Tech firms shell out to hire and hoard talent
economist.com
economist.com
Am I the only one who has started to see media hit pieces for what they are? One way to lower personnel costs is to make it socially unacceptable to attempt to profit from a business transaction (aka job).
People were angry because Wall St bankers raked in bonuses while the economy tanked, Wall St got a massive bailout, and people were losing their houses.
Silicon Valley isn't looting people's retirement accounts and doesn't need bailouts. The money is also spread slightly more equitably than Wall St (individual companies vary of course).
There's a push by the media and investors in every direction to lower engineering salaries (through shame or increasing the supply of engineers). Some is profit motivated, some is probably motivated by jealousy but together there's a theme that engineers are in some way privileged and undeserving of what they earn. Given how incredibly difficult and time consuming it is to become a good engineer I suspect all this whining will not accomplish much.
And remember the Economist is a UK publication and the status of engineering is now where near what it is in the USA
From Wikipedia:
"In the UK, "engineering" was more recently perceived as an industry sector consisting of employers and employees loosely termed "engineers" who included the semi-skilled trades. However, the 21st-century view, especially amongst the more educated members of society, is to reserve the term Engineer to describe a university-educated practitioner of ingenuity represented by the Chartered (or Incorporated) Engineer. However, a large proportion of the UK public still sees Engineers as semi skilled tradespeople with a high school education."
And I though the origin was military engineers you know like Leonardo
Wrt startups, it's also a signal that this is perhaps not where value is, ie turning coders which are already expensive into some product which needs to be even more valuable. You could for instance start a business that takes unskilled labor and turns it into something else offering high ROI. It's just a matter of developing such a business.
The fact that it's expensive also skews the founding teams towards having coders. Which IMHO makes it more likely they'll succeed, at least in coding intensive businesses.
As a coder I'm not so worried. For the moment it appears demand is outstripping supply, and I'm somewhat sceptical that the marginal supply is particularly good. The first guy to sign up for CS really, really wanted it. The last guy, he might be smart, but he was just as likely to go into management consulting or banking. And coding in particular seems to reward people who have real interest. I'm sure a lot of other fields are like that, but coding especially so. You're sitting in front of a machine that allows you to practice and look up advice 24 hours a day. Other fields are typically limited, eg you can only practice sports for so long each day. That will tend to advantage people who are interested, rather than those who need a paycheck (which isn't a terrible reason either).
I don't think you become a better coder by going on sleepless coding sprees. Sure, sometimes its necessary and productive - but over all I think it has as little impact on your development as an engineer as a researcher binge reading academic articles (sure, sometimes you need to when approaching a new area/problem) but I don't think that's what defines you as a researcher either.
This investor is probably making more than the vast majority of the people building technology. It's not clear to me why society benefits from that.
High salaries encourage young people to enter the field. That's a good thing.
High housing costs are another matter...
"The engineers are getting paid too much so my startups can't convince them to work for equity because of the free market while my entire industry avoids paying taxes and stiffs America." Cry me a river, vc.
The problem rather is that it is (from bureaucratic-legal-financial overhead) hard for an "ordinary" person to become a VC. That is where you should demand change for more justice.
I think if smart people get enough money to found companies, which at the end deliver products people want (otherwise they wouldn't give their money etc. for it) and new job opportunities for prospective empolyees (people would not take the jobs if they had better opportunities), society clearly benefits.
Having said that, this feels like somebody got butthurt that they couldn't find cheap labor who will work 80 hours a week. Tough luck!
Precisely. The article acts as if employees receiving excellent compensation is bad, yet cannot put its finger on why.
Meanwhile, a few guys were paid millions of dollars to play baseball last night.
They do, down towards the bottom:
"The rising cost of talent has also pushed up the level of funding startups need to raise. The idea that it is cheap to launch a firm is a myth, says Evan Williams, who co-founded Twitter and set up Medium, an online-publishing platform. “It’s harder and more expensive than ever to make a startup successful.” The more money young companies raise from investors to pay their employees, the harder it is for them to break even or become profitable."
> a few guys were paid millions of dollars to play baseball last night
Which significantly raises the bar on entering the baseball team market. The world is unlikely to suffer from the shortage of baseball teams. Shortage of new tech companies does seem to have stronger negative effects on the economy.
