> It is a wealth-sharing problem as well. I don't know much about stripe, but think of Bezos as a pretty good example - to a O(n) rounding he has 100 billion dollars and 1 million employees. Why is he getting 100,000 from each employee?
I used to work for Amazon. I did not give Jeff Bezos $100,000. In fact, I actually made money out of the deal.
Fundamentally, tech workers don’t seem to understand this point mainly because they are making more money than “everyone else.”
The other reason is that we as humans don’t understand big numbers. Big ape brains can’t understand the gap between $1 million and $1 billion let alone 100 billion.
If software engineers would have banded together a long time ago to get a larger piece of the pie like professional athletes, then….
That is an absurd exaggeration, unless by "senior engineers" you are including people who do a lot more than "just" engineering, e.g. build companies, build products, etc.
The reason NFL wages are so high is not just that they bring in a lot of money, it's that the players are to a large extent irreplaceable. If you take the, say, 500 most talented players in the US at a given time, you can't just replace them with the next 500 most talented players and get the same outcome. So each of them commands a very large salary - because the alternatives are worse, and will lead to worse outcomes, which will lead to less money for the team.
And at the top end, the best players are a massive draw that makes teams tons of money.
Compare that to engineers. We are, to a much larger extent, replaceable. If Amazon can't hire the 1000 "best" engineers, going to the next 1000 will probably not noticeably impact their product. I'm not denying that there are talent differentials between engineers - I think it's even more than the commonly cited 10x. But it's still not that big, definitely not bigger than the difference in NFL players (since engineering is not competitive.)
Note that if you stretch the definition of software engineer to include people building and launching brand new products, building huge successful teams, etc, then you're getting into the realm of CTOs, CEOs, founders, etc, which are far less replaceable (I'm a good engineer, but I couldn't have built Stripe). But then we're talking about the people who are adequately compensated for their work.
> If you take the, say, 500 most talented players in the US at a given time, you can't just replace them with the next 500 most talented players and get the same outcome
I genuinely believe that a league made of the 500-1000 rank players would be just as (or at least almost as) entertaining as one with the top 500 players. Relative rank is what matters and it's why NCAA March Madness is so popular despite being made up of relatively low ranked players.
> I genuinely believe that a league made of the 500-1000 rank players would be just as (or at least almost as) entertaining as one with the top 500 players.
This is a popular enough theory that it's been tested multiple times. In the successful cases, the rival league still ended up trying to poach the top players and ended up merging with the other top league. In the less successful cases, the league went out of business.
Absolutely. I think it's worth thinking through the difference to software - because it's a competitive field, as you said, the relative rank matters, and therefore getting the best player is important for your team, unless they are for some reason no longer playing. E.g. Michael Jordan was a huge draw when he was playing, and made his team relatively better off (and the league as a whole).
In software, that's not the way it works. Or at least, the competitive business aspect of it is largely out of engineer's hands. Few businesses ultimately succeed because they wrote better code, IMO. Though interestingly, a bunch of startups only get big in the first place by having great code that allows them great speed/flexibility/etc. Stripe itself got big originally because its API was really great, which I'd attribute more to product than to engineers, except in this case it's kind of a merger of the two.
The AFL, WFL, USFL, XFL, AAFL, 2nd XFL and 2nd USFL would likely disagree.
"March Madness" is an anomaly, a single-elimination tournament with 48 games in one weekend with a history of upsets and buzzer-beaters. Additionally, college basketball and football in the US benefit greatly from the local and alumni network affinity for the programs, that doesn't exist with, say, minor league baseball or the NBA D-League.
The AFL was actually relatively successful since it forced a merger with the NFL. Meanwhile, at least according to a 30 for 30 documentary, the original USFL had a potentially viable niche as a second-tier spring league for awhile until they made the bizarre decision to switch to the fall football season and try to force an NFL merger.
I mean that if the NFL didn't exist then the AFL would be popular. A better example would be Japanese Baseball. A lot of those players are great but very few of them ended up transferring to the American leagues, yet the sport is still extremely popular in Japan.
