you get the slice you deserve. For a company it's really painful to lose an employee who is already performing well, they'll likely give up on the margin to keep you on.

We used to joke that people with naïve pictures of Africa in their heads, expected to see wild life immediately after stepping off the plane. I believe the image you have is somewhat more nuanced, but still could do with some work. We are very aware we are generating value which we are not capturing. I've heard AWS CT devs complaining about receiving less than half the total comp as their US peers. We just don't have much leverage.

I am kind of in the same boat, I also tend to settle with less. My point is to push that leverage to its limits, many don t do that.

I am a developer, so I am all for higher developer salaries, but your posts shows a common misunderstanding about economics. The value someone creates has nothing to do with their salary. Their salary is dictated by how many people need to hire developers and how many developers exist to fill those jobs or in simple terms, supply and demand. I might create millions of dollars in value with my code, but there might be another developer that will accept $5k less that can still create millions of dollars with their code. Similarly, the job that 95% of us do really isn't that unique. Sure, each development job has its own challenges and there certainly are a handful of 10Xers out there, but the truth is that once you get to the point of "competent developer" and the meaty part of the bell curve, we are all pretty much interchangeable. It then becomes a question of who will do the same work for less.

Your answer also shows a common misunderstanding about economics, because it takes too narrow a focus.

If there exist jobs that produce $1MM in value but that have a going rate of 200k, then there should be more of those jobs: either the company doing the work should expand, or it should have competitors. This will lead to increased competition to hire, which means higher wages. The increased number of jobs might generate downward pressure on the value produced by those jobs (since the output is now less scarce), and the increase in salary should increase the number of people who want to work in the field (which would dampen the salary increase), but we should ultimately reach some sort of equilibrium. The fact that tech companies bemoan how hard it is to find employees suggests that we aren't at this equilibrium.

To give an analogy, your explanation is akin to when people observe that the price of a good is based on the competitive market, and that the cost to produce merely provides (in most cases) a floor to that price. However, that's only part of the story: in a well functioning market large spreads between cost to produce and price encourages competitors to enter the space, which leads to lower prices. There may be delays, and there may be exceptions, but generally the function of competition is to reduce these spreads. Likewise, we should expect competition to reduce the spreads between job value and job salary, generally by increasing salaries and lowering values.

>If there exist jobs that produce $1MM in value but that have a going rate of 200k, then there should be more of those jobs: either the company doing the work should expand, or it should have competitors.

How could you possibly determine how much value your efforts are producing? How much value are you assigning to the risk the founder and investors are taking? Maybe your $200k job is producing $200k in value. Or even less.

>The fact that tech companies bemoan how hard it is to find employees suggests that we aren't at this equilibrium.

Tech companies always pretend it's impossible to find employees. That's not reality, though. That's a political strategy.

> How could you possibly determine how much value your efforts are producing? How much value are you assigning to the risk the founder and investors are taking? Maybe your $200k job is producing $200k in value. Or even less.

I'm not disputing that there's difficulty, and that it might not always be possible (although we can often estimate and assign a confidence level). But the parent comment claimed that even if we did know, value shouldn't pull salaries up: that's what I'm responding to (side note: the parent also implied that we can know what values are, since he acknowledged their use as a floor for salaries).

In college I spent a couple summers doing repair work in the shop of a family friend. I got stuck with a boondoggle repair and when it got into day 2 that I was still working on it, and the manager got pissed off and tried to take over for half an hour before he figured out why it was taking me so long. Then we had a shocking conversation about the fact that while he was paying me $x/hr, I needed to be booking at least $10x/hr in repairs, so I needed to work faster. It seemed so unfair to me until I spent a lot more time working in small companies.

The repairs were a profit center, and the labor I was billing was keeping the utilities turned on, buying replacement tools, consumables, paying for my lunch break, covering rework, a hedge against me injuring myself, paying for the shop van I used to run inventory between stores, paying taxes, business licenses, my manager's salary, the owner's salary, paying for Bob to wander over and consult on a repair I wasn't sure about, paying the interest payments on the loans, and covering the loss leaders that got us repeat customers who needed repairs in the first place. Things like trade-ins and entry level equipment.

At your programming job, every manager above you in the chain, every support team that you use to get your work done are all being paid out of the money billed for you. Yes you may be writing $1M in software a year, but the company wouldn't exist and you wouldn't have any sales without those other people, so all of that overhead gets subtracted from your value. Ironically and possibly painfully, a company can exist for months without a single programmer, but it can't exist long without a management chain.

I don't disagree with any of this. I'm not saying that if an engineer writes software that increases profits by $1MM then they have realized $1MM in value: it's a team sport. But I don't think that prevents us talking at all about the value of the work that is done in a job.

Do you have quarterly goal setting reviews? People generally find that a formal process such as this will answer the questions you pose.

For example, you may discover that someone else got that promotion that you were eyeing, because they provided 15x value compared to you - 7 patents, 3 products architected that opened up new areas for growth, etc.

> Tech companies always pretend it's impossible to find employees. That's not reality, though. That's a political strategy.

Genuinely interested to hear an expansion of this. How would pretending that technical employees are hard to recruit, benefit a company politically?

If you can convince the general public the tech industry will wither on the vine for lack of skilled labor, you can get Congress to raise the H-1B cap, allowing you to drive down your labor costs.

"How much value are you assigning to the risk the founder and investors are taking?"

Absolutely 0, because they're not the ones doing the work.

Really? You think people should risk their money without compensation? Where can I find such people?

