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Comment by habosa | Hacker News Reader

I think because individual tech workers are so highly paid relative to other industries, we fail to see how low our pay is relative to what the people at the top are making.

A high performing Google engineer may make 500k+ in total comp, Sundar Pichai makes $100M+ in many years. That's 200x as much ... and the baseline is already super high.

You see startup founders who exit with generational wealth (tens or hundreds of millions). They are also frequently able to cash out along the way, or borrow against their success. Meanwhile while their first engineering hire, the person who probably wrote half the damn code for years, gets < 1% of the equity and none of the glory.

It's not bad enough that this is true. The Bezos and Musks and Kalanicks of the world believe that this is correct. They truly think they do something in their 24 hours of daily human life that makes them hundreds or thousands of times more valuable than even the absolute best "labor" in their industry.

The other industries known for highly paid labor (finance, law, and medicine in the US) do not distribute rewards this way. Yes the people at the stop are still pulling in massive pay but there's a much stronger distribution of profits throughout the labor pyramid. I don't envy the culture of those industries, but I do sometimes wonder what tech would be like if we leaned a little more that way.

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I once worked at a startup that was acquired and the founders made a killing. A few years after the acquisition, they founded a new company in an adjacent domain and started raiding their original company for talent. At the time I was working with a guy who had product and marketing experience who happened to be close college friends with one of the cofounders. No one liked working with this guy. Yet rumor had it that he was offered a 5% stake in the new company while the engineers they were recruiting were being offered .25-.5%. I was very confident that they would be successful but I opted not to work for them because I was so offended by the inequity of the offers. The developers they were attempting to raid also had proven that they were productive and effective so it wasn't as though they were making a wildly speculative bet on them.

I also knew that in a major exit, I would be more resentful of the relative difference between my rewards and that of this other guy than I would have been pleased with my windfall. I had once had serious respect for the cofounders, but their greediness and willingness to perpetuate these systems of inequity permanently diminished my opinion of them.

Yet, I have to concede that the cofounders were correct in their assessment that they could lowball the engineers with little impact on their prospects for success. They were able to exploit their way to a second major windfall, far larger than the first.

It's also that good marketing of a product is probably more integral to its success than its engineering. There are so many stories of superior technologies failing because of bad marketing.

Good marketing would make a mediocre product succeed, but it will not save a crappy one.

Also, "superior technologies" is a loaded term, because it is in fact very subjective.

Lots of products literally don't work at all and still sell, and even lead their industry in revenue. I wish it wasn't true.

I agree that marketing is extremely important. There is no product without the engineers and no customers without the marketers. If you prioritize quality, I think the engineers are more important. If you prioritize making money, perhaps then the marketers are more important. I don't really know.

The problem is that in this particular case, the only things this person seemed exceptional at were being friends with the CEO and being unpleasant to work with.

IME at startups (well very small micro startups) you focus on quality at first, and wait for the company to go bankrupt. Then sell the IP to another company you happen to own. That second company focuses on marketing without having to worry about the ownership %'s afforded to the engineers at the first company.

Fascinating. We may have worked for the same founders at some point, as I have had nearly the exact same experience (I was an engineer at the 2nd startup with a ~0.5% stake (before dilution, of course!) -- the payout was nice but it was not a life changing event).

One detail in my story is that I found out a lot about the personal lives of the founders and their friends. They all came from obscene wealth to begin with. The founders father was on the board of a major tech company in the Bay that bought the first startup and financially backed the second.

The nepotism I've seen in my career disenchanted me long, long ago.

I've been working on re-framing nepotism as "selective altruism" -- it's like there's an "in" group, within which the members feel completely justified and even a little obligated to help each other out. So it's our usual human tribal stuff, basically, but we can recognize the altruism in there.

Of course the next step would be leveraging this thought to propose a mechanism to convince them to expand their notion of "in-group" to include, i dunno, everyone who works for them? Everyone who was integral in their success? Every living being with whom they share a planet? So that the altruistic instinct could be expanded to be helpful to many many more.

... no particular ideas atm, but commenting in case it helps someone else reach an actionable insight :)

Engineers should absolutely know their worth. Were they also offering much lower pay for that little equity? It's perfectly fine to accept lower equity for market rate salary. That's adjusting risk to your personal situation.

> The other industries known for highly paid labor (finance, law, and medicine in the US) do not distribute rewards this way. Yes the people at the stop are still pulling in massive pay but there's a much stronger distribution of profits throughout the labor pyramid.

This is wrong. Lawyers get paid worse than FAANG SWEs unless they make partnership, which is the equivalent to becoming a co-owner or working as a lower level exec at a big tech company.

Doctors at big hospitals in the bay make worse money than Google SWEs last time I was chatting with my friend’s wife who was a Doctor at Stanford medicine. The super highly paid doctors are the ones who found or cofound practices.

Finance can pay a little higher, but that’s only because the teams are usually smaller and you have more direct impact. You might pull down 1M/year at Renaissance or whatever, but the partners are still pulling in nearly 100x that.

> It's not bad enough that this is true. The Bezos and Musks and Kalanicks of the world believe that this is correct.

This is the same across nearly all businesses. The owners get to decide how much to pay for operating costs. It’s not a coop.

IME the OP is correct. In my experience, doctors, lawyers and veterinarians all make 6 figures. Low six figures if employee, high 6 figures if partner. 3X difference maybe, nowhere close to 100X.

The key difference is that those professions don't "scale", and the output is linear to the labor (hours) put in. The wealth doesn't lend itself to concentrate into a few hands, and the professional worker is mostly independent and in control of what they do themselves.

In tech, people work in teams where each person is a tiny cog in a (relatively) big machine. We still don't agree how to objectively quantify a person's work output. (Eg: do 10x programmers exist?) When a product becomes successful, there's no objective way to distribute the windfall, so the default capitalist rule applies (whoever invested money and/or has access to the best lawyers gets most of it).

I don't think the discrepancy is the same in any other field of knowledge work, though.

Even hospital CEOs and partners at law firms are making 3-15x what their doctors and attorneys are making. Not 100-200x. The magnitude of the gap is way higher in tech.

The difference is not as great in these other fields, but that's because the pyramid isn't as large. There's one person at the top of Alphabet, and tens of thousands of people below him. No law firm has as many people, by a long shot. And the medical analogy isn't right either. You have to look at the CEO of a pharma company, who probably does make a similar multiple to Sundar.

But the person at the top also has a much greater risk because pay is tied to stock performance. The top lawyer in a firm gets paid well, and probably some of that is tied to firm performance. But the base salary is a much greater percent of total comp in that case.

I know this is beside the point you're making, but that guy at the top does not have greater risk.

The right measure of risk isn't money, it's freedom. Work as CEO of Google or Roche for a month and you don't have to work any more. You don't risk shit, you can only win or win bigger.

This is what I don't understand. There are plenty of people who can run a business, so why is it that we pay so much for them? There's a massive queue of candidates who will all do a decent job (you won't know), so why are they paid astronomical sums? There's no way you can be sure a guy is not going to mess things up, and paying him a lot of money won't motivate him more, he's only got a 24h day. He can't go and be CEO elsewhere because he doesn't know other businesses that well, only a few places could logically use him. On top of that a huge proportion of the stock price is not in his hands.

One creative theory I heard is that a rational benefit of seemingly-irrational executive pay is to incentivize harder work among the people who desire to be executives. Not sure if it makes sense or not, but it's an interesting possibility.

Only works if the would-be CEOs are themselves irrational. You can't seriously be expecting to outcompete thousands of other prospective CEOs.

It would only really apply to companies that promote from within. That could motivate a few dozen people who have a shot at becoming an executive in their career at the company.

You might feel that only a few people are qualified to be your CEO. And they all want to retire - you're competing with the "retire instead" option.

> that guy at the top does not have greater risk.

The CEO and CFO of publicly traded companies get paid pretty handsomely in exchange for taking on a significant amount of risk by signing off on the financial statements.