Ahh. I see. If only they let go of tight grip on our balls by issuing more stock to the wealth creators, the problem should resolve itself. That is not happening though. Hence the pain. If you can't pay in cash, you can pay(generously) in stock. Can't you?
You almost shouldn't hire lots of people until that point?
I disagree. Baseball is a legally enforced monopoly in the united states. (http://www.swcollege.com/bef/policy_debates/baseball.html) If not protected by antitrust laws, all major sports would arguably be prone to disruption and price undercutting.
The SF megacorps are not similarly protected. These salaries are market based pricing.
For example Leicester's run from third tier to the championship 09 - 16
Well, kind of. They actually collude with each-other to suppress salaries.
But you're not talking about companies producing technology, you're talking mostly about companies producing gadgets or providing services without which we would probably be just fine.
Some guys get paid millions of dollars to play baseball, and generally the American public seems okay with it. That is why you probably won't have a problem with diversity if you make a baseball team in your neighborhood. But hit pieces like this show that the American public in general distrusts the idea of "nerds" getting respected and paid a lot. This is going to translate into fewer people being comfortable with joining that distrusted group, i.e. tech people.
Nobody is concerned that the top level baseball players are all men of similar characteristics because the teams themselves aren't making it an issue. The leagues realize that it is those men of similar characteristics that they are selling. Fans latch onto the players, even to the point of buying merchandize with the player's own brand. There is absolutely no worry about paying such a person millions of dollars, because the crowd is there to see David Ortiz, not a random woman who was born in India. There is no drop-in replacement for the brand of (insert your favorite player), and there never will be.
Tech is different. The product is the tech, not the people. In this case, it may have been Linus Torvalds or that random woman born in India who built your product. Assuming they are able to deliver equally, it makes absolutely no difference to the customer. Theoretically, everyone could be a drop-in replacement. As such, driving down wages is a top business priority, and the way to drive down wages is to increase the supply of the product you are buying (i.e. labour).
The stats show that men with certain characteristics are also most likely to be building the tech. "Group X/Y/Z" is the most logical untapped market to go after. If we assume women make up half the population, but make up almost no portion of the tech labour force, that is half the population that has not previously been within your hiring pool and are ripe for the picking. It is in your best business interest to encourage them to join the ranks.
This is also why those who couldn't find cheap labour are pushing learn to code initiative so hard. We don't see the baseball industry pushing for "learn to baseball" initiatives because, again, they are selling specific people and adding more random people nobody cares about does not help them lower labour costs.
1) warehousing: as an engineer you are on ice in an insignificant project in the bowels of one of these tech chaebols but are locked in with golden handcuffs. Some people find that soul crushing, some are perfectly content with it and just focus on raising their families and hitting personal finance milestones.
2) Disconnect from true value-add. As horded talent at one of the tech chaebols you're not paid on your direct value add, but rather your value is in context with higher more nebulous corporate goals. One day one of the corporate game masters decides your initiative is no longer a strategic play, and you are axed. One thing sv engineers often don't consider when they say they want Wall Street like comp, is Wall Streeters have a very mercenary and "live by the sword / die by the sword" existence - there are tons of guys on Wall Street making a million a year and if they lost their current gig they'd never work in the industry again. This works for many people, but others hate it.
Some things to consider.
Can you elaborate on this? Why might that be the case?
After fin crisis of '08: junk bond market close for a few years, was let go. By the time the market came back, there was a whole crop of young guys that survived '08 and had come up the ranks, no need for him.
For a more current example ask some FIC traders that are getting laid off at banks this year.
Tweaking bond offerings and doing FIC trading is not a "leather tanner" type skill. Maybe coding is for reprograming the "moister harvesters" but it sure isn't for "$1m a year doing "other bets" at Google"
^This. Or hire remote, which is a perk in itself.
If someone wants to start a company focused on streamlining the hiring & benefits process across state or country lines, I think that would go a very long way to increasing the remote-only attitude among startups.
That's weird, none of the US startups that hired me (I'm from EU) complained about it.
They actually complained more about the wire fees than anything else :)
Maybe it's because I'm setup as a one-man-company in my home country?
The way I'm setup, it's actually less paperwork for me if the company is outside the EU -- which is why I prefer those.
I just checked my papers now and it does say "consultant".
Is there a difference (legally, in the US) between contractor and consultant?
