I used to work for Amazon. I did not give Jeff Bezos $100,000. In fact, I actually made money out of the deal.
Fundamentally, tech workers don’t seem to understand this point mainly because they are making more money than “everyone else.”
The other reason is that we as humans don’t understand big numbers. Big ape brains can’t understand the gap between $1 million and $1 billion let alone 100 billion.
If software engineers would have banded together a long time ago to get a larger piece of the pie like professional athletes, then….
- Senior engineers would make NFL wages
- And quants would be making NBA/NFL wages
That is an absurd exaggeration, unless by "senior engineers" you are including people who do a lot more than "just" engineering, e.g. build companies, build products, etc.
The reason NFL wages are so high is not just that they bring in a lot of money, it's that the players are to a large extent irreplaceable. If you take the, say, 500 most talented players in the US at a given time, you can't just replace them with the next 500 most talented players and get the same outcome. So each of them commands a very large salary - because the alternatives are worse, and will lead to worse outcomes, which will lead to less money for the team.
And at the top end, the best players are a massive draw that makes teams tons of money.
Compare that to engineers. We are, to a much larger extent, replaceable. If Amazon can't hire the 1000 "best" engineers, going to the next 1000 will probably not noticeably impact their product. I'm not denying that there are talent differentials between engineers - I think it's even more than the commonly cited 10x. But it's still not that big, definitely not bigger than the difference in NFL players (since engineering is not competitive.)
Note that if you stretch the definition of software engineer to include people building and launching brand new products, building huge successful teams, etc, then you're getting into the realm of CTOs, CEOs, founders, etc, which are far less replaceable (I'm a good engineer, but I couldn't have built Stripe). But then we're talking about the people who are adequately compensated for their work.
I genuinely believe that a league made of the 500-1000 rank players would be just as (or at least almost as) entertaining as one with the top 500 players. Relative rank is what matters and it's why NCAA March Madness is so popular despite being made up of relatively low ranked players.
This is a popular enough theory that it's been tested multiple times. In the successful cases, the rival league still ended up trying to poach the top players and ended up merging with the other top league. In the less successful cases, the league went out of business.
In software, that's not the way it works. Or at least, the competitive business aspect of it is largely out of engineer's hands. Few businesses ultimately succeed because they wrote better code, IMO. Though interestingly, a bunch of startups only get big in the first place by having great code that allows them great speed/flexibility/etc. Stripe itself got big originally because its API was really great, which I'd attribute more to product than to engineers, except in this case it's kind of a merger of the two.
"March Madness" is an anomaly, a single-elimination tournament with 48 games in one weekend with a history of upsets and buzzer-beaters. Additionally, college basketball and football in the US benefit greatly from the local and alumni network affinity for the programs, that doesn't exist with, say, minor league baseball or the NBA D-League.
The AFL was actually relatively successful since it forced a merger with the NFL. Meanwhile, at least according to a 30 for 30 documentary, the original USFL had a potentially viable niche as a second-tier spring league for awhile until they made the bizarre decision to switch to the fall football season and try to force an NFL merger.
What is so special about them?
...because they formed unions.
I don't understand what makes people think that software engineers are so valuable that they'd get wages that are multiples of doctors.
The Logic of Collective Action explains the mechanics. https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action
It's basically game theory, by another name.
"Preventing defectors from collective bargaining" is also, more or less, the definition of what an economic cartel does.
If you could hire 2 or 5 of the next best engineers for the price of a top pick 'NFL' engineer, you'd be ahead in output in most situations.
The same does not go for the NFL.
This is the main reason it’s completely illogical to expect that an employee receive most of the revenue their labor helped generate.
If your work earns $100k/y in revenue for a company, that doesn't mean your work created it entirely. The continued dividends of organization of the company, customer acquisition, legal apparatus, support of your entire organization made that revenue possible and are entitled to a share of it too. It took a village to make that revenue, unless it didn't, in which case: quit and do it yourself to keep all that money.
This is a self-correcting system that ensures everyone gets paid approximately what they contributed.
It's of course hard to precisely quantify these things, but the worsening gap between worker and owner incomes is quite obviously not proportional to any change in how much value owners add to a corporation compared to workers (if anything, workers' contribution has been increasing, not decreasing, as productivity tools and techniques have been advancing).