And when does that risk ever materialize apart from the Enron/Wirecard/FTX cases where the CEO and CFO truly were pulling a massive scam?

Kenneth Lay died after being convicted but before being sentenced, so afaik his family still has the money.

They get paid well to not do crimes? That's nonsensical.

They get paid to take responsibility for crimes that happen underneath them. That’s a lot different and why you got confused.

I think the problem here is it is incredibly difficult to evaluate the kind of value CEOs bring. Certainly I could have done a slightly better job than many ousted CEOs of large tech companies.

It’s also possible that simply by listening to your executives/board, an intelligent engineer could do about as well as Sataya or Ballmer or Sundar.

The bottom of their risk is having to become labor again, that's not a risk, that's the default for every one of their employees.

"The owners get to decide how much to pay for operating costs."

They do make such decisions, but neither that nor their net worth makes them better than anyone else... yet too many of them act as if it does.

What they really are is nothing more than people who've won a rigged game.

Since when does this have to do with people “being better”?

I don't see the problem here.

A burger flipper makes $10 in an hour. An engineer designing a burger flipping robot makes $100. Their department's engineering manager makes $1,000. The CTO makes $10,000.

The hardest worker here is the burger flipper. They work 16 hour days just to afford rent, and it's hard manual labor.

The engineer makes 10 times as much because each line of code they write produces more value than an entire day of manual burger flipping.

Their department manager makes 10 times as much because they solve problems impacting entire teams of engineers that are more important and more difficult than coding problems.

The CTO makes 10 times that because their policies affect many engineering departments throughout a large organization and have multibillion-dollar consequences. It doesn't matter if they work 1000 times harder than a burger flipper, they probably work less than the burger flipper. But their work is 1000 times more important, so it's worth 1000 times more.

This is not 100% wrong, but you are missing an important part of the calculus, which is that as you go up the hierarchy you have more overall and more concentrated power to demand higher pay, out of proportion to the value of your labor.

> higher pay, out of proportion to the value of your labor

To the extent this is a problem, it's a problem of corporate governance. Unfortunately, I'm not sure that problem is fixable, since its root cause is a shift in corporate ownership from individual stockholders to mutual funds (because mutual funds is how most people now invest their retirement savings in 401ks or the equivalent). The effect of this on individual corporations is to make their time horizon for stock price growth much shorter, because unlike individual retirement investors, most of whom adopt a buy and hold strategy and don't trade very often, mutual funds trade stocks all the time based on short term performance.

Somehow that wasn't always the case in the past, so presumably it's also possible for things to be different in the future. If we have the audacity to imagine a different world, it is fixable through organizing and demanding that incentives be aligned with our values rather than with the spiraling fortunes of a handful of extremely self-centered people.

> that wasn't always the case in the past

Yes, that's correct. The movement of stock ownership to mutual funds largely took place in the few decades after WW II.

> presumably it's also possible for things to be different in the future

Yes, but the changes that would have to take place are quite drastic. I don't think disallowing mutual funds is an option. But the only other mechanism of control (aside from market forces--see below) would be to drastically change the regulations concerning corporate governance, and it's not even clear that that would do more than exchange one problem for another, since regulatory capture is a thing.

The only other way to change the incentives facing corporate governance structures is to change the market, either on the producer side or the consumer side. On the consumer side, consumers would have to stop buying goods and services from companies that overpay their CEOs and underpay their workers. Unfortunately that would mean consumers choosing to take a huge economic hit, since those same companies provide huge economic value to consumers. (And in some cases, such as Google and Facebook, consumers don't even have the option of not paying, since the services are free; they would have to stop using the services altogether even though they're free, which is probably even harder to make happen than getting consumers to stop paying for something.)

On the producer side, new companies that are structured differently in terms of governance (for example as worker cooperatives) would need to enter the market and out-compete the existing companies. Sooner or later that might well happen, but it could be quite a long time.

I didn't say it would be easy. What I said is that the potential for change is rooted in organizing and class struggle.

> regulatory capture

Regulatory capture just is the capitalist class organizing to shape the structures of society to their continued advantage. It is class struggle. The only solution is to struggle back.

> the potential for change is rooted in organizing and class struggle

I don't think this is a useful way to view it. I would say the potential for change is in people shifting to a more long-term viewpoint instead of always chasing short-term gain and satisfaction.

> Regulatory capture just is the capitalist class organizing to shape the structures of society to their continued advantage.

If you don't think of yourself as a capitalist, you are dooming yourself to always be on the losing side of interactions with those that do. Particularly if they are predators.

Regulatory capture is just one way that predators use the system to their own advantage at the expense of everybody else. But not all capitalists are predators. The immense wealth our society has was built by people who were both capitalists and cooperators: wealth building is positive sum, the aggregation of win-win interactions over time. But sustaining wealth building requires taking a longer term view in order to preserve the social institutions and social trust that are necessary for it to happen. Unfortunately, the current trend is in the opposite direction.

> not all capitalists are predators

That is simply untrue. Sure, some capitalists have good PR, touting their non-capitalist efforts in ways that intentionally confuse them with capitalism for the purpose of increasing PR value. The increase in PR value is just a more oblique means of wealth extraction. The actual act of being capitalist, i.e., extracting excess value from labor by leveraging capital (piles of money, factories, infrastructure, etc)... that is inherently predatory in nature. Capitalists use the fact that they own stuff, and the fact that workers need food, shelter and healthcare, to grift the maximum amount of value for the minimum amount of public good, PR notwithstanding. It's codified into the cornerstone concept of shareholder value. Capitalism itself is distinct from any charity or other social good that a capitalist or company might engage in, and all capitalism exploits labor. Not every act a capitalist does is predatory, but every capitalist is a predator.

> That is simply untrue.

Sorry, you are simply misrepresenting the facts and the economics at this point.

So, is capitalism somehow not the extraction of excess value from labor (profit) by leveraging capital?

I think you have the causality backwards. A person is able to demand higher pay not because they are in charge, but because the owners/upper management want them to be in charge. That is, they get hired with high pay because that's the value the employer puts on their labor. They determine that the same way the determine what they're willing to pay for other goods and services: how much do they want it, and how easy it is to get.

I don't know what point you are trying to make. You are describing some of the ways that people higher up the hierarchy have more power to demand higher wages. That's what I was talking about.

Ok, let me say it a different way. They don't have the power to demand more than they are worth, because the amount the employer offers reflects what the employer thinks they are worth. You may disagree about how much value they supply, but that's not really relevant. Wages aren't set by what some 3rd party thinks is fair, they're set like other prices - how much the employee's skills are needed and the available supply of people with those skills. Hierarchy is only incidentally involved, and not always. Consider, for example, the wages of actors or professional athletes for example.

In my experience it’s not about labor at all. It’s very far from wanting to put the best high up and more about which social circles you get access to. It’s always a struggle between what’s best for the company and what is best for the individual board members/ceo and there is way to few real active investors for the best of the company to take priority usually.

There is no evidence that management problems are harder to solve than coding problems. Not only that, but when coders make mistakes the impact can be large and the responsibility clearly falls on the coder, whereas when managers make mistakes, the responsibility is diffused to their subordinates. Managers should either be paid a lot less, or be fireable by their reports when they make mistakes.

It has nothing to do with difficulty. It’s not a leveling up game of leetcode.

> whereas when managers make mistakes, the responsibility is diffused to their subordinates.

No it’s not. They will roast their subordinates but unless the org is completely dysfunctional they are responsible for the ultimate deliverables.

The higher up you move, the more responsible for outcomes that are less and less in your control. You even gain legal liability as you enter the “officer of the company” levels.

> It has nothing to do with difficulty. It’s not a leveling up game of leetcode.

Then you should reply to the parent comment and not mine.

> No it’s not. They will roast their subordinates but unless the org is completely dysfunctional they are responsible for the ultimate deliverables.