And what makes showing up at the office and typing on a keyboard such a holy use of time that it alone deserves compensation?

I do not believe that you shouldn't get any compensation, but the idea that simply having money entitles you to the lion's share of the compensation, above and beyond those that actually do the damn work, is idiotic.

"And what makes showing up at the office and typing on a keyboard such a holy use of time that it alone deserves compensation?"

The fact that it actually makes the damn product.

I know what you mean. It's the current system that's messed up, that just by holding money you can create money. It generates all kinds of fucked up inequalities.

If there exist jobs that produce $1MM in value but that have a going rate of 200k, then there should be more of those jobs

This is true generally, but I think it doesn't apply in context. Tech has saturated the existing market, there is no demand to be satisfied for more tech. Of course, the industry will continue to grow, but only because the very nature of tech is to innovate. Growth in tech doesn't come from creating new supply to fill an ever-growing demand, it comes from innovating and creating new demand. That means that the growth of tech is bound to the rate of scientific progress, of investor's wallets and of cultural change. You can't keep hiring more and more 200k developers to make more millions, because there's no one left to pay more millions.

The parent, slg, was right in their analysis except for one point: employers have to compete on salary between each other, but they also have to compete against the engineer's opportunity to start their own company, which would let them earn directly in proportion to the value they produce. Engineers' salaries are therefore related to the level of risk and difficulty of entrepeneurship. The easier it becomes to start a startup (controlling for the expected returns of starting a startup), the more employers will pay their engineers.

As long as not everyone has eg an iPhone, I see plenty of demand for tech left.

No. People who don't have an iPhone either have a different smartphone (their demand is owned by Apple's competition), they can't afford a smartphone (they're not a source of demand — until someone innovates and makes a cheaper smartphone), or they've actively chosen not to own a smartphone (not a source of demand).

You said:

> Tech has saturated the existing market, there is no demand to be satisfied for more tech.

Of course, if you mean at current prices, then sure: everybody who wants and can buy at current prices will do so.

Still, demand is very elastic. Even with current tech, there's lots and lots more demand at slightly lower prices. Companies can just wait until their capital investments have deprecated a bit more, and then lower prices a bit.

(You also want to keep prices high initially, even if costs would allow to go lower and still break even, to capture the higher willingness of some people to pay more to get your product sooner. Basic price discrimination.)

You are looking in the wrong places, then. Not everyone without an iPhone wants one - the demand you cite doesn't exist.

> If there exist jobs that produce $1MM in value but that have a going rate of 200k, then there should be more of those jobs: either the company doing the work should expand, or it should have competitors.

> in a well functioning market

All these big California technology firms argue to shareholders that their network effects create a "moat" (they prefer you not to call it a "natural monopoly"), and that this is exactly why their revenues are disproportionate to their spending/hiring.

I think your argument should be played backwards: the large-cap CA technology industry is not a "well functioning market" because everyone's just seeking natural monopolies--and sometimes capturing them.

> either the company doing the work should expand, or it should have competitors.

That's not how technology works. The most evident example is where data feeds data, creating a market without compare. You can't compete with google for map data or AWS for hosting.

> we should ultimately reach some sort of equilibrium

The equilibrium is not based on the metrics you have proposed except in the slightest degree.

Doesn't the fact that people are trying to compete with those services suggest that you can? Bing maps, Apple maps, Azure, Google Cloud Platform, Digital Ocean, Joyent.

I don't think technology is that different. Incumbents have always had advantages. That doesn't totally preclude the possibility of competition. It might be that they compete by providing less value for less cost (eg the maps might not be as good, but they might be good enough for some users), or by servicing users that the incumbent doesn't care about (side note: isn't this what The Innovator's Dilemma is about?). But it's rare that a competitor is so dominant as to totally preclude any possibility of competition. You certainly haven't provided an example of one yet.

> Doesn't the fact that people are trying to compete with those services suggest that you can?

In 20 years, we will see who is competing and who is was just funded with unicorn dreams. I don't consider a single one of those comparable.

> I don't consider a single one of those comparable.

Azure and Google Compute Engine? I'd say those are pretty comparable to AWS.

Does this mean if a company loses money the employees should contribute to the funding of the company rather than take a salary?

No. Why would that be a remotely rational thing for them to do?

When I use "should" in my earlier post, I don't intend it as an ethical "should". I mean it as a "if everyone acts in a rational way, this should, eventually, be the outcome".

If everyone acts in a rational way, and there is no occurrence of monopolies or price fixing, and if information is widely distributed, and a few other "ifs" that are not obviously missing from the scene, this should, eventually, be the outcome

True :).

To put it in simpler terms, if an employee creates $100 in value but only costs $10, competitors will line up to outbid that $10 to poach that employee.

...except if all the competitors ask how much the employee was paid at their last gig, so bid $12.

Price fixing is an actual thing, that's why we have labor laws. Also see: non-compete agreements.

And the next competitor bids $12.

There are 10s of thousands of businesses in the US. It's hard to believe there'd be any remotely successful collusion in keeping wages down.

Non-compete agreements are invalid in many states. Also, would you sign a non-compete agreement in order to get paid 10% of your value to the business?

> There are 10s of thousands of businesses in the US. It's hard to believe there'd be any remotely successful collusion in keeping wages down.

This takes many assumptions: People know of all these businesses. People are able and willing to move at a whim (not so easy with family/friends), people are willing to change their jobs every other month (for a business a job is just a transaction of money vs time, human beings, failed constructions that we are don't see it that simple) and so on. Neither the world nor people are completely rational, so things which work in theory often donThere are 10s of thousands of businesses in the US. It's hard to believe there'd be any remotely successful collusion in keeping wages don't work in reality.

