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Is it possible the German company was trying to see how you react to failing tests?

I just ask because it seems like trying to get work done for free through code exercises is much more trouble than it's worth.

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You would stand a good chance of waiting a lot longer to get that work done, but as mrcold said, testing a solution doesn't cost much. If you're willing to wait for the solution to a problem, getting work done through code exercises can be worth it.

Yea, I guess I was thinking more that it would take a lot of time to unnaturally break down a problem into portions small enough to pass as code exercises.

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