Please. If you’ve never seen incompetent managers bumbling along making their staff into scapegoats, etc., then you don’t have a lot of experience.

Nothing changes at the higher levels either. Projects are cancelled and teams fired etc, not the executive in charge. The time execs get fired is when they do deliver and there is some kind of liability.

I guess I’ve been mainly working at successful companies? The biggest company I worked at was Google 7+ years ago and managers that couldn’t deliver and blamed employees would get exited or demoted quite quickly.

It’s been even more aggressive in the startups I’ve been at since.

> ...unless the org is completely dysfunctional they are responsible for the ultimate deliverables.

This is true in theory if everyone has perfect knowledge. In practice I've never seen it play out. A large part of management is framing (i.e. playing off imperfect knowledge). It happens before and after success or failure is decided. Smart managers commit, but frame their responsibilities or outcomes in favorable terms. They find ways to de-risk. They publicly share risky deliverables with other teams or increase scope to push decision making up the ladder. They commit to only what their team can slam dunk. They make sure to only lead rockstar teams (this is huge). They cherry pick metrics to make failure look reasonable and success look incredible. They leave before major failures are realized or hand failures off before they sour. Remember: In large human systems, feedback cycles can easily take years.

It's a game and there's lots of clever ways to play. But the only way to lose is to publicly accept loss. When you do, it's very honorable and moving. But I've never seen the hit to perceived competency offset by perceived integrity. Because at the end of the day, companies make money. There's no company metric for honor. It's politics, whether we choose to see it or not doesn't really matter. For an extreme example, take a look at the presidency. Incumbent presidents lose in election year recessions. Period. Never mind most economic crises are a decade or so in the making.

People in aggregate are much simpler than we like to think. And so leadership is much more sleight of hand than our nobler ideals would have us believe.

> There is no evidence that management problems are harder to solve than coding problems.

I think that's the sort of thinking some forms of schooling drill into our heads: harder problems = greater reward/value.

That's not really how it is. We get rewarded for the value we supposedly generate by solving some problem or at least some portion of that value is rewarded to us. So if there are some low hanging fruits that generate a ton of value, then that's how you will be rewarded. I'm sure Ph.D.s solve far harder problems than me all day long but societally we don't tend to value many of those problems or their solutions.

> We get rewarded for the value we supposedly generate by solving some problem or at least some portion of that value is rewarded to us.

And that's the sort of thinking other forms of schooling drill into our heads: value generated ~= value compensated.

That's not really how it is. We get rewarded for the position we are at in the class hierarchy. If you're "in charge of" someone, you have to be making more money than them.

Is that how it should be? No. It's very much not. But it's largely how it is.

Totally agree with you. I think your point and the one I made earlier are at least two of the naive beliefs often held by a lot of engineers in tech -- myself included. The really pernicious part is that the value generated by engineers are sometimes quite big and the reward they get is a small fraction of it but big enough to make the engineer happy that they never stop to ask for more or find a better deal.

> There is no evidence that management problems are harder to solve than coding problems.

As someone who has done both in small and medium companies, I find people problems to almost always be harder. Most coding problems outside cutting edge companies tend to at least have solutions. People and leadership often doesn't have a right answer.

And yes, a key coders mistake can be large. But a management mistake 'build feature X over Y' or 'implement policy B' can just as easily cost the company dearly and put small companies out of business.

There is! Management would be replaced by cheaper management if it were possible to do so at the same level of quality.

Either corporations are insane immoral pathological paperclip/profit maximizers, in which case any manager would be replaced with a cheaper version or even a algorithm, or they're not and managers aren't worth what they're being paid.

If the CEO or upper management is so fungible, why aren't they being replaced with staff who will work just as hard and effectively for a tenth of the price?

You’re confusing leverage and political positioning with competence and capability.

Not that all managers are incompetent. Some are indeed inspired and or excellent. However these are rare. Just as there are many average engineers who aren’t very productive, so there are many managers who aren’t very capable and are just in their position because they were in the right place at the right time.

Obtaining leverage and positioning oneself politically are indeed competencies and capabilities that are required to excel in medium to large orgs. They're not mutually exclusive.

But then you jump up another level, where someone is making a hundred thousand or a million times what the burger flipper makes. Are they generating enough value to warrant that? Elon Musk's current net worth is roughly what 100,000 burger flippers will make in their whole lives. Is it plausible that he generates some multiple of that value, or is he just much better at capturing value than the burger flipper?

Given the things he has managed to bring to market, and the impact he is having on the world - I would say yes.

People can get really lucky once, but Musk has an overall track record that can't be attributed to just getting lucky or being in the right place at the right time;

I can't think of anyone else - except perhaps Steve Jobs, who managed to go from one huge idea to another and execute well more often than not, at several companies and industries.

Were what you said even remotely true than a really bad department manager and CTO would stand to lose 100x/1000x what a burger flipper makes when they fuck up and make things worse.

The force multiplier works in both directions.

More realistically, the pay is about control and class. An incompetent CTO who always makss everything worse is just not in the same social class as a programmer, let alone a burger flipper, and will typically still earn 100x as much while making everything 100x worse.

^ I've worked with one of them.

Good point. Usually sentiment here is equality should be about pay of engineer and higher ups. Anyone lower than engineer deserve what they get due to market forces. They can always up-skill themselves to become engineers.

Let's pretend for a moment that your ratios were true (i.e. that we actually have an efficient labor market), it has nothing to do with what anyone deserves, nothing to do with their worth.

Do not conflate an economic system chosen for its ability to allocate resources efficiently (whether it does is another question) with a moral value system that assigns value to individual humans or what share of resources or power they deserve.

> But their work is 1000 times more important, so it's worth 1000 times more.

This too is misunderstanding the value equation. The cost of replacement has to be part of this too. Engineering salaries are bid up in the market relative to other professions not because their work is more "important" than teaching or administration or whatever, but because engineers are hard to hire. Literally every software group, even now, has open spots where they'd like to put someone. There are never enough people.

And... is that true at the top of the hierarchy? Have you ever even heard of a company with a VP req sitting open for months for lack of candidates? That just doesn't happen. Senior positions seem to be drowning in competition[1]. And yet, their salaries aren't showing the result of that competition between candidates. Boards aren't going out to find a "better deal" on their CEO. Maybe they should, but they don't.

And I think it's worth asking why that is.

[1] In fact I think with the exception of a very small list of genuine innovators, even tech CEOs are mostly just replacement level players shepherding already-tuned organizations. You could dump Jassy or Nadella out on the street tomorrow and Amazon and Microsoft would be just fine with whoever stepped in.

> Their department manager makes 10 times as much because they solve problems impacting entire teams of engineers that are more important and more difficult than coding problems.

This is very rarely true.

Does a CEO provide 10x, 100x, 200x, 500x, or 1000x the value of ordinary employees?

Doubtful, especially for the higher multiples (although they can certainly cause orders of magnitude more financial damage than ordinary employees).

In 1977, the late Peter F. Drucker, arguably the most famous management thinker, suggested the pay ratio between CEOs and employees be a maximum of 25-to-1. Yet the CEO-to-employee pay ratio has increased from 20-to-1 in 1996 to 202-to-1 in 2018. [0]

"The average S&P 500 company’s CEO-to-worker pay ratio was 324-to-1 in 2021." For NuSkin Enterprises, the ratio is 22,092:1, for Amazon, it is 6,474:1 ... pretty amazing chart. [1]

And this is why the tax system should recognize and tax excessive pay ratios. These are nothing but the financial result of abusive relationships between the executives and the workers, and the other taxpayers who pay more than their share of the burden. It is also easily measured to tax fairly (which of course corporations will hate, since it is hard to game). But of course, all the tech bros will cry that we need no govt so why should we be taxed? (Not incidentally, the same tech elites and wannabes as the article properly exposed as abusers.)