If you get bitten by that, you are just a bad negotiator.

64k Bay Area tech workers were bad negotiators?

https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...

You appear to be ignoring everything else that goes into making a company besides labor. There isn't perfect competition in the real world. Companies don't all have the same resources, customer base, or opportunities.

For example, a person doing the exact same job at Facebook is going to provide more value than a person doing the exact same job at Twitter which is going to provide more value than a person doing the exact same job at a brand new startup. The Facebook employee might be producing $1m and the Twitter employee might be producing $200k. In that instance Twitter can't pay more than $200k and Facebook has no incentive to offer more than $200k.

Or maybe a more concrete example, if I am the head of design for Ford, the value I produce for Ford is always going to be more than I can provide by myself because I have no way to put my skill set to use in a new company. I don't have access to the supply chains Ford does. I don't have access to the factories that Ford does. I don't have access to the labor market that Ford does. If I wanted to actually compete with them, it would require billions in funding behind me like Tesla.

I feel like my earlier comment has been misconstrued as "if your work generates $1MM in profit than it should be rewarded with $0.999MM in salary". That's not what I'm attempting to say at all. Assessing value is definitely more complex than that.

Additionally, yeah, it's true, competitors might not be able to realize the same value in the same space. Competitive advantages exist. Spreads between value and salaries will exist, and some companies might have bigger spreads than others because they're more able to realize value. I agree with all of this.

All I am attempting to do is refute the claim that there's no relationship between value of work and renumeration for that work ("[t]he value someone creates has nothing to do with their salary"). I don't dispute that we can create toy examples where that doesn't happen, but they aren't effective refutations of the general point.

The labor theory of value has been refuted. In a market economy, prices (including the price of labor, i.e. salaries) are set by supply and demand.

In the short term, yes. In the longer term competition and companies/people entering/leaving the market moves demand and supply closer to something that justified by costs of production and 'value' of product.

(Economists say demand and supply are elastic, I think.)

I agree. Labor is just another input that a company requires in order to create its product. I would expect labor prices to be driven by similar if not the same market forces as goods. Excluding government interventions of course.

Labor theory of value claims that the value of X depends only on the amount of labor required to produce X. This theory doesn't explain how gold is more valuable than iron, or how $UNICORN is more valuable then this other startup. So it's a bad theory.

matthewowen's argument is not assuming the labor theory of value is true. It's just pointing out that, other things being equal, if the demand for X increases then the demand for X-makers' labor increases too; hence X-makers' wages increase.

Which is bullshit, all the way around :)

And what drives demand for labor?

Unfortunately we have network effect monopolists who can get away with huge margins. See Google, Facebook

Nail on the head right here. The price of an employee isn't their MPL, it's no greater than their MPL and is set by how little the next guy is willing to take to do the job. Competitive pressures work to drive down labor prices, too!

Nobody is stopping engineers from saying "I'm going to contribute $1.5m to your bottom line this next year, I want you to pay me $1.4m", but they'll be shown the door because there's a guy that's willing to contribute the same $1.5m in exchange for $100k in compensation.

> Nobody is stopping engineers from saying "I'm going to contribute $1.5m to your bottom line this next year, I want you to pay me $1.4m", but they'll be shown the door because there's a guy that's willing to contribute the same $1.5m in exchange for $100k in compensation.

Which is why you should be an owner/competitor versus an employee if you know the business well enough.

Assuming that you can tolerate the commensurate risk, absolutely. Many people forget that the rank-and-file employee isn't exposed to the financial and legal risk that their employers were/are.

But they are exposed!

In case of financial trouble (very common at startups), who gets to be laid off first, the CEO or the developer?

Also, rank-and-file employees are typically scape-goated in legal proceedings, example: finance people going to jail for rogue/insider trading, even though upper management at least encouraged such behavior.

who gets to be laid off first, the CEO or the developer?

Wrong comparison. The CEO and developer are both employees. I've outlasted laid-off CEOs at several places of employment.

The comparison is between an employee and an owner. (Of course an owner may ALSO be an employee, maybe even CEO, and an employee may also be an owner, but comparison should consider these roles separately.)

The employee is risking having his assets stop growing temporarily as he is forced to go find another source of income. The owner might have no income from the business for a long time even if it is succeeding (or ever if it fails) and has to hand over already-earned assets to the business in hopes of getting it back plus more, but if things go south, he might not get anything back and may even be forced to hand over additional assets to cover damages. The employee's risk is temporarily not gaining assets, while the owner's risk is potentially losing his.

Reality is a little murkier than this separation, because an employee might lose assets moving to a new city only to get laid off. In a certain sense, an employee is the "owner" of a small service business providing services to a customer (his employer) and owners can trade off equity for risk by bringing in partners, but the big picture is still that people who decide on ownership vs. employment are choosing between two very different risk/reward profiles.

Every employment position comes with some degree of risk exposure. But, the risk of "I might lose my job" is quite a lot less scary than "I might lose all my invested capital and/or be stuck with crippling debts after the company crumbles". Early-stage startup employees are given greater compensation packages than later-stage employees specifically because of the greater risk of going to work for an early-stage startup.

This isn't a very difficult thought exercise - if you believe the risk profile is greater for employees than CEOs, then why not quit your job and become a CEO of your own company?

Financially they don't generally risk anything. Yes, your compensation could end at any time due to termination of your employment, but the risk of not getting paid at some point in the future is unavoidable regardless of whether or not you're an employee. The major difference is that as an employee you're very unlikely to have to put any of your own capital at risk.