Basically unless there is a requirement for reverse VAT charges which isn't applicable to the US there is nothing a company needs to do when hiring a contractor other than pay the invoice, on the other hand there are tons of regulatory and legal requirements that they need to meet when they offer you employment.
I personally prefer to pick each service provider separately. For example, a payroll processor like Gusto will handle all the onboarding forms (W-4, I-9, W-2, state new hire reports), state insurance compliance, fed and state payroll taxes in all 50 states. TaxJar figures out and reports sales taxes in all states. Guideline for 401Ks etc. Healthcare is definitely still the most problematic one.
Yes, it could be easier and more streamlined. However there's already some great services that can make hiring in multiple states easier.
Or he can start one man ltd corp in his country and make company-company contract. It is mostly a matter of will.
How is it a perk? You provide your own equipment, give up some of your personal space, do your own support, the company saves on rent, cleaning, utility bills, equipment, furniture, security... and they convince you its such a perk you should be paid less too! Remote workers should be more highly paid! The boss is laughing all the way to the bank!
Remote isn't for everyone but is a perk for many.
In particular, my last employer gave everyone the option to use an app[1] for easy access to email on their personal phones. I refused to install it, since it gave my (then) employer the ability to remotely wipe my phone at the press of a button.
[1]: https://play.google.com/store/apps/details?id=com.good.andro...
Wiping a personal device to delete business data within one app would be illegal in a lot of countries.
Maybe it is, maybe it isn't - the point is that you need to give your employer the permission to wipe your entire device. And even if you trust them - whose to say there will never be a bug that triggers that code path?
As always, your rate is only ever as high as you set it.
I ask HN, who are the shovel sellers in this goldrush? Is it the tech superstars who can "touch millions", the VC, the founder? Who is hocking shovels in our current scenario?
Not sure what it's like in the SV but here in the midwest I know a lot of people are hired through third party recruiters, and even a small team can place hundreds of candidates per year.
EDIT: Sorry for the confusion, in this case I have no idea why the recruiter revealed the "true $ amount" to me, rather than just the amount I would make.
They wouldn't be taking the $30/hour from me, they'd be charging the company I'd work for obviously.
99% of the time you only see the amount after the agency takes their cut.
They wouldn't be charging me, they're taking a 30% cut of the hourly rate and giving me the rest.
My point was that the recruitment agencies will benefit from the rise of salaries
I agree that it's annoying that a company would pay a recruitment agency 90/hour to have me, but would never pay me directly that much.
Recruiters get paid by the employer, and not off the candidate's pool. It's employer who bears the burden of paying the recruiter in our current setting. This is why your situation was deemed scam (a.k.a. unusually sub-par for the environment).
If the customer drops the firm, you just get fired instead of benched.
That is exactly how hundreds of "Beltway Bandit" firms operate. Charge the government double what it costs you to employ someone, and spend most of your workday recruiting on behalf of your customers.
The recruitment agency wouldn't be charging me, they'd be taking a chunk before they pay me my cut.
The vast majority of startups would be just as successful using prior models of the shovel, but people love to be on the bleeding edge and take the stance that their business model couldn't exist if it weren't for NewShovelX.
Property owners, who get to rent out their houses and complain about how millennials ruined everything?
AWS/Azure
- Restaurants, bars, night life sellers
AWS is more like SUN microsystems, selling infrastructure, whose subscription will dry up (or at least slow down in a bust cycle).
I'm not in the know here, but if i'm allowed to throw my 2 cents, i feel the article focuses too much in money as the only way of attracting talent. Maybe smaller companies can attract top talent with different strategies? Remote work option, family benefits (health and education packages).
Some creativity would have to be thrown in the mix, but going the extra mile could play a big role in getting people's attention.
What kind of bullshit is this? "Reckons Roelof Botha". Number coming out of his ass with no basis whatsoever. Not even a meaningless study to back it up.
All you need is to rack up a decade of experience, then put in 60 hours a week plus 20 hours of professional development to keep current on the latest technologies. If you're reading this you already have everything you need.
What, that doesn't sound very appealing? Alright, here's my card.