[0] https://www.corporate-rebels.com/blog/ideal-ceo-to-employee-...

[1] https://aflcio.org/paywatch/company-pay-ratios

It's even more doubtful when we see historically the multiplier was more like 20x than the numbers now.

Have they got that much better, while everyone else hasn't ?

The extra value we all add is being skimmed off the top, and worse we are being treated with contempt.

> Does a CEO provide 10x, 100x, 200x, 500x, or 1000x the value of ordinary employees?

Moreover, we're not even "supposed" to look at value-created, aside from setting a maximum feasible pay level. At least, that's what we're always told when looking at employees farther down the org chart—"deserve has nothing to do with it".

I, for one, am deeply skeptical that the set of people who could run companies well is anywhere near as small as the comp suggests. I just think those at the top aren't interested in seeing that comp reduced. Sure, there's the board—but so-and-so on this board is a top officer with another company and wants to see top management pay rates stay high and need sky-high examples to compare themselves to when negotiating pay, and besides, they want their kids and nephews and so on to be able to pull those fat paychecks, too. And anyway, you want the CEO to appreciate you so that they use company resources (Other People's Money) to "appreciate" the other companies you have stakes in....

The way I think of it is who do you want to be off sick for a day? The CEO, or 324 staff?

Pay is determined by supply and demand, not just how difficult it is to provide the supply. And what determines the good pay of tech workers & CEOs is their BATNAs. To hire a CEO of a top tech company, you essentially have to be a better offer than the EV of them starting their own firm with copious amounts of venture capital out there and them out competing you with the efficiencies that come from startups. That is what big-corp tech CEO pay has essentially stabilized on.

I don't know. Where is all this anger and righteousness when it comes to all the people servicing tech workers, from farm workers picking your food in record high temps for slave wages and no protections to food industry workers to janitors to delivery people to the nannies and school teachers caring for your children?

What about the other people who are more deeply exploited by your employers, the factory workers in poorer countries, the $2/hour workers in Kenya "tortured" by having to tag obscene material to make ChatGPT less toxic? What about all the people downstream in space and time who pay the costs of all the environmental debt incurred by your luxurious and convenient upper caste first-world lifestyles, lifestyles made "efficient" by waste, consumption and the ability to outsource life's chores to bottom workers, enabling you to put all your time into higher rate-of-return tech work?

All this whinging is what happens when SV restricted stock stops going up 20% annually for what, six months.. a year? Imagine some actual oppression.

I couldn't care enough about how much someone at the top makes, as long as I'm getting paid fairly for my work.

Startups often use this argument in reverse ("we're a small company, we can't pay you as much") while paying their founders far, far more than 200X what they pay early engineers. I'm including equity grants in this calculation because you are, as well.

The problem is that by definition, if the CEO is making 100x what you do then you're not being paid fairly

Did you mean to say you just want to be paid modestly?

> The problem is that by definition, if the CEO is making 100x what you do then you're not being paid fairly

Really, "by definition"? You can't think of a possible universe where a CEO draws on all their skill to make a crucial decision, that most other possible people in that role probably wouldn't have made, that saves a company billions of dollars, and that this is 100x more valuable than what you or I have contributed or are likely capable of ever contributing? That's a lack of imagination, to say the least.

Sure, maybe the CEO makes great business decisions, but I don't see how that entitles them to 100x the compensation of the people around them. I don't think researching and making decisions is 100x harder than engineering or HR or law etc.

This misunderstand markets. It's not about some abstract and subjective notion of difficulty. It's about how much value you bring to the table in the context of labor market supply and demand.

You are 10x more valuable to your company than a cleaner, so you get 10x the pay. Why? Because your skills are more scarce than a cleaner, and because you can have a bigger impact on the company's profitability by writing code than cleaning toilets.

The CEO is 100x more valuable to your company than you are, so they get 100x your pay. Why? Because their skills are even more scarce than yours, and they can have an even bigger impact than writing code. That's it.

Was a CEO only 6x more valuable to the company than a regular worker 70 years ago?

We know that CEO pay has increased vastly out of proportion to any other related changes in our economic system over the last several decades. We also know that the makeup of boards (who choose CEOs, and determine how much they will be paid) is significantly slanted toward CEOs of other corporations. There is a clear financial interest there both to choose people who will be favorable to you, and to raise their compensation, so that when they are on a board they will be more likely to choose you, and when that board is considering your compensation, they can look at the "average CEO compensation" and see that it's high...because you've kept it there.

Furthermore, I would posit that most CEOs do not actually have skills that managers and leaders at other levels don't have. What they have is the accident of birth, and a habit of authority. If you replaced most CEOs with any reasonably thoughtful and educated person, you wouldn't see much change overall in the average performance of businesses. (You might see an increase, actually, given the number of CEOs who govern primarily based on their own egos, rather than what would help the business.)

Those statistics about CEO pay growth are often deceptive. If you sample the top N firms over time, where N is fixed, the mean market cap of those N firms will be growing, given that the economy has grown over the time window. That the average compensation of the CEO of these sampled firms is also growing is unsurprising. The omitted variable that causes this statistical illusion is GDP growth itself.

Now, even with a non-flawed methodology, I don't doubt that we'd still find that CEO pay has gone up a lot more than other job types. But that should be true for knowledge work in general, especially high-demand + low-supply roles. There has been large structural changes in the economic system that causes this. Mainly, China has come online, meaning the non-knowledge workers in wealthy countries must compete with a billion extra people, which depresses their compensation in the labor market, which increases the ratio of a CEO's pay divided by the pay of non-CEOs.

A non-market based explanation is highly suspect and should not be the default explanation. You are basically claiming that shareholders are willingly giving away their own money for no good reason. Why would shareholders do this? They are not running a charity. The simplest and least nefarious explanation is the most likely: Shareholders believe the CEOs are worth that much in the context of current (2023, not the 1970s) supply and demand dynamics in the labor market for highly niche highly impactful CEO positions. If I own an asset worth $2 trillion, I do not care about paying $100 million for someone to not ruin it.

> If you replaced most CEOs with any reasonably thoughtful and educated person, you wouldn't see much change overall in the average performance of businesses.

At least recognize this is a speculative claim made without evidence. More of a hunch. A hunch that I disagree with.

That's a lot of words to try and justify CEO/worker pay discrepancies of a factor of over 300.

All that bullshit about statistical illusions doesn't change the fact that the median worker in America has barely seen any real wage growth for 50 years, and all that extra wealth went straight to the wealthiest people in the country. Many of those are the CEOs we're discussing.

Income and wealth inequality of this level are genuinely harmful to the economy and to the political system, and every bit of effort you put into justifying them, rather than admitting that it is wrong and harmful, is effort being put into actively making the world a worse place.

It was a lot of words because you made a lot of factually false claims, so that's to be expected as per Brandolini's Law.

I appreciate that you brought moral certainty into this discussion, but that doesn't make your understanding of reality or factual premise correct, even if your moral conclusion may be correct by accident.

> doesn't change the fact that the median worker in America has barely seen any real wage growth for 50 years, and all that extra wealth went straight to the wealthiest people in the country.

Fist in the air != explanation. Depressed wage growth has little to do with managerial compensation. If you want an explanation based in fact rather than anger, you have to look at the labor market economics of the situation, which you aren't.

If you want an explanation based in fact rather than blind faith in market theory, you have to look at the capitalist labor relations side of it too, which you aren't.

I'm not misunderstanding anything, I just disagree with you.

On one hand you say pay is based on value brought to the company, on the other hand you say it's based on scarcity.

If it's value then how come the same engineer, bringing the same value, would receive different pay based on the country they live in?

Clearly that's not it.

So maybe it's scarcity? That drives up pay, but it's not enough by itself.

Markets forces are a factor, but they're not the only factor, or even the most important factor, in compensation.

No, the CEO is not 100x more valuable than the engineer. The decisions taken don't matter if you can't build well. Building well doesn't matter if you don't build the right thing. They're dependent on each other. Neither has impact by themselves.