I hate to say this, but if you think getting laid off is a huge financial risk then you probably have not done much business. There are exceptions of course, but most founders I know carry huge financial risks (like years and years of salary on the down side, and tens of times that on the upside...).

If you haven't tried you probably can't imagine how stressful it can be at times...

>> But they are exposed!

For their exposure, employees are compensated with salaries. Are you willing to pay your company money if the product you work on misses expectations?

Between those two choices, the developer.

However, there are many staff that are let go prior to cutting engineers out right.

> Many people forget that the rank-and-file employee isn't exposed to the financial and legal risk that their employers were/are.

Which makes it the perfect position to be in to launch and iterate and test and lean startup a good side hustle.

This is what they're trading, decreased risk for decreased reward.

But in reality, it's not really a decreased risk.

...but Massachusetts just killed their efforts to reform non-competes.

http://www.wbur.org/morningedition/2016/08/02/non-compete-ag...

Argh. Oh well. Massachusetts continues to be a state I have on my blacklist.

Or you can just get your non-competes redlined. I did it at literally every job I worked at after my first out of college (and that non-compete was "travel companies", BFD).

Having thought about this a bit, I actually come to the opposite conclusion.

I think a lot of companies who might have previously hired devs would be better off trying not to anymore, with what devs cost today. This is going to mean all sorts of things, including more off-the-shelf stuff vs. home-rolled for companies, smaller software companies that don't get started because people would rather take the BigCo job that pays $200k base plus stock, etc.

Pretty much any business is about taking stuff and making something out of it that can be sold for more than its inputs. With dev salaries being what they are, a lot of opportunities get ruled out quickly because they just aren't big enough.

Sure. And this seems an OK thing. Many tiny companies hire a programmer to write them excel macros. If they can be replaced by some SAAS app, then do so.

No reason for 100s of companies to write the same app.

I wish I could, but I don't have the cash. Maybe I can save some, by working a few years as an aforementioned employee monkey, but I'll be 30+ by then.

The assumption there would be risk is silly. Business structures isolate risk and eliminate that as a problem.

If I'm willing to walk away from a paycheck to eat your margins, I have implicitly agreed to take on a substantial level of risk.

Agree though, risk vs reward.

>Which is why you should be an owner/competitor versus an employee if you know the business well enough.

Uber just lost a war of attrition with Didi Chuxing after throwing a billion dollars at China's taxi market

How much attrition can you afford?

The reason is simple: Uber did not know the business well enough, at least not in China.

The reason is simple but absolutely wasn't that: they both subsidized their customers' rides to the tune of a billion dollars in a bid to undercut one another.

As it turns out taxi riders care a lot more about price than they do about the company's cultural sensitivities.

This isn't unusual in the transportation sector. In the 80s UK bus companies would undercut each other in a bid to achieve a monopoly. Some even offered completely free buses in a bid to drive their competitors out of business.

No, the reason you don't get that salary is because you need to discount for the risk that you don't deliver $1.5m.

Realistically, you just could be full of shit, you could get bogged down in politics, your wife could get cancer, and any number of other things could happen. So the price trends down sharply.

How did you come to that conclusion? All thing being equal why shouldn't you pick the 100k guy?

All things are never equal.

Even assuming that you had an identical prior on the two candidates, the information that one person was willing to do a job for half price would make me doubt his intelligence.

So you always go for the guy who requests the highest salary?

This assumes the opportunity's to generate 1.5m in value are finite and all developers are equivalent. Both are rather sketchy assumptions. I might have a 1% chance of preforming an amputation successfully. But, the people with an 90% chancing of doing the same are worth vastly more.

Out of 100 developers 10 might save you 1.5million and getting the correct 2 might save you 3 million.

But what the patient really needed was an appendectomy.

Not sure your point. A heart surgeon has much better odds of doing an appendectomy than I do. Further, while doctor and programmer can do a range of things a specialist is a much smaller pool.

You seem to assume that no one is being paid to do nothing. Sometimes an employee, for a multitude of reasons, may be paid top dollar and merely benched. Whether to keep the employee out of competitors hands or because their deployment is done and as a reward for prior service does not matter. There are no upper or lower bounds* in what employers will pay.

* I say there is no lower bound because slavery still exists. There are employers who do not pay people at all.

So, this supply and demand thing.

We keep hearing from large tech companies that there's a crisis -- a massive shortage of qualified software engineers, to such a degree that they won't be able to operate at all if they can't raise the H1-B quotas and import more people to fill all the jobs currently going unfilled.

If that truly is the case, then supply and demand would tell us that currently engineers are underpaid; if there are companies so desperate to hire engineers that they're turning to immigration law to try to increase the supply, why aren't they simply offering large enough compensation packages to attract the existing pool?

Pondering the answer to that may enlighten you.

A similar issue exists with respect to illegal immigration and low-pay, low-status jobs such as crop picking, meat-packing, and janitorial services: if there aren't enough Americans willing to do the job at prevailing wages, then aren't prevailing wages too low? Sure, my tomatoes would cost more and cleaning services might be 200% more expensive, but that's just the cost of doing business.

Exactly. If a company were to announce they were going to bump dev salaries up by 75K/year, they'd be flooded with people wanting to interview.

> why aren't they simply offering large enough compensation packages to attract the existing pool?

Well, they are. Compensation packages at the big tech companies are ridiculous. I know someone that got $100k signing bonus (cash, not stock) without a degree at 21 years old. He's not a genius either.