While senior engineers don’t make NFL wages, the executives do (including some former senior engineers). Would it be fair to compare execs to NFL player instead? (While engineers are those work behind the scene to support the game)
You used that employee’s labor in conjunction with a bunch of other things to produce more value than the wages. If the value was in just the work alone and not the work directed at the right things in the right environment, there would be no point in working for Amazon and you could just collect the entire revenue yourself.
This is the main reason it’s completely illogical to expect that an employee receive most of the revenue their labor helped generate.
This is the answer and why the labor theory of value tends to fall flat without due consideration to the labor of managers and the cumulative returns of labor.
If your work earns $100k/y in revenue for a company, that doesn't mean your work created it entirely. The continued dividends of organization of the company, customer acquisition, legal apparatus, support of your entire organization made that revenue possible and are entitled to a share of it too. It took a village to make that revenue, unless it didn't, in which case: quit and do it yourself to keep all that money.
This is a self-correcting system that ensures everyone gets paid approximately what they contributed.
While you're right that you have to account for the entire organization, not just the engineers (obviously), the gap between what the owners earn compared to all other employees combined is still wildly disproportionate.
It's of course hard to precisely quantify these things, but the worsening gap between worker and owner incomes is quite obviously not proportional to any change in how much value owners add to a corporation compared to workers (if anything, workers' contribution has been increasing, not decreasing, as productivity tools and techniques have been advancing).
This same argument also applies to owners. If the org makes $100k in revenue and the owners take $10k of that, why don't you just leave to start your own firm and keep it all?
It's because there ARE contributions from the owner, even a passive owner has what I called "dividends from stored labor": they took on the risk, created a functioning company solving a problem, did the work of organizing the systems/structure that run the thing, and so they are entitled to a piece of the revenue as well (as that revenue couldn't have been earned without their contributions either).
No one says that owners are not entitled to a piece of the revenue, obviously they are, and doubly so when they are also doing their own work for the company.
My point was that owners currently get a disproportionately large piece, and that the gap between what owners get vs what workers get has been widening with time. And not only is it widening, but it is doing so while the relative contributions to the business' success are often narrowing (give the huge increases in worker productivity in most domains).
You're not taking risk premium into account. Owners run the risk of working for several years and getting absolutely nothing in return. Sometimes they put their own money into the company and never get it back.
No, on AVERAGE you get more value out of each employee than you pay in wages, if you turn a profit (let's put aside investing in growth / VC funding for simplicity). That's how you stay in business. That does not mean for each employee you are efficiently paying them based on the value created for the business, some may be underpaid and some grossly overpaid.
By its nature, the employee's wages are more valuable to them than the time and effort they are expending on the job. Otherwise, there would be no point to working.
What's happening here is gains from trade. I have a lot of free time and a set of skills, while my employer has a lot of money and the willingness to shoulder the risk that the work they're asking me to do won't be profitable for them in the long run. Both sides get something out of the deal.
On average that is true, but certainly employees who make minimum wage contribute a higher percentage of their salary than someone who earns 6 digits, to the point that the weapon who earns 6 digits may actually come out ahead depending on how many employees there are
It's about how and why the deal was structured that way.
Amazon is structured so that there is net 100,000 dollars of wealth in the deal betweeen you and him that goes to him (whatever goes to you, he also gets 100k.
I am sure you have no complaints, but why the 100k? why can't that be 50k to him and 50k to you.? Or 33, 33 and 33 extra in tax? or ...
And is the particular arrangement something that is fundamental and inviolable to creating the wealth Amazon did? Or is it just that because it was that way Amazon could beat the alternative universe Amazon ?
what is the phase space of "still generate wealth" and "society looks different"?
Fine, so what's stopping you from starting a business that does exactly the same thing Amazon does, except you make less money and you pay your employees more, and then you go ahead and poach Amazon's entire workforce? If that's actually possible, you should do that, because if you only end up half as rich as Jeff Bezos, you'll still be