Also disagreed on 'scarcity' of CEO skills. There's a scarcity of CEOs because there's only 1 per company, but the "skills" are pretty common imo. Any C level exec or director level person has the skills to do the job.

> On one hand you say pay is based on value brought to the company, on the other hand you say it's based on scarcity.

These things aren't separate unless you're using a colloquial definition of "value" which would be inappropriate. If water was more scarce, it would be more valuable and the market would price it more than $0.005/L or whatever it is. My wording implied these things are linked: "it's about how much value you bring to the table in the context of labor market supply and demand." Which, I admit, wasn't the most precise or clear way to word that.

Things hold $ value for two reasons: (1) the thing has perceived utility (we need water to survive, this is the demand side), and (2) the thing is scarce (this is the supply side).

The CEO ticks both boxes. There is high demand for a competent CEO because a bad one will cause Apple's market cap to go down by billions, and a good one the opposite. There is short supply (scarcity) because less people can run Apple well than can write code well. You may disagree personally, but the market, that is the people in charge of hiring the CEO, doesn't. And the market is what sets the price of labor.

We generally talk about risk and probability when discussing this. You get 50% when it's just an idea with a 99.9% chance of failure, and below 0.1% when it's a rocket ship. So we have to apply that to your question too, and apply "market for lemons" thinking. So while it's possible that they can save a zillion dollars by making amazing decisions nobody else would have made, the odds of them doing so are empirically not that great, so the "fair" value is a zillion dollars times a very small number. So it seems like that's not a big factor in their comp. It's just a big factor in how they justify it.

That's not the expected value thinking anyone would go through when deciding who to hire as a CEO. I mean, firstly, it's ignoring the large downside of hiring the wrong CEO.

There's steps of difference between hiring someone good (Steve Jobs is worth a hundred million dollars a year if you can get him to run Apple, because he will improve Apple's market cap by more than a hundred million dollars), hiring someone average (worth negative if it means rivals eat market share and market cap declines), and hiring someone who will commit fraud and ruin the company (worth negative 2.43 trillion). The large asymmetric possibility of downside from a mediocre to bad CEO skews the expected value calculations.

> You get 50% when it's just an idea with a 99.9% chance of failure, and below 0.1% when it's a rocket ship. So we have to apply that to your question too, and apply "market for lemons" thinking.

Apples and oranges. You're comparing different markets. CEO compensation is in the context of labor markets. It should be compared with other labor market activity such as the compensation of software engineers or surgeons. But here you're talking about capital markets.

In your last paragraph, you're definitely misunderstanding me, but I can't figure out what you think I meant.

Another way to look at your story is that the CEO is just doing their job. Perhaps they had a specific talent, perhaps they had a stroke of insight, or perhaps they just randomly made the right decision. But at the end a cynic could say they were just being at the right place at the right time.

On the other hand, you can also say that the board should be paid 100x because they somehow picked the right CEO.

But why stop there? Shouldn't the CEO's parents get a bonus for the upbringing of such a brilliant person? Or should the CEO's teachers get paid as well? The possibilities are endless... why attribute success to one single person?

PS: I'm not seriously saying this is what we should do. I'm just trying to illustrate how the concept of fairness looks a bit funny if you think hard about it.

> The possibilities are endless... why attribute success to one single person?

I don't disagree, but this same critique can be applied to anyone, yet it disproportionately gets applied to CEOs. How can a SWE justify their $300k compensation? After all, the fact they hold that job can all be explained by circumstance, parenting, genes, being born in the right country, etc.

Indeed. That's kind of my gut reaction to highly paid big tech employees asking for "fair" pay. Seems a bit "hypocritical"(?) to only consider fairness within the industry and not society as a whole.

No, what I mean is I don't care how highly paid the CEO or executive team is. It's the last thing on my mind.

I do care about how much I'm being paid.

Right, so as long as you're being paid modestly even if it's unfair you're ok with it. I think most people would agree.

"as long as I'm getting paid fairly for my work"

Fairness is in the eye of the beholder.

To me there's nothing fair about the economic whip. Nothing fair about starving or freezing to death if you don't work. Nothing fair about having to sacrificing my time and my life to afford to feed my family, have a roof over our heads.

There's nothing fair about someone's who orders others around never having to work another day in their life while the people who actually do the work having to make endless sacrifice to make their bosses rich, and usually be spat upon for it, while those who made their fabulous wealth by exploiting others are lauded endlessly as if they were the benefactors of mankind.

This is straying away from the original point of worker pay relative to CEO pay.

You can have highly paid CEOs that treat their employees well, and you can have low paid CEO's who are brutal towards their employees.

>Nothing fair about starving or freezing to death if you don't work. Nothing fair about having to sacrificing my time and my life to afford to feed my family, have a roof over our heads.

How on Earth do you think people survived before the dawn of capitalism?

Hint: you can do it today, head out onto a homestead, build your own house, get your own food, pool your own water.

The economic whip just allows you to do what your good at, I can do what I'm good at, and the guy who is good at growing food and feeding us is good at what they're good at. This isn't worse.

Roughly 25% of the world still lives this way. People can fill in the blanks of what happens to subsistence farmers who get impacted by drought, severe weather, swarm of locust, and other serious factors outside of their control.

Google employees complaining about Tech CEO salaries is the 1% complaining about the 0.01% of the world.

> The Bezos and Musks and Kalanicks of the world believe that this is correct. They truly think they do something in their 24 hours of daily human life that makes them hundreds or thousands of times more valuable than even the absolute best "labor" in their industry.

I mean to play devil's advocate, these people have created organizations that employ hundreds of thousands of people in highly paid tech positions. These 500K Google jobs wouldn't even exist if it wasn't for Larry Page / Sergey Brin. Moreover, their organizations also generate useful products that improve society, AND make a profit while doing so. I think one could definitely make the argument that these people are hundreds of times more valuable to our economy than the average worker. The reason our system is set up like this is because there's a strong incentive to create new companies that generate even more useful products, employment opportunities, and returns on investment. It's really not such a bad thing IMO.

> These 500K Google jobs wouldn't even exist if it wasn't for Larry Page / Sergey Brin

Citation extremely needed. Do you think without some billionaires around everybody else would be sitting on their hands all day?

From my job to my marriage to my artwork, what couldn't conceivably be done by someone else, if I wasn't available?

Most of us are fungible.

Bingo. Nearly everyone is replaceable. It may not be easy to replace a certain individual, but it can be done.

Uh yes, because they founded the company? If Google was never founded nobody would be working there, don't think I need a citation for that.

If it's so easy to start a FAANG-grade company, why has there been no real equivalent to Amazon in 20 years? It's not like they even have a real anti-competitive "moat", and yet no one is building a competitor.

Amazon's moat is massive vertical integration across multiple verticals, which they also leverage cross-vertical for e.g. promoting new services (say, their streaming service) and to gain business intelligence on a scale no startup can dream of (see: Amazon Basics).

You might—might—out-compete them in some niche they're overlooking, just picking up their crumbs, but you'd need stupid-high amounts of capital to take a real shot at them, high enough that there'd be no hope of a break-even exit if things don't go perfectly.

I'd call that a moat.

So you seem to agree that Jeff Bezos is doing some things right, since it's easy to get vertical integration wrong - looks at Japanese or South Korean conglomerates for plenty of evidence. Doesn't that handily disprove the "you didn't build that" POV?

Well, Amazon is actually too young to tell, Japanese conglomerates, while not being all dominating anymore, are doimg quite well. As do the Korean ones, e.g. Samsung.

Is the thing keeping some other person from building Not-Amazon (or a dozen companies that effectively, together, fill its entire role—potentially better, even) that Bezos is uniquely capable, or that the existence of Amazon makes trying to do it way, way riskier than when Bezos got started, no matter how good you are?