At a certain point, don't you think it's better to share some of that opportunity with smart foreigners? How many Teslas does an American twenty-something need?

> if there are companies so desperate to hire engineers that they're turning to immigration law to try to increase the supply, why aren't they simply offering large enough compensation packages to attract the existing pool?

I don't get this argument. If there are 100 open positions and 80 eligible candidates, 20 (at least) positions will remain vacant, regardless of compensation. Not saying that this example reflects the real world, just that the argument is not sound from a logical/mathematical standpoint.

All of these things are true. However, there is another input into supply side, and that's alternatives to employment like starting a company.

Any employees that really create much more value than their salary can and will just leave and start their own company, where they get to set their own salary. By doing so, they'll also be leaving the pool of employees, and potentially hiring others too (reducing supply, increasing supply, driving salaries up).

Of course, every employee creates more value than their salary, to cover overheads, some profit for shareholders, etc. Employees that claim to be creating far more value than their salary, but not leaving to start a company, are probably deluding themselves, and vastly underestimating the value of the capital employed in their company, goodwill with customers, the sales and management functions, etc.

The latter is not necessarily true - you might be creating tremendous value, but have barriers to market entry that are enormous such that you can only really create that value from within one of the existing players on the market. See aerospace, telecommunications, medicine, government contracting for examples of such industries. If I'm making a huge amount of added value for a large telecom, it's unlikely I can start a startup to compete with it, and given the state of the market I'm unlikely to make much more at their direct competitors. Thus, as long as my value is industry-specific, and the industries have large barriers to entry, I might be creating much more value than my salary but unable to leave and compete against my employer.

Right? So many people are looking at company overhead as burdensome, but how are you going to cash in on the $1.5 million in value that you create if you don't have sales and marketing people to get your product out there? How do you even know it's worth $1.5 million if you haven't done market research?

It's not just overhead, it's a highly efficient system.

I agree with your explanation but I'd suggest a slightly different way of explaining it.

Labor's price is set in a competitive factor market, just like land or capital. It gets bid up and down by supply and demand. Let's call this "the labor market force".

How much value a person can provide in a given setting depends on a whole range of things including what the employer does (scaled product company vs. body shop), overall management effectiveness, how motivated they are (both themselves and by their employer), their skill level, etc. Let's call this "the company force"

The reason people aren't paid as much as California devs elsewhere has a lot more to do with the "company force" than the "market force". The fact is, most companies who employ developer just don't need great devs. They need people who can develop websites of moderate complexity, keep things going, write line-of-business software, etc., not people who can do original, innovate algorithmic work.

Related, there is no "Developer shortage". There is only a technical talent shortage insofar as dev salaries are getting bid up and the buyers who are getting outbid (mostly smaller startups) are complaining. The good companies are getting exactly who they want.

>The fact is, most companies who employ developer just don't need great devs. They need people who can develop websites of moderate complexity

They actually do they're just unable to recognize great devs, unable to recognize that they don't recognize them and refuse to pay for them.

But they certainly need them.

>Related, there is no "Developer shortage".

There's always a shortage of labor in every industry.

That's one of the iron rules of business lobbying - if you whinge about it enough the government will go and do something (training, bring in immigrants, teach code in school) that will let you pay employees less. => higher profit.

An illustation of that is found in high-end hotels. Beyond the building, it's the value that the cleaning and groundskeeping staff provide which makes the stay great. And yet their pay is not that much higher than their counterparts working for a budget hotel.

(As a side-note, that's why I always smile and engage with the staff whenever I can: it's a thankless job, despite being one of the most important.)

That's great! I dig how you treat them with respect and human dignity, that they're not beneath you but working hard, too. I hope you also support their right to unionize wherever that is possible.

I don't think the poster of your parent comment would disagree with your explanation of the how things are; they're only saying that's not how it should be.

If we lived in a just meritocracy, people who created millions of dollars in value with their code would be compensated with millions of dollars, but this is rarely, if ever, the case. It's this fact which makes libertarian arguments about the unfairness of tax and social welfare programs offensive.

The are great advantages to individuals and society to paying less than the value of goods and services. If my daughter is ill, and a simple shot of antibiotics will cure her, should I pay $20 for that, or should I pay what saving her life is actually worth to me? I've enjoyed ever faster internet connection speed at my home (coming in two weeks -- gigabit!) I assure you I'm not paying the full value of what that speed is worth to me. The same for food, clothes, transportation, everything. If I really did have to pay the full value to me for each of those I would, by definition, be indifferent to buying any of them.

Market economics has some serious downsides, but it has vastly increased the welfare of humanity. More people have been coming out of poverty in China in the past few decades that ever before in human history.

If you feel it is unfair that as a developer you can create millions of dollars in value that you aren't being compensated for, then I recommend you consider ways that you could be compensated for this value. Perhaps instead of being an employee, maybe get involved in a start-up with equity (or found a company.) Having done so, I can assure you it's more nerve wracking than ever I would have expected, and harder to unleash the millions in value than one might expect, but it's still fun, challenging, rewarding, and worth giving a go! :-)

It should be noted that several tech employers were found to be illegally colluding to artificially lower wages.

This, slightly adjusted, would make a killer Onion headline.

Have you ever worked on a project where management considered developers as pretty much interchangeable and added folks to the team that did more damage than good? If so, do you want to repeat that experience?

I'll say this: if you aren't writing code in a way that someone else can pick up the project when you leave, then you are being an irresponsible coder.