It's because there ARE contributions from the owner, even a passive owner has what I called "dividends from stored labor": they took on the risk, created a functioning company solving a problem, did the work of organizing the systems/structure that run the thing, and so they are entitled to a piece of the revenue as well (as that revenue couldn't have been earned without their contributions either).
My point was that owners currently get a disproportionately large piece, and that the gap between what owners get vs what workers get has been widening with time. And not only is it widening, but it is doing so while the relative contributions to the business' success are often narrowing (give the huge increases in worker productivity in most domains).
What's happening here is gains from trade. I have a lot of free time and a set of skills, while my employer has a lot of money and the willingness to shoulder the risk that the work they're asking me to do won't be profitable for them in the long run. Both sides get something out of the deal.
Amazon is structured so that there is net 100,000 dollars of wealth in the deal betweeen you and him that goes to him (whatever goes to you, he also gets 100k.
I am sure you have no complaints, but why the 100k? why can't that be 50k to him and 50k to you.? Or 33, 33 and 33 extra in tax? or ...
And is the particular arrangement something that is fundamental and inviolable to creating the wealth Amazon did? Or is it just that because it was that way Amazon could beat the alternative universe Amazon ?
what is the phase space of "still generate wealth" and "society looks different"?
If Amazon employed me tomorrow, would their revenue immediately and automatically increase by $100k?
It is always useful for fish to ask what is water.
Otherwise people accept knee-jerk political phases like "free market" or "business friendly policies", without considering if it is optimal
There is a continuum of ways to arrange government, labour and private ownership. The particular point labelled "USA early 2000s" is not the only one.
That is what I genuinely believe - and I want to look around to see what the rest of the continuum looks like - the good and the bad parts
Amazon's secret sauce was cheap capital. Both tax holiday/avoidance and persuading Wall St to forego profits. A combo that's unlikely to be repeated any time soon.
If Amazon had had a competitor back in the day that had done just that - everything Amazon did, only shared more, then probably we would all be buying from ... err ... Mississippi.com. But this competitor would have had to pull all the right moves - as well as sharing differently.
And one day, yes there will be some innovative new company that will do to Amazon what they have done to Walmart. And maybe that company will have a competitor that will be a co-op and maybe they will have the edge. It has worked ok in the UK for John Lewis. But the lesson from John Lewis is they have to be good at all the basic stuff - and only then do they get to pick staff based on the nicer governance / culture / slight pay gap.
Building a company is hard. Building something like Amazon is freakishly hard. Which is why this "treat employees well" is basically never left up to the market and just tacked on afterwards in regulations.
And finally - yeah would Bezos exactly be hurting if he was half as wealthy. Neither of us think so - which kind of is my point. If there was some (weird) regulation that meant no-one can become richer than 10 billion dollars, and would need to improve share grants when they go over, guess what, Bezos would still have started Amazon, still done it all, and still have a yacht and a second wife.
The phase space available to us is larger than we think.
I'm not angry. I'm just making a point.
> Building a company is hard. Building something like Amazon is freakishly hard.
And that's the point.
> If there was some (weird) regulation that meant no-one can become richer than 10 billion dollars, and would need to improve share grants when they go over, guess what, Bezos would still have started Amazon, still done it all, and still have a yacht and a second wife.
I don't want to fixate on Bezos in particular, but there are probably a lot of founders who would be hesitant to start a company if, once that company became valuable enough, they would be forcibly divested from it by law and therefore be at risk of losing control. Even if you're a vision-focused founder who is intrinsically motivated by wanting the company you are founding to exist in the way that you want it to exist, with no regard to your own personal wealth, you're going to be hesitant with that sort of confiscatory regime. And that's setting aside the fact that building a large company is not only "freakishly hard" but also tremendously risky. If you have a wealth cap of 10 billion dollars thinking "10 billion dollars is enough motivation for anyone", sure, but there's a risk premium involved and the expected value is nowhere close to that number.
If you were a fairly senior SWE then customers gave Amazon a few million dollars for the work you did. Jeff got $2.8m, you $200k. On paper it's unfair, unreasonable, and unbalanced, but you agreed to it, and without Jeff you would have earned less. Maybe it's fine.
This was early in my career, and I didn't work on anything customer facing, but there's still no guarantee of that. What if I'd worked on the Fire Phone?