Other businesses get started and are very successful, somewhat often. Are all those successful business people just not going after Bezos because he's so much better at business than them that they cannot hope to succeed, or is it because the market is transformed by the existence of Amazon such that trying to take Amazon on is a bad use of capital?

>It's not like they even have a real anti-competitive "moat", and yet no one is building a competitor.

They absolutely do. Their market share means that you must sell on them or lose a massive amount of sales. To sell on them you must agree to their anticompetitive price controls - must give them a cut, can't sell cheaper elsewhere. To get good product placement you have to agree to cominglinging and allow your legitimate product to be mixed with counterfeits.

The have built a huge moat, but that's besides the point. You are making an absurd claim.

This is what happened in the Soviet Union. Leadership at consumer-facing enterprises had no incentive to do anything more than the bare minimum because profits are socialized. Meanwhile the Soviet military did a much better job of keeping up with that of America because that was of upmost importance to the politburo and and successes were rewarded with political capital.

I do. In my career, the choice has always been working hard at a company where the founders are trying to become billionaires, or going to a company where the drive for success has atrophied and sitting on my hands for 80% of my working hours.

I remember one job where I did literally nothing for the first 2 weeks because maintenance didn’t connect the Internet in my cube and my manager couldn’t find the external drive with the training videos on it. There’s no law of nature which says all the Googlers couldn’t be working there.

> > These 500K Google jobs wouldn't even exist if it wasn't for Larry Page / Sergey Brin

Stop believing in fairy tales, they were just the lucky winners in a winner-take-all market. Those 500k people would sill be employed by say a company called Poogle, founded by Parry Lage and Bergey Srin.

It's like all common sense and statistics goes out of the window when people discuss the Forbes 400, it takes people meeting them to realize they are just dudes winging it like anybody else.

So? Just because some competitor could have possibly formed in an alternate universe doesn't make the company or Page / Brin's contribution any less valuable.

In order for something to be valuable it needs to be rare and irreplaceable.

And the true test is the subtraction, if Brin/Page were never born we'd still have something like Google, much like we'd know relativity if Einstein was never born or the 3 principles if Newton was never born.

Humanity advances as a whole, while individual humans play dice and games to get to be the one guy (or girl although it's mostly guys) who get the privilege to be the person signing off the advancement. But in the end there is nothing special about the person doing the signing off, much like there is nothing special about the person who wins the lottery among the many who play.

In fact, yahoo would probably still be a major player. (remember them)

Organizations are nothing without labor. The 500k salaries are a but small percent of revenue the labor is generating. These companies are sitting on the largest ungodly amount of cash piles ever seen in history of mankind and that should be cause of huge concern.

These so called tech icons were at the right place at right time and nothing else. I refuse to believe that these individuals are somehow 200x smarter or deserve 200x more than the people who are working for them. The reason they have intergenerational wealth while you & I still have to worry about mortgage is because our f'd-up system allows these "titans" to steal the profit we the workers generate.

It's not a bad thing to generate useful products to improve society but it's definitely a bad thing when labor doesn't get their share.

there is absolutely no way that these guys are 100x as valuable as the people how actually build the product. if larry page and sergei brin's search engine hadn't won out, someone else's would have. these guys are all just average to dumb, and very often end up vaporizing millions if not billions of dollars with stupid decisions. there is no doubt in my mind that these tech giants would be better off if they fired their ceos and c levels. this should be obvious to anyone who has ever interacted with the ceo of a tech company.

But the employees of AltaVista and other search engines Google ran out of business (or ran into the arms of Compaq, who cut their losses on it) might still work for a much larger AltaVista that expanded beyond search.

> These 500K Google jobs wouldn't even exist if it wasn't for Larry Page / Sergey Brin

What has Google done since Page and Brin left? Other than trying to suck what they already built dry for max profit?

...

You are equating early technical founders with the MBAs who later took over the big tech. They are not equal. The former builds things and creates new paradigm. The latter's purpose is to suck things dry for profit. Including the employees and the users. The former is scarce. The latter is plenty and it is imposed on the organizations, the tech sector and inevitably the end users by totally un-attached, profiteering, destructive investors.

> > The former builds things and creates new paradigm

Why the religious talk? This sort of talk only happens in SF.

Google is a product/service which serves customers to propel their convenience and quality of life. There is nothing more to it.

Also Google just happened to be the winner in a winner-take-all market which was made of 10s of search engines.

So it's true, MBAs might care about profits, but all the above is very clear to them, founders instead are blinded by these sort of mythological figures who build a cult-like following around them, whereas in reality it's just survivorship bias.

> Why the religious talk? This sort of talk only happens in SF.

Something being exploited in SF does not invalidate it. The last 20 years' of tech progress did create new paradigms. From search to social to Open Source. The last one even became a culture in which we are living today. People are so used to its paradigm that they think its 'normal' and not something different. The world of 90s was a totally different world, including how people worked.

> Google is a product/service which serves customers to propel their convenience and quality of life. There is nothing more to it.

It also made accessing knowledge and anything much easier compared to before. There is no comparison of the search after Google and before, like how it was with Altavista, Yahoo et al. There is even less comparison of the world before search and after.

> founders instead are blinded by these sort of mythological figures who build a cult-like following around them, whereas in reality it's just survivorship bias.

Many technical founders, or rather, 'non-MBAified' people just want to build things. Make something happen. And those things change how we do things. People mythologizing successful, actual founders does not make it any less valid.

...

The world today is totally different from how it was in 1990s. Thanks to technology and people who build things with that technology. "MBAification" of things is not a problem only in technology - it always afflicted all the other sectors too. Some people build things and change the way we do stuff, others come to milk it at the cost of destroying it.

> > The last 20 years' of tech progress did create new paradigms . The world today is totally different from how it was in 1990

I feel the opposite, if anything the rate of innovation is slowing down, and besides this sort of religious type words should not be used in the context of business.

And if were to be used it should be reserved for something that really changes human life in a pivotal manner in the same way as the invention of fire or the wheel did back in the days.

I don't know what it could be that can be compared to fire and the wheel but Google and opensource isn't it.

> I feel the opposite, if anything the rate of innovation is slowing down

Of course it is. The sector has been 'MBAified' after the first decade and a half. Its about extracting maximum value by providing the minimum. It happens to every sector - look at computer games. First decade is full of innovation and firsts. Then big corporations take over and consolidate the sector. Now its about milking what already existed by rehashing them.

> religious type words

They are not religious words. They are accurate words. Knowing the difference in between the attitudes in society and tech life are important in deciding what direction to go. Identifying destructive 'MBAification' (or whatever you may want to call it) of things as opposed to 'building' things and telling them apart is critical.

> I don't know what it could be that can be compared to fire and the wheel but Google and opensource isn't it

Wheel is exaggerated. People used other means before the wheel.

However Open Source is a major change in most attitudes. It even changed the hierarchical, feudal work relationships and organization that corporations inherited from early Victorian corporations. But that's a long topic that involves history and social sciences.

> > of things as opposed to 'building' things and telling them apart is critical.

Innovators of the past would call Brin and Page 'MBAs type' like you do, or better yet they'd call them not imaginative or risk taking enough given that MBAs didn't exist back then. It recursively goes like this the more you go back into the past.

In the end it's all about risk. You think MBAs are risk averse. People like Edison and Rockefeller would think Silicon Valley entrepreneurs are risk averse.

Guys like the Montgolfier brothers and Christopher Coloumbus would laugh at Edison and Rockefeller for being risk averse and they themselves would be subject to the same ridicule from the guy who invented fire and the wheel.

This is coherent with the idea that the rate of innovation is slowing down because of less risks being taken.

The only difference between my stance and yours is that you only analyze the last 10 years and identify a bogeyman in the MBAs, and hail founders as the great pioneers, whereas in reality it's a phenomenon which traces its roots way back into the past.