My post had the condition of "competent developer". There are certainly some developers that aren't competent. In my experience those developers get weeded out of the industry relatively quickly. This cuts off the bottom of the bell curve leaving most most developers with something close to an average skill set or above.

I also won't discount the frictional costs of changing teams. If you take two identical developers and switch their jobs, each of their teams would see a temporary hit in performance as each one gets acclimated. But they will eventually get to the point were their team is exactly as efficient as it was with the other employee.

Agreed. In my field, physics, salaries are low precisely because supply is high.

The work is hard, and demands a lot of training/skill, but there are a lot of people who will do almost anything to stay in the field. One of the things they can do is accept a lower-than-tech-market salary.

Yes... see game programming too.

> the truth is that once you get to the point of "competent developer" and the meaty part of the bell curve, we are all pretty much interchangeable

That is not my experience at all. I see big skill differences in my coworkers.

But as an employer, it's real hard to know which candidate is 200% of the average and who is 50% (or -10%), so you end up having to offer everyone an average salary with small variations.

CEOs and top executives are highly replaceable too (they sure change companies a lot), and yet they command massive salaries. What happened to the laws of supply and demand there? Why do CEOs have to die or retire before the board decides to replace them with someone more competent? How was Steve Ballmer able to stay in charge at Microsoft for so long?? I remember the day Ballmer announced his resignation, MSFT stock went up by like 10%! So the market definitely wanted him out!

The main difference is that executives have leverage (and they have friends in high places) while average employees have almost no leverage.

It's the government's job to make sure that employees have some sort of leverage over their employers.

There's supply and demand, and then there's also principal agent problems. In practice, shareholder capitalism is a lie: companies are run for the benefits of upper management.

(You see some more examples of stories like the Ballmer resignation, when you look at the "Effects of untimely CEO death", eg http://www.cnbc.com/2016/04/28/the-effects-of-a-ceos-death-o...)

It's not only rank-and-file employees that have little leverage, average shareholders aren't much better off.

The government can try and make sure to keep barriers to entry low for competitors, and barriers to switching to competitors for employees. Competition keeps companies in line, even when it's executives running the show.

This isn't exactly correct either. It's a combination of barriers to entry (e.g. startup costs) and how much value the developer can make vs what they're paid. If a developer makes $100k/year and can create $1 million in value, then certainly I can poach them by offering them $200k/year and still make a profit on top of that.

In many fields what prevents this is startup capital. It's expensive to get a supply chain for physical goods up and running. But if you have the business acumen and connections there is not nearly as much of a barrier to entry in the software world.

You don't even need much startup capital if you're starting up not in an expensive location like SV. The reason so many of us 100kers don't up and leave when we realize we're generating millions in value is because we're only generating that value as part of a larger organism telling us what to focus on. Given individual autonomy most of us couldn't produce the same value, maybe not even our salary value. Ability to autonomously produce value seems independent from coding ability, business acumen, and connections and I would argue is far more important in building a lasting business.

In Silicon Valley it seems popular to just start your own company and capture the value that way, but other fields have solved this issue by unionizing.

> other fields have solved this issue by unionizing

careful with the "U word" around here. We don't need no stinkin unions, or any sort of professional association.

I mean sure we don't get OT and too frequently get asked to be in a hellish oncall rotation or some 80 hour a week death march. We like it that way and we don't want to do anything to change it!

Unions do not have a good history of preserving value, at least not in the USA.

I can't agree with that. For most people, the salary is dictated by how good they are at negotiating, and how strong their ability is to walk away. Two things that are completely unrelated to their ability to do the job, and as such, should have nothing to do with the employment process.

Those factors are hugely important. But you'd be hard pressed to get more out of a company than you provide in value to them, even with the best negotiation.

(Unless you are going to work for fools..)

I don't think the poster of your parent comment would disagree with your explanation of the how things are; they're only saying that's not how it should be.

If we lived in a just meritocracy, people who created millions of dollars in value with their code would be compensated with millions of dollars, but this is rarely, if ever, the case.

As a counterpoint: people don't create millions of dollars in value in a vacuum.

Somebody (usually several somebodies) took the chance to create a support structure to enable said person to create the millions of dollars in value.

How much of the value should go to the value creator and how much to the enabler with the capital (and the vision to use it in that way instead of spending it on something else) is a very interesting question that has been tackled for a long time, particularly from Marx onwards.

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

But is it ok for competition to kill the value of developers work (in the benefit of managers/founders and whomever else)? The actual point I think is to get developers to understand they need to lift the bar higher because it's now set too far from the value they actually create.

Competition drives down prices. Everyone likes that fact except for when it is applied to their own price.

Supply and demand absolutely determine programmer salaries.

And what you neglected to mention is that there is currently a massive developer shortage of supply, and lots of developers are being suckered into low salaries when they could be making much more somewhere else.

Once I stop reading article after article here and elsewhere about how there just aren't enough developers in the world to fill all the jobs he have now and coming, then I'll buy that we're on a pure supply & demand curve.

"There aren't enough developers" is explicitly why devs can make six figures rather than $10/hour.

> the truth is that once you get to the point of "competent developer" and the meaty part of the bell curve, we are all pretty much interchangeable. It then becomes a question of who will do the same work for less.

This under-values domain knowledge and especially company-specific knowledge. Yes, someone can ramp up on a code base over time, but I don't know if you've seen how ugly the limiting case is where they utterly replace all the devs with a new set who know nothing about the codebase and drop all the organizational knowledge. The rate at which things get done suddenly becomes a fraction of what it was before and the defects multiply quickly.

