A conversation with Shel Kaphan, Amazon’s first employee (2016)
blog.ycombinator.com
blog.ycombinator.com
There isn’t much growth for pay increases or promotions since it’s not a large company, and job security isn’t the best because it’s a semi startup.
And since the founder is paying you directly from his pockets, he really wants to extract a full pound of flesh for every dollar he gives you.
He promised a few of the more senior employees a cut if we got external money, but when we got that, he didn’t give it to them and they both left to form their own company.
Working in a small startup style company without negotiating a cut of the ownership via shares, is being a sucker - you do 80% of the work & intensity for the owner and are left with not much if it takes off, unless you can find a good enough company that promotes you as it grows larger, and not just replace you because they can afford somebody with more credentials.
Some people may come back and say not to join such companies but pick wiser, but the harsh reality is that most of these startups founders are narcissistic and would sell you out for a dollar.
This is a just a warning and insight to anyone thinking of joining these companies.
For me, I can’t wait until the pandemic ends and I can find a better job elsewhere.
That may be the case but there is a world of difference between what you are describing and every hypergrowth Series B+ company with reputable top tier VCs I've worked at. Maybe part of the problem is the "non-tech semi startup" part -- tech startups, while still having founders who "would sell you out for a dollar" must nonetheless participate in a labor market which is biased in their counterparty's favor.
Why is this the case? The counterparty can work at a FAANG/newly public company, a quant fund/finance, and so there are bidders from multiple industries who want the top tier talent. Are you a technical employee or a non-technical employee? If the latter, have you considered making a transition towards working in a tech startup for better mobility, if you want to work in startups at all? I have run into all kinds of shenanigans in my tech startup employee days, but the general quality of life at the good companies was the best I've ever had.
Reputable VC backing would definitely be a positive signal for a better working environment — the big backers know that time and some amount of money (not wasting it) is required to build a startup up. They are also in a position to coach owners to treat their employees as assets not an expense
But even though I'm getting a lot less salary than I could have, I decided to keep grinding because I see way more opportunities and chances than my "personal loss".
Imo, everyone working his ass off in a startup should make sure it's worth. And that, for me, means looking for opportunities regardless how shitty the founders may be.
Being an early employee gives you a shit ton of responsibilities, but instead of seeing them as a burden, take them to shine and negotiate your future.
Just my advice feel free to ignore. I probably would have!
But everybody should choose the path they want.
There are always good and bad cases of course - I’m hopeful that the parent of your post is a good case (we should always be optimistic!), so it’s not to bring him down but rather just share other experiences.
I think the "blindness" here can be on both sides, but I definitely don't want to suggest to "blindly" endure the workload for little pay.
Imagine the pandemic has 1-2 more years to run. Don’t let that delay lull you into forfeiting two more years of your short (work and non-work) life.
For me, I’m a bit stuck in a niche field in a niche region (don’t want to disclose too much in the rare case my boss reads), so it’s quite difficult to move around. Also as I’m no longer young, my salary is a bit higher than for young 20s so it’s not that easy to move into other adjacent fields. But the expenses are higher - with a partner and bills to support. Now I know what it feels like to get older!
I've made some drastic change to our culture to be more empathic, transparent and based on trust. Since then its way more enjoyable for everyone and we are way more productive. Salary for our employee are still under market, but we increase them whenever we have the chance and the financing. We aim to get to 10% above market value so that everyone is confortable. Also we've cut the 80h per week bullshit. If someone is working that much he is most likely doing a crappy job and needs to prioritize his day properly.
Here is a series of concept/book I've implemented that drove the change:
- Objective and Key Result: the only work that matter is those explicitly tied to the objective. There is a good book on that.
- The book Drive, it helped us understand how to create a motivating environment for our employee.
- The book Traction, it gave us a set of tools to make the business run smoother.
- Effective DevOps: It gave us a blueprint on how to structure our technology developement and team interaction.
- Peopleware: This was one of the best book that we've implemented. We moved to a remote-first company based on trust, we don't track time anymore and we don't care when people work. All that matter is objective attainement and the wellbeing of our employee.
Let me known if you want to chat about this.
Yes, meeting objectives matter. But setting the right objectives is a conversation between the business's wish list and the constraints of the resources that the business actually has. Trust is a two-way street; too many managers talk about trusting their workers but they don't talk about what they do to earn their workers' trust.