As kids say: 'fuck around. Find out'

I don't think MBAs were the first figures who refused to 'fuck around' and I don't think Silicon Valley founders are the kings of the 'fuck around' either, that title belongs to our early ancestors

The rate of risk and innovation will never be as great as the time that we invented the wheel and fire. As I said it has been slowing down ever since, mostly because people 'fuck around' less and less. Not just MBAs but everybody.

> Innovators of the past would call Brin and Page 'MBAs type' like you do

They objectively wouldnt. The science and engineering history of late 19th century is filled with people like Brin and Page getting 'MBAified' out of their inventions. Tesla and Westinghouse is a good example of such stories.

> Christopher Coloumbus

A genocidal profiteer is the last person who you would want to invoke as an example of such people. He didnt invent or innovate anything, he didnt want to change anything, he didnt bring about any new paradigm.

> because of less risks being taken

Equating innovation with taking risks is a faulty concept to start with. You can bet that the 'person' who invented the fire or the weel didnt take any risks. To start with, those were not invented by singular people 'taking risks' but invented by entire species (likely more than one) by adopting them gradually through observation from nature and learning from each other. Likewise agriculture. If anything, risk-taking was not something that early human ancestors or their close relatives would risk themselves.

> The only difference between my stance and yours is that you only analyze the last 10 years and identify a bogeyman in the MBAs

Sorry, but its otherwise. Thinking that fire or wheel were invented by singular people shows the lack of insight into science of history, leaving aside the history of this species.

> > Equating innovation with taking risks is a faulty concept to start with. You can bet that the 'person' who invented the fire or the weel didnt take any risks. To start with, those were not invented by singular people 'taking risks' but invented by entire species

Back then people were making human sacrifices and starting wars because 'the Gods told them to do so'.

Innovation happens when risks are taken (eg. Montgolfier brothers, Wright Brothers, the guy who discovered testosterone by self injected blood taken from the testicular veins of horses...) and given that risk and confidence are a state of mind much less a business practice, you cannot conflate it just to science and technology but said risk and confidence will be visible all around society. So wars, genocides, violence and genearlly stuff considered bad.

The rate of innovation has been slowing down due to the diminishing in the standard deviation of human behavior. Or as kids say: 'Less fucking around, means less finding out'

Standard deviation of human behavior goes both ways, people rejoice that we eliminated the negatives but we have also eliminated the positives. No Einsteins without Hitlers, no Archimedes without Alexanders etc.

So even if the guy who personally discovered fire or the wheel didn't take risks personally (I doubt it) he operated in an environment where the standard deviation of human behavior was much larger. For sure there were people jumping off trees with wooden wings, wars, genocides, much more violence. And that is statistically enough to make sure that at least one unit in the sample stumbles into something great like fire or the wheel.

> Back then people were making human sacrifices and starting wars because 'the Gods told them to do so'.

Not relevant. All of those were established behavior patterns at the time. Not 'risk taking'.

> Innovation happens when risks are taken

For every such example you can pull out from history, there are dozens of innovations resulting from incremental improvement and learning from others and the nature.

> The rate of innovation has been slowing down due to the diminishing in the standard deviation of human behavior.

There has never been more deviants in human history than now. In human history, sticking with the social norms, known behavior patterns and keeping the existing social group and its framework safe were critical to survival. From traditions to laws everything were based on those. With your logic, it should be the most innovative period in history whereas the past should be the least innovative. Yet you are saying the opposite.

Innovation as you see it has been slowing down because science and technology have been privatized through patents towards the end of 19th century by big money entering the field and consolidating it. Exacerbated by the 'state secrets' concept. Before that, virtually everything was Open Source during the scientific revolution.

> So even if the guy who personally discovered fire

There was no such singular guy.

...

In any case, thanks for the discussion.

They're necessary but not sufficient conditions for google to exist. There are countless other contributors who are also necessary but not sufficient conditions for google too.

What's the incentive for other necessary people to work at these companies?

Assuming that they are necessary and sufficient for making new businesses that hire lots of people, aren't we disincentivizing them by paying so handsomely for their first such business. If we realigned the incentives, we could have 200 google equivalents made by Sergey and brinn, not just the one

It is that 95 to 99% of the ones that go the Musk, Bezos or Kalanicks way fail and be left with no payout. In return the ones succeeding will have 20 to 100 times the payout.

Its almost the same as if you just take your salary and bet everything on 13 at the roulette. Small chance of huge payout, high chance of failure.

all the engineers at an early stage company are "gambling" with exactly the same stakes as the founder. If they fail, they're all out of a job. The founder risks nothing more than that: he's gambling with other people's money. Why should one of those people reap generational wealth while everyone else ends up in the upper-middle class?

Hmmm it seems like the engineers bounce around jobs whenever they feel like it while the founder is locked in for 5 to 25 years. Way different stakes.

You have to invest a lot of time and effort to convince other people that they should "gamble" their money on you and your idea.

The early engineer has a pay check from the start.

Again if you want your shot at generational wealth just bet all at the roulette. Or convince someone that they should gamble their money on you.

But is that true? Every VC-backed founder I know "failed up". They pulled a more-than-dev salary from the company during the failure, and then after the failure they just started a new company and had an inside track on VC.

OTOH, the bootstrapped founders have my respect. They had their houses as collateral for their company's operating loan. They also succeeded at a much higher rate than the VC backed founders I've known.

I've seen this as well. VCs are actually terrible at their investments by and large. They mostly use gut instinct or personal networking as their determiner of whether to invest in stuff.

That's a poor heuristic and it is why so many people continue to fail upward.

This is among the problems of capitalism. We act like it makes sense for the winners to decide about the resources (money, businesses) they've won because their success suggests they are good at administrating it.

What happens? They spunk their money on kids who are playing League of Legends during meetings.

I've not often been in an investor meeting where the investors asked smart questions. They send people who aren't equipped to think about what they're shown. They think DD means making sure your accounts can't be stolen by the boss.

I believe what you're describing is an anomaly from a decade+ of negative real interest rates due to quantitative easing. Getting rich while failing upwards in the future will be an exceptional rarity.

Real interest rates are lower today than they have been for the last few decades.

4.5% interest with 6.5% inflation is lower than anything we've had in the period of 1.5% - 2% inflation.

You are using backwards-looking inflation figures and comparing against forward yields. If you believe that the Feb 2024 price level will be 6.5% inflated compared to Feb 2023, then please go ahead and take that 4.5% loan. The rest of the market believes that inflation will continue to fall and infinite money has ended.

Basically, if you borrow at 4.5% today with the assumption that it is effectively a negative real rate, you will be pretty disappointed in a year.

The comparison shouldn't be VC-backed founders, but all founders including those who weren't able to fund their company and therefore failed.

Getting VC funding is a significant filter.

If making sunsets and co. showed us something, it is that nepotism makes VC money access a lot easier.

Being born into a lot of wealth and "bootstrapping" a company is infinitely easier than raising funds from a VC.

But in my experience those who got VC funding failed at a higher rate than those that didn't.

A far better filter is "do you have enough revenue that you can afford to hire employees." Self-funded entrepreneurs pass that filter, whereas VC funded ones usually don't.

The article is about employees so we don't care about the entrepreneurs that fail before they hire anybody.

Sundar Pichai's job is to make sure Google has enough revenue to keep paying all those $500k+ engineers. If Google's revenue is at risk, the stock plunges and Sundar is out of a job. All things said, it seems like a remarkably fair arrangement.

But CEOs don't actually have that much impact...

So whatever decisions - in this example - Sundar makes, it only carries so much weight.

And, you also get fired if you're a $500k engineer and you suck at your job. So I'm not sure what's so much different about Sundar - except that if he sucks at his job he has a way better golden parachute.

You're Apple's CEO, its 2018 and you are about to bet 80% of the current profit stream on M1 platform or stick with Intel. What do you do?

