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Comment by scop | Hacker News Reader

That was where my mind went to when I saw the headline. Granted that while I’m not on the Finance side of things and am in fact a developer, “six million” didn’t seem like much at all considering engineer salaries. It’s certainly an achievement, but at what short and long term salaried cost?

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A primer on valuation: in many financial contexts, $1 of operating savings may be worth much more than $1 of investment.

That is because an investment is a one-off, so it's actually worth $1, but the savings are recurring, so they are worth the same number of years that a company's profits are valued. Depending on sector and investors' beliefs in the future of companies, this factor is typically in the 5-20x range. That means that $1 of savings is well worth at least $5 of investments.

Factor in anything you want!

In an ideal org, perhaps. In many places, forming that team starts a process where it continually finds reasons to still exist, so your $1m is yearly until a reorg.

Sigh.

If that $1 of investment doesn't yield any returns that's not an investment it's just an expense.

So yes $1 of savings is worth more than $1 of spending.

You could potentially take it as an investment loss for tax purposes. Whether that’s proper depends greatly on the circumstances surrounding how the money was accounted for and spent.

That's not how taxes work. Investing $1 doesn't count as a loss for tax purposes.

I did not claim that investing $1 is a tax loss.

$6m across 2.5 years is like $15.5m, how many engineers man-months to breakeven, I'm pretty sure it was worth the work.

$6m in perpetuity is like infinite and engineers can be fired.

It really isn't. The first years dominate the value and later years are worth nothing due to inflation. Google a calculator and use a reasonable discount rate and I suspect you will find that todays value for an infinite perpetuity is a lot less than your intuition might guess. It always surprises me.

But they will save more than $6M the second year because AWS will up their prices.

What?

It costs me $10M to run something every year, it now costs me $4M to run something every year. I have $6M in my pocket every year now in perpetuity. Compound that annually with the assumption that I maintain or increase top line revenues and thats pure extra profit.

Note - I admit, all of this ignores two key things (a) we dont know the engineers salaries who built this and (b) we dont know the ongoing maintenance costs.

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