I’m not in a place to make decisions, so unfortunately can’t change the culture from within. The founder isn’t a bad guy, I just know he’s going to screw me in the end, so overworking for him doesn’t make sense for me.
For me it sucked that I was lied to in the interview (if I had known that two of the senior members left, I would never join), but once you are roped in, it’s not that easy to get out.
That said, I don’t think my experience is particularly unique — honestly I think finding a good company is more rare than working for a bad one, but when we are in good roles (like I was in previous jobs), we do assume we can always be in good situations.
Pandemic didn’t help - worst time to be an employee looking for a change!
So, you are kind of the forgotten founder? Most people think of Jeff Bezos as the creator of the company. “In fact, to be completely technically true about it, he is the founder. But I was talking to him about joining him on the venture before the company was incorporated. He basically was just arriving from the East Coast and setting up his house when I moved up from California. All that existed of Amazon was on paper at that point. Jeff was working on it full-time already, and his wife, Mackenzie, was writing checks every once in a while. But that was it. I didn’t get founder’s stock. It didn’t seem worth the argument at the time, although I kind of felt like, well, you know, I mean I was there at the beginning. And it was all going to work out the same way, one way or the other, regardless of the technicalities. And it just didn’t seem like something that I wanted to make a big deal about at the time.”
[1] https://www.geekwire.com/2011/meet-shel-kaphan-amazoncom-emp...
Moreover, many of those people are willing to hire someone good who is available for temporary jobs, and hence paying very competitive rates, at the same time surviving on canned tuna themselves.
I've been #1 techie in many failed protects. Not depending how you think about that business ideas and personalities behind them, all those people should be highly respected for putting their neck on the line.
A founder may only be investing an amount in the venture that does not affect their own quality of life. They could have other wealth or means, and losing the entire investment would not be catastrophic. They might have a personal runway of several years before they have to give up and get a day job.
Meanwhile, the early employee at a startup is far from without risk themselves. They are almost certainly not well paid (until the last decade of multi-Billion-dollar Unicorns, startups were NEVER known to pay well). They are also likely not making meaningful savings or even eating into them in the hope of hitting it big. They are almost certainly sacrificing a substantial part of their personal life just as the founder is, risking personal relationships and health.
I can confirm :/
Worked at a startup as an employee, made a significant financial loss, living on savings and eventually credit, because cost of living was higher than income. Eventually had to stop.
This happened gradually as I just couldn't keep up the work. Employer was annoyed with me for not doing more work. I kept telling them I had to do other work because their pay didn't cover my essential bills. They kept telling me if only I would finish X, Y and Z we'd have more money coming in.
I took a risky bet and lost - as an employee. I don't resent it, they really couldn't pay more. But it was definitely a gamble.
That financial cost still has lingering effects years later.
Don't assume employee #1 or #2 is not taking on a risk.
I'd still like to work at a startup! But I'll automatically turn down offers with low pay now, as well as offers of "no pay at the moment until we get investment" which I had some of this summer.
I knew exactly how much was in the business bank account. There were no secrets about the state of the business. I knew how it had arrived at the state it did as well, and its development and investment history.
The developer I was replacing had just died, before the product was ready. He was a good friend.
I could either take it on and try to make it work or not.
They weren't underpaying due to failure to value me. They were underpaying because we mutually agreed the project was worth it, and there was the pot of money that there was.
So I took on that risk on full knowledge as (replacement) employee #1. Yes, that's a business risk.
The amount of money they put at stake can be very little, either living off Ramen which is cheap, or coming from a previous venture, then it's negligible. You should generally follow the same principle as investing in stocks: "Never invest money that you can't afford to lose."
A lot of people also see a risk to reputation due to failed startups, but for the first 1-2 it doesn't really matter, and as long as you raise _some_ early round and have good explanations/takaways for why it failed, and you didn't pull anything shady, it will only increase your reputation.
By taking an employee founder is effectively paying monthly, mind that, very expensive, insurance which provides free hands at any moment when needed. Employee's benefit is immediate, unconditional and guaranteed. The opposite of being an owner of business.
The employee takes money from the company, not the founder. Those two are only the same for the pre-seed phase of a startup. It's also unlikely that any people are employed before some investment round has been raised.