You're Apple's CEO in 2018 and due to a decade of skillful engineering you own a proven platform that's already shipped in 2 billion devices, and is now objectively fast enough to run a PC, the demands of which are not all that different from the 12.9" iPad that already exists. Do you respect the work of this talented semiconductor organization by refactoring the Mac to use the same CPU?

In what way is this a tricky decision?

I'd be surprised if Tim Cook even greenlit this decision. It's really something that should be decided by whoever is running the Mac business line.

That one is obvious. The decision was made long before that. Apple’s A-series of chips were clearly on that trajectory for years prior.

The bigger decision was deciding to buy NEXT instead of Be Inc. That decision brought Steve Jobs back to the company and acquired a modern operating system to replace Mac OS Classic.

Amelio was fired for his decision even though it was the right one to save the company. That’s the truly hard part about being a CEO.

Except the M1 did not magically show up at the CEO's doorstep by one of their underlings in 2018. Apple (i am guessing) would have had several secret projects pointing towards this. Doesn't seem out of the ordinary given how many parallel streams they would have had to invest in to bring all those iP[aeiou]*d devices (running non-intel) to market?

You take the bet because it's not even your entire profit stream and iPhone is much more of your revenue.

Tim Cook's operational experience helped them increase their market cap dramatically once he took over, so I'm not sure you can discount the value of him as CEO.

A bad CEO can definitely drive a company into the ground, so in many cases I think the pay can make sense. Spending the money does not assure a good pick though...

Confer with the team around me to ensure I make an informed decision. Hopefully they do the same. Maybe the CEO has the final say, but they don't make decisions on their own. I'm sure there's tons of research behind those decisions that was not collected by the CEO on their own.

Pay experts—using our may-as-well-be-infinite warchest—to do literal years of R&D on several options and pick the best one, such that the decision's not anywhere near as risky as you imply?

You know, same thing they've surely been doing with VR behind the scenes for years and years. If/when they finally release a product, it won't be because the CEO just suddenly decided to make a big bet, but because they'd made a ton of small bets and waited for one of them to look worth betting big on.

I think Apple'd be easy-mode for a CEO, actually. Tons of capital behind you to undo all but the gravest "whoopsie", and no direct competitors credibly doing anything like the same thing you are (others making devices, sure, but nobody even really trying to attack your niches—not really). It's why they can fuck up a few times in a row and it hardly even matters, as long as they come back to their senses within a few years.

They do have impact if they're super competent or super incompetent.

Yeah - but most CEOs are super average.

> Sundar Pichai's job is to make sure Google has enough revenue to keep paying all those $500k+ engineers.

No, it is not. His job is to maximize profit, and his personal goal is to earn as much as possible. To say that the CEOs goal is to make money so employees have salaries is a very strange statement.

> If Google's revenue is at risk, the stock plunges and Sundar is out of a job.

Google revenue is not at risk, but many engineers are already out of a job. Sundar job is only at risk if the board is not happy with him.

> it seems like a remarkably fair arrangement.

No, it is not. That the people that earn more money is not the ones that produce the most but the ones that protect the rich is far from fair.

Nature abhors arbitrage. If you think the tech elite are somehow renting out ill gotten gains, the go out and eat their lunch.

> That's 200x as much ... and the baseline is already super high.

People have a hard time with big numbers. See richest people in the world or how much money Apple makes. It's staggering when you turn it into visualizations or $/second or something. And even then, it's hard for our minds to comprehend something so completely foreign.

I think your argument is advocating that the 'person who probably wrote half the damn code' should get a lot more, right? What should that person have gotten, exactly?

Either they did not negotiate for a better package with compensation and equity early on OR sadly, they joined too late. If they wanted a lot more equity (and therefore risk but also potential for a high return like Musk or Bezos or whatever), then they would have needed to join super early, or better yet, have been a co-founder to a Musk or a Bezos or whatever.

But they weren't, so no, they don't get anywhere near the sharing in the big reward, just a small or tiny slice.

Abstract arguments about fairness and who provides more value aren't really useful, IMO. What is definitely true is that the engineers, who have lots of options, accepted those terms. The investors decided to invest their money, and grant the authority to spend it to those particular founders. Could somebody else have done it better? Maybe, but I'm not sure how I, or anyone else, would have the confidence to tell the VCs how to invest their money, the founders how to hire, or the engineers about which offers to accept, and do it better than the people directly involved.

> Meanwhile while their first engineering hire, the person who probably wrote half the damn code for years, gets < 1% of the equity and none of the glory.

For whatever it's worth, market comp for Engineer #1 equity is significantly above 1%. Depends on a lot of things (number of founders, how many founders are already technical, whether hire is pre or post PMF, prior experience, etc.) but by and large <1% is not going to be competitive at this level.

Big law (at least outside of the US, in the UK/EU) is very much pyramid shaped. Typically the model is based on getting the maximum number of chargeable hours from the minimum number of associates, for a dim prospect of eventually making partner. The overwhelming majority of profits flow to partners at the top of the equity structure.

At the same time, thousands of companies, where hundreds of thousands software engineers writing the damn code, going into oblivion, generating billions of dollars losses for their investors.

Writing the damn code is not a big deal. Knowing what to write is.

This again comes to same place. The person who wrote code can launch their company and keep all proceed of billions to themselves if code is that good. For now its like asking for upside of owner and risk of hired hand. Doesn't really work that way in past or now.

For law, finance and medicine there is lot more personal liability to reach for big rewards unlike coders sitting in office and implementing business requirements they received from management which in their view is clueless.

I can guarantee you employee 20 at Google is very well off, buying houses left and right.

In finance, law, and medicine, the workers are the product roughly.

Anyway this debate about being 1000x more valuable is pointless. It does not matter what any individual thinks about their worth. We've all agreed(#) on this system(the worst, except for all others) ostensibly because of the benefits to the rest of society. The internal allocation of profits within a company is irrelevant.

# The old Marxist limitations about lacking capital or means of production don't count in tech/software. It takes nothing to sieze the means of production(just grab it from the cloud) or raise capital.

> It takes nothing to sieze the means of production(just grab it from the cloud) or raise capital.

It takes time.

There's no such thing as the cloud, just other people's servers (means of production) you're renting.

The idea that the solution to lacking capital is to _raise capital_ is a contradiction.

I’m saying it’s way easier than for a factory worker in 1823 or 1923 to raise money or gather machines.

I’m not being cynical. I’d really like to see alternative governance structures to produce and sell software. Co-ops are an example.

Not true at all. Partners & MD take a much larger share of the pie compared to execs at tech companies.

That's because of leverage. MD : consultant is 1:7 or so. Plus another 1:2 or 3 for admin staff. So there is a limit to the scale of wealth generated. That said, MDs make 10x what entry level consultants get.

This is different than tech where exec : professional staff can be 1:x,000 or more.

(Source: was a consulting MD.)

Recent events might mislead us, but I believe Musk has had a huge net-positive impact on the world.

Crashing Twitter into the ground will never come close to diminishing what he has helped achieve with SpaceX, putting his money where his mouth was to the point of almost going broke, and, to a lesser extent, Tesla where, despite not being a founder, he was the biggest investor at the beginning.

SpaceX does not belong in the same conversation as "net positive impact."

> > Recent events might mislead us, but I believe Musk has had a huge net-positive impact on the world.

I always hear this argument about the supposed great impact on the world, society etc.

But I am a citizen of the world and think this guy is a scam because he actually hasn't done nothing for me but he keeps pushing his name into my face. Kinda like the POTUS except the POTUS is forced to do media and speeches whereas this guy injects himself into every situation or debate out of his own will to shill his products.

For a regular individual who is not concerned about climate change or has a deep desire to life off the grid (but still wants internet) mr. Musk is like the Kardashians with the trash entertainment unfolding on twitter instead of E!

Examples of Musk benefitting Musk do not demonstrate a net-positive impact on the world.

The artists criticizing Mr. Musk make a good point about what's really happening.

https://youtu.be/i9qWYUH5x3k

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