I disagree, there was a time when the finance community similarly valued themselves with the broader market until some people realized the numeric dollar value they could create. And the rest is history. Its time for software engineers to collectively realize their expanding relevance to value creation in actual numeric value.

Why collectively? Did the finance people need anything collective?

I think his point may be: Don't be that guy who accepts $5k less.

They have you trained well.

Assuming perfect information, yes, "supply and demand". Since you are so eager to offhand dismiss people, you can now research that one condition you conveniently left out.

I tend to ignore any comment that starts with "you misunderstand basic economics". That's not so much the arrogant tone but rather the crass dogmatism that pervade those comments.

Change the set of axioms and the initial parameters and you end-up with invalid definition and properties of market dynamics. I guess OP probably believes that markets reach equilibrium by themselves.

>Assuming perfect information, yes, "supply and demand". Since you are so eager to offhand dismiss people, you can now research that one condition you conveniently left out.

There's plenty of information about salaries at software companies floating around. Everyone knows (or could know with a quick search) what the salary for each level at the big tech firms are, as well as what the typical pay at startups is.

This reality provides one of the best arguments for a switch from a capitalist economy, in which it is shareholders who have little to do with the creation of value in the economy who ultimately benefit the most from it, to a free market socialist economy (one based on democratically owned worker cooperatives). In an economy based on worker cooperatives, the distinction between "employee" and "owner" is eliminated. Instead of there being competition in the labor market which drives salaries well below the value created by individual laborers, labor simply receives the value it creates.

Consider that practically every company begins as a democratic worker-owned cooperative, and those worker-owners generally can't wait to diversify themselves out of that position. Risk exposure is a lot higher when you're a worker-owner, and most people are horribly risk-adverse.

Ignoring the risk factor in the equation leads to some rather wrong conclusions.

This is interesting. Can you suggest any resources that lay out concrete proposals for how this could work in practice? Are there examples of where it has already worked in the world?

Some questions: 1. Wouldn't there still be a need for capital to finance risky ventures that take a long time to create value? How would a forward-looking startup with high capital costs, such as a biomedical device company with unproven technology, work in this economy? 2. How do you measure the value labor creates? 3. Is the allocation of resources among labor proportional to the value it creates? How does that work among a team of specialists that are more than the sum of their parts?

I'd genuinely like to understand whether this could work or has worked.

> Which is why it pains me to see that so many engineers get stuck with such ridiculous salaries (relative to the value and wealth they provide and create). Problem is that some salaries are seemingly high compared to what the average worker does in the country but ridiculously to what they would look like if engineers were allowed to capture a greater (that is a >0.01%) percentage of the added value they CREATE.*

As an engineer, I'd certainly like to make more, and I plan to negotiate more aggressively at my next position; but I'm honestly more concerned about how little most of the rest of the nation gets paid compared to the value they create. I don't like seeing my friends who work harder than I do--and contribute at least as much to society--getting paid 1/3 of what I make, just because they don't happen to have natural aptitudes for a currently fashionable skillset.

If I could fix just one of those two problems, it would be the second one. I make enough to live comfortably. Too many people don't.

You could run a business and pay everyone above market rate. If you are good could help 10 or even 100 people.

+10000 I've always maintained that Wall Street is way fairer to its employees than the Valley. Most investment banks and hedge funds offer great bonuses to their traders/analysts as they should -- they are the ones bringing in money. Relative to the value engineers create for firms like Apple/FB/Google, its easy to see they see peanuts of that value.

Sports is another industry where the employees are paid quite fairly relative to the owners. This is often missed when people complain about someone getting paid millions to throw a ball. The alternative is that the owners of the teams make even more.

The other thing to note is that most athletes in America's sports industry are unionised.

If I have learnt one thing, it's that creation of wealth, no, rephrase that, the creation of a business that can extract profit from the creation of wealth, is the 80% of the total effort.

I happily produce code that does a job. But doubling my skills with nested loops, debuggers etc will not produce double profits. This is because in most cases competent coding produces good enough code.

Increasing my skills with architectural design, improving my processes mgmt (releases, testing) will likely increase profits because those are often left unfixed in many companies.

Then improving my ability to understand what the ultimate paying user needs will have much much more impact because I will build the right thing

And finally improving my ability to co-ordinate with others (a market?) will magnify my efforts again.

I suspect that the creation of a business that allows and encourages all the above (call it marketing ?) is the key to extracting wealth.

Not sure where that goes but it meant something as I types

If in 10 years, every high school graduate is trained to be what we now think of as a 10x programmer, do you think they would still make six figure salaries?

Of course not! Value-creation may drive demand but it does not (itself) set prices - supply is in there too. There are enough programmers willing to work at current salaries, or they would rise.

Salaries seem lower today than the value add because some companies are being valued very highly. $20B for Whatsapp. $26B for LinkedIn. If you were risk taking and joined a no name startup early enough for a less than market salary- and it turns out successful, you do get that share of the pie.

If you want a cushy secure job writing hr applications for a Fortune 100 company, or some code for facebook when it reached 1B users, then its crazy to expect a large share of 'the profits' as the company's profits are spoken for by the owners who bought its shares and they are happy to get rid of expensive engineers as the engineering prowess you are bringing is not required as much now.

A job's salary might be capped by the value created, but it's supply and demand that determine wages, not value created.

If you're creating $1M in value, but there are only 100 jobs and 1000 people applying for them, you'll never capture the $1M.

If the supply/demand curve pushes the salary above the value created, then the job will disappear and that value will never be created. That is how resources get allocated to the most valuable projects.