Once some investment is raised, the money comes predominantly from the investors and not from the founder. At that point the risk for the founder is mostly gone.
I'm not saying that there is no risk at all for the founders, just that it's concentrated in the pre-seed phase of a startup.
> This is none of the employee's business to assess founder's risk exposure
If you are asking me to join your very-early-stage startup, you can bet your ass that I'm going to probe you on your risk exposure.
Of course not every company has investors. In fact I personally strongly favor that for my own endeavours nowadays, but that's not what the discussion was about.
Don't say "I'm taking all the risk over here" because it creates an adversarial dynamic with your team. There is no need for you to separate yourself from the rest of the company in that way. You're all on the same side and the language should focus attention on cooperation and the benefits which cooperation will bring. Writing a check takes seconds. Real work takes hours, days, months, years off of a person's finite life. Try to stay grounded in the real world.
What risk exactly are we talking about and who has suffered it? (I'm assuming your suggestion of 'neck' is hyperbole)
This is usually compensated with stock, which is currently worthless but may not be in future. In effect, the employee is giving the company a high interest loan with a high risk of default.
Calling BS on this has not yielded any great results. If not anything, there should be some clause that benefits the first 2 or 3 employees with an outsized monetary outcome, if the company becomes immensely successful.
The above equity numbers probably make sense if founders have worked on the idea for a while, built some reasonable MVPs, done market validation, have found reasonable PMF and all that.
Bottom line, it's not worth being the first engineer purely from a monetary standpoint.
Edit: ah yes, and https://news.ycombinator.com/item?id=12437322 from 2016.
If you'd please highlight some excerpts?
Take a look tomorrow night. I'll pick out a few juiciest bits by then.
What's like the percentage of people who takes on that kind of wild Hail Mary pass and win it all?
Also I am curious, as single-track minded Software Engineers, how do we protect ourselves from the super smart and super driven Bezos of the world? And I don't mean that in a negative way. I am genuinely curious how we can stay competitive when we're working with that type of personality.
software engineers are not very socially adept and can't read people who are predatory
it's even worse with 'save the world' type software engineers
* the only thing you can do is make sure you get some stock
even then most predatory business side founders will make adjustments (the way Zuckerberg did) to take most of the stock for themselves
also percentage of people who win taking that kind of Wild Hail MAry pass
every startup is a wild Hail Mary pass
So you will get some really crazy 'starting scenarios'
Talk to anyone who started a successful company. There were always moments where chances of success went to 0.0001%
and apart from the founder/founders/ a few employees who drank the Kool Aid, no one else thought there was any chance left
There's no need to project this onto all software engineers, it works for a joke in big bang theory but even there they needed canned laughter.
He offers you a role and terms: you take it, you don’t, or you counter. That process converges on you working there or not.
I don’t worship at the altar of Bezos (though I have overall respect for him and his accomplishments), but I don’t see anything beyond my ability to say no that’s needed to protect myself.
Available for free [1], and Shel Kaphan is one of the several former and current employees interviewed by the Frontline investigative reporters.
Been watching SpaceTime with Matt O’Dowd with my kids and it’s utterly terrific.
As a matter of fact, the U.S. (of which I'm a citizen) has a singular entity to thank for the fact PBS is here today.
And, to add some insult, one of our two leading political parties is currently making fun of that entity. Things are great over here.
Love this attitude. As flippant as it seems, the statement speaks volumes about confidence and the ability to venture into unknown areas. Skills often overlooked while hiring.
As far as I can google, both of those states have had a substantial sales tax for many decades — Washington's is one of the highest in the country!
What am I missing?
Think the article confuses sales and income/capital gains tax. Being in a small market was an advantage from a sales tax perspective. Being in WA or NV was advantage from income/capital gains tax perspective. The latter gave Amazon an advantage in hiring. And, later when successful, allowed Jeff and early employees to realize more wealth from their stock/options.
Nevada, on both fronts, would have been as much of more efficient. But, I’m guessing, the difficulty of recruiting great technical talent (which was needed in the early days of Internet ecommerce) would have swamped those advantages.
For much of Amazon's early history, the sales tax in Washington was only relevant if you happened to live in Washington. The set of areas where Amazon must collect taxes has grown, and at this point for all I know might be everywhere in the US.