The Anatomy of Your Salary
philipjoubert.com
philipjoubert.com
If I am hiring sandwhich makers and pay them $10 an hour, which brings in $15 an hour of revenue, then some other sandwhich maker is twice as good at making sandwhiches, how much do I pay them? Probably not $20 an hour, since them being faster might still only net $15 of revenue an hour. That increase in revenue is what drives salary. The downside to a bad sandwhich maker is very small, its at most a few messed up sandwhiches.
Tom Cruise makes 1000x another actor for the same movie because the fact that Tom Cruise is in the movie brings in some large multiple of revenue, and Tom Cruise takes a cut of that increase. Sports work in the same way. Software, Finance, and to a point Sales are the "normal" jobs out there that work in a similar way because its largely non-fungible. An amazing trader or dev might make the firm 100x revenue than an average trader. A bad dev or trader brings in Negative value as they make things worse.
This is why teachers don't make more money, a better teacher does not bring in 10x revenue to a district, a worse teacher doesn't create 10x losses. Even though teachers have a large societal effect, there is no direct revenue analysis you can do to show what the replacement value is.
I would argue this is exactly what a worse teacher does. They can discourage/mislead/destroy 100s or 1000s of students over their career which can have dramatic effects for a society.
The hard part, and what a lot of engineers should focus on, is putting a dollar figure on that.
> a better teacher does not bring in 10x revenue to a district, a worse teacher doesn't create 10x losses. Even though teachers have a large societal effect, there is no direct revenue analysis you can do to show what the replacement value is.
To me that's an incredible opportunity for companies in the education sector to bring an alternative business model where compensation is based on track record. I'm certain a lot of parents would be very interested to hire tutors that have a good track record of their students going to top 10 schools for example.
I wrote blogposts for two reasons: 1. To think through things 2. To get external perspectives from interesting people
This definitely ticks the second box, so thank you.
Could you suggest anything to papers/books to read about Wins Above Replacement?
Its like treating IT as an expense, especially if your business model solely functions on IT working. For all the same reasons you mentioned.
>Water is cheap because it’s relatively easy to acquire, whereas diamonds are much harder to get. Salaries work precisely this way.
Diamonds are expensive not because they're hard to get, but because their sales and distribution channels are controlled by a cartel. Oddly similar to SWE salaries, now that I think about it. :P
That’s _why_ they’re hard to get.
I also don’t think SWE salaries are similar. A union would be analogous to the cartel, which are pretty much non existent in tech. Not necessarily in terms of good/bad but in terms of controlling the supply of labor.
What do you see as the analog to cartels?
For example, the new EU gas buying cartel or the Apple/Google/Intel/Adobe wage fixing cartel:
https://www.cnet.com/tech/tech-industry/apple-google-others-...
0. https://qz.com/247251/silicon-valley-hasnt-got-away-with-its...
Feel free to define analogy as a thing in which everything applies in exactly the same way to the level of detail that it really means you're describing the exact same thing using different words, while the rest of us go on with understanding that analogies are limited-purpose.
Is inventing things all day and understanding rapidly changing complex systems easier than family law?
Outside a few thousand high paying jobs concentrated in a few regions, if you objectively look at most software developers worldwide, they're barely middle class.
Median full-time income is a good starting point for defining the middle class, at least in developed countries. People earning around the median tend to be pretty good examples of what middle-class life looks like. Most software developers earn above the median, but not so much above that their lives would be qualitatively different.
In the US, the median is currently somewhere between $55k and $60k.
In more recent times, such as the 18th-19th century, the middle class expanded dramatically to include typical professionals, such as doctors and lawyers -- people who may rub shoulders with the elites, but whose wealth was still tied to their jobs. If their business failed, they would often no longer be middle class, whereas the upper class could likely fall back on connections and maintain good social standing. The median worker was decidedly lower class.
This structure broke down somewhat in the US and, to a lesser extent, in western Europe in the post-war era, due to an abundance of demand for labour, which allowed lower class workers to enjoy traditionally middle-class luxuries, which included widespread homeownership, often multiple cars per family, etc. But don't make the mistake of thinking a well-paid factory worker was middle class -- they were working class.
Most software engineers worldwide are working class. In certain pockets -- the Bay Area, Seattle, etc. -- or certain industries -- such as finance -- they are closer to middle class by earnings, but still working class by vocation, as they (we) work for a living and do not own our own businesses (as many doctors and lawyers do).
The line between the working class and the middle class is difficult to define. You could describe the middle class in terms of having the extra income for some luxuries, owning your home, having higher education, having the social capital from growing up in a family with educated parents, having a white-collar job, and so on. Those with most of these attributes are middle class, while those who lack most of them are working class.
What you call the structure breaking down somewhat I call a massive expansion of education and wealth that defined the 20th century, particularly in Western Europe. Communism was defeated by turning half of the working class into middle class and improving the quality of life for the rest as well. As people now had a vested interest in the system, they no longer wanted to overthrow it.
Interestingly, those companies are also the ones that I think have put the most effort into quantifying the value of a software developer to the business as a whole. The salaries look obscene to many people, but the cartel pays them because it believes it's getting more value than it's paying for.
It was more cartel-like when Apple and Google were conspiring to keep tech salaries down by setting salary caps.
Some people will refuse to work for a FAANG as a matter of principle, and they don't have a monopsony, so it's not exactly a cartel I'd say
Or who actually completed a data structure and algorithm course as well as a discrete math course.
I mean someone could grind leetcode for hours and rote instead of putting the work to complete these classes I suppose.
...which is only effective because naturally-occurring diamonds are hard for the average person to get. If there could be a water cartel there would be, but it doesn't work because 1) you can just go down to the river/find some snow/dig a well/etc/etc, and 2) water is inefficient to move in large quantities. You could fit millions of dollars worth of diamonds in the space of 1L of water (maybe $10-$100 at cartel prices)
Teachers generally need a post grad degree to teach, assholes in tech only devalue this work because it isn't coding. I would pay money to see this guy try to run a classroom.
Finally, teachers don't "get a lot of time off". They get a lot of time off in the summer but are pretty swamped throughout the rest of the year and it seems to end up hitting the average working hours per year in total. This is one of those job stereotypes from before the 2000s, when jobs at the bottom of the pay scale were not squeezed as hard as they are now
In South Africa teachers don't need post-grad, many don't even have grad. South Africa also don't have 3 month school summer holidays, but holidays spread throughout the year.
Why not actually do some research and back up the claims? Give some insight?
However these kind of posts are commonplace and often very popular. Sometimes I refrain from writing if I can't find data to back up my point. Maybe I overestimate the importance that people place on these things.
A lot of underpaid jobs have leverage due to how the USA infrastructure / economy is structured, which is that it's difficult to move / change.
Even if you want to leave a job, you can't given you have no leeway in budget to search for a job, let alone pay the expenses to likely move (since our urban areas are so spread out). Factor in family that is relying on you, company provided insurance, etc. and your ability to consider leaving a job is heavily restricted. You can't even afford to go on strike, at least not to a duration that the company will care about. That and unions are absolutely gutted here.
So you end up with a group of folks that have no leverage.
It's by design unfortunately.
The reason they aren't paid much is it usually low wage jobs are pretty easy to hire and train for. Which means there is a very large potential applicant pool.
See https://www.kold.com/2023/02/23/study-shows-severe-arizona-t...