- Be willing to sit in a chair for 8-12 hours a day, staring at characters on a screen, paying attention to tiny details that would drive many non-devs mad, and work in deeply-focused, high-concentration mode
- Be willing to keep with the latest technology trends on your time and often on your own dime. For many people this means essentially jettisoning the idea of a healthy social life
- Have the financial resources, talent, and drive to get through challenging academic material for 4-8 years at a university or spend all your free time teaching yourself everything you need to know, which can even harder, meaning again, no healthy social life
- Live in an area with an incredibly high cost of living that only gets higher each year (occasional pullbacks notwithstanding.) This can mean spending 30, 40, even 50% or your income every month just on rent or living with a gaggle of roommates through your twenties, thirties, even forties.
- Be part of an industry that, despite fierce competition for talent, will decline to hire qualified candidates on that basis of age, perceived "poor culture fit," having attended a "bad/wrong" school (or no school)
Devs are also value multipliers; they're worth more than some marginal value. When you hire a dev, you're hire them to bring in 2,3,5,10 times what you're paying them in value, not 120k so that they can bring in 130.
The fact that devs are paid high salaries is good and makes perfect sense. It's part of the reason doctors are paid so much (and if we were really fair, currently underpaid professions that are similarly demanding would be paid far more than they are now.)
Now, the "this hurts startups" issue is something to be concerned about, but not at the expense of workers. What can be done here?
- Get used to needing more VC money. Adjust expectations
- Figure out ways to make startups cheaper (#1 on the list should be massive housebuilding. If rents were 1/3 of what they are, we would likely not be even reading this article. Right now all that would-be "extra" money gets directly funneled into the pockets of landlords. Tech bigwigs should be pouring massive resources / clout into changing this. Density, public housing to take pressure off the low end, all of it: https://medium.com/@spencer_th0mas/fixing-the-nyc-rent-crisi...)
- Get used to having fewer, but better capitalized startups
42% of RSU earnings withheld to cover taxes.
90 minute commutes to work one-way.
Stack ranked performance reviews.
Open office space, cramped quarters, and distractions.
Off-hour email and texts. Implicit expectations to be "on-call".
Lower housing costs would slow salary increases and make recruiting easier.
Maybe they think the increase in infrastructure (requiring taxes) and lobbying costs would be more than they would save?
Or maybe they see their personal property appraisals increasing and decide not to do what's best for the firm?
I don't think they're interested in lowering housing costs for the whole valley though.
"The perceived skills gap is because companies have stopped training and developing people internally," says Peter Cappelli of the Wharton School, who was interviewed for the report. "Before the 1980s, 90% of vacancies were filled internally and 10% were hired outside. Now, 65% of vacancies are filled from outside," Capelli says.
So cut-throat.
http://www.businessinsider.com/why-cisco-showered-three-men-...
As the article notes, companies are likely to maintain lists of specific companies they don't want people moving to and will offer retention bonuses to prevent it.
This is far more pervasive than the cream, they are getting at best the top third. That is just high demand for programmers, not a talent war.
That can't be right -- various sources but the number of CS graduates at 40,000 per year. So that'd be 4k CS hires (apart from math and other engineering hires) per company, per year. Sounds a bit high. But like a lot of other things VCs say, it's probably not meant to be taken "literally".
I bet he wasn't quite so outraged at the illegal wage fixing cartel.
I'm 100% sure it's the other way around.
I imagine this has more to do with keeping company secrets within the company. It has to, right? Is one person really worth 100M?
I guess if an athlete is worth 400M over the course of his career to a franchise (thinking of an A-Rod), it makes sense in this case also.
The thing is that too much is centered around a few spots. That increase the "scarcity perception" because them are in a island and don't look across the ocean.
The article states the cost of living is 41% higher. That's a large underestimation. In Palo Alto and SF, the average house prices (keep in mind these are mostly dilapidated tiny lot and barely livable) for 400% to 700% higher than the national average.
Taking into account the cost of living, I'm surprised that bay area salaries and compensation are not increasing more than it already has.
Additionally if they were on the evil side, they could also advocate for open borders and removing visa restrictions for high tech workers.
But no, instead it's just whining. It's particularly hypocritical since it's coming from a bunch of rich folks, who typically became rich by owning a successful tech company.
that is so wrong i don't even know where to start.
I'm estimating the percent of all American undergraduates hired in those places to be ~5%.
http://nces.ed.gov/programs/digest/d15/tables/dt15_322.10.as...
.3 * 55367 = 16610 or about 5000 per company. Google employs 57,100. Facebook employs 12,691. Amazon employs 132,600. It's hard to say how many of those are CS grads. Yeah, count me as incredulous.