(Value of course is subjective, but here it refers to things that can be measured in dollar amounts).

This world rewards people for the value they bring (supply vs. demand). The world you propose seems to reward people for the value they think they are bringing.

Let me clarify.

The world does not reward those who work the hardest. More pain /= more value. The people working might feel like they are bringing more value; a construction worker probably does more "work" than a white-collar executive. The worker may even be more stressed, physically and mentally.

But does that mean he is bringing more value? Unlikely. This is because how effective you are has no correlation with how hard you work.

I could dig holes all day, and I would be "working hard," but at the end of the day, I haven't done shit.

Saying "I am getting underpaid" is admitting "I made a wrong strategic choice." Don't complain about the state of the world, but instead compose the right strategy moving forward according to the state of the world.

The Dough of Idealism must go through the Sieve of Reality to create a product that realizes the idealism for as many individuals as possible. Have just the former, you are a lone idealist. Have just the latter, you are a lame realist. Idealism and Reality are both necessary to bring the most value to the world.

Because Salary has nothing to do with value they create but what someone else is willing to accept to create the same value.

Your problem is you are labouring (if you pardon the pun) under the assumption that wages are set by a function of the value created. This is not how pricing works.

Western economies largely operate by attempting to establish monopolies and by not passing on value created by employees. This is essentially the foundation of profits, otherwise they would be cooperatives.

If you want to get into the true middle class (who should not have to work as they do not need the money, not the faux middle class we have now who have a reasonable car and a holiday for 2 weeks), you need to stop creating wealth and capture wealth creation by:

1. land monopoly to capture wages (like money moustache man who as 3 properties and write blogs about grain being cheap)

2. run a business that does not pass on as much as possible of the value your employees create, ideally by choosing an industry without organised labour

This is not to dismiss all companies as terrible capitalists, of course!

What is it like being so rich that starting a tech company is something you just do for fun?

It is my greatest goal and wish in life to have as much money as you and to be able to give myself more money whenever I want it.

Do you have any advice for someone who hopes to have the same kind of success as you?

We buy the line that value drives price from sales people selling their wares to us. Yet we do not hold that line when it comes to the price we sell ourselves for.

@markonthewall, in the companies you start do _you_ pay your engineers based on their value or based on market rates?

So the CxOs get no credit for vision?

Basically you're saying that a developer's worth is tied to the worth of the company; that the same developer who works at a multimillion dollar company is worth millions, but if they then move to a startup that is struggling and then fails, they are only worth tens of thousands (or even zero).

If developers were paid relative to what the company was earning, there wouldn't even be a 'startup scene'.

As a businessman, I'm going to find the cheapest way to do something at the necessary quality that I can, regardless of how much value it adds. If a faster database is worth $50M to the company, and one person can do it for $500k and the other for $200k, I'm going to choose the guy who will do it for $200k (assuming he's up to the task). It's all about supply and demand.

Revolución.

It can be pretty demoralizing when you look at it from that perspective. We really need to have a conversation that even though passion is important and great for quality of life, it can hide real systemic problems and inequities

Not sure why you're calling out California when developers there get paid more than literally anywhere else in the world, often by several times.

Cost of living ? If you make 30k in Budapest, you will live a better life than with 140k in California.

I probably shouldn't post because reading this kind of stuff always annoys me. Let's back up from the "OMG I'm getting scammed" position and see what a "fair" share for a programmer is.

Let's say there are 10 programmers on the team and the company makes $10m in sales that year. How much money should each programmer receive? You might naively think $1m a piece is fair. But there are other people in the company and other costs involved. It is quite common to run companies with a 5% profit. R&D expenditures are usually around 10% of total expenditures. So $10m sales is $500k profit and $9.5 million expenses. $950k of that is spent on R&D, or about $95k per developer. The rest goes to paying other employees, real estate, cost of sales, etc, etc. If you find a way to reduce these other costs in your company, you will almost certainly be able to negotiate a wonderful bonus, but otherwise you really can't complain. It's just hubris to think that your contribution should account for more than everybody else's. Go ahead and fire those sales people. What could possibly go wrong.

But you may not be thinking about sales. Because, hey, we're in "dotcom version 2" these days. Who cares about sales? It's company valuation that really defines "the added value they CREATE", right? Well, please forgive the sarcasm from an old programmer. Moving money from your investor's pockets to your own is an age old and proven business plan. If you feel you deserve a slice of the action, then by all means go for it. My moral outrage does not quite extend to your plight, unfortunately.

You might be thinking, "I'm not talking about those scammy startups that are just pumping their valuation to score a big exit. I'm talking about the true unicorns that are wildly successful. Where's our cut?" Well, if you look at a wide cross section of startups and look at return on investment over a 10-20 year period, it is true that there is some growth. Let me be really clear, though -- you don't deserve that money.

Let's face it. Are you going to take responsibility for the failed projects? Are you going to refund the investors when it turns out that your awesome architecture suddenly implodes and causes the company to miss its window of opportunity? Are you going to pay for those days when you were arguing with your coworker about whether to indent 2 space or 4 spaces instead of getting the damn product out the door? Am I going to pay my employer for wasting their time writing this ridiculous reply instead of fixing their sales system? OF COURSE NOT!

The attitude that "All the success is due to me and all the failure is due to someone else" really bothers me. If you really think you're worth millions, then go ahead and stick that giant price tag on your head. I wouldn't hold my breath about landing that "no downsides, all upsides and BTW make me rich" job, though.

If you want to get maximum compensation for the value you create, become a founder.

Pay=marginal productivity. There's a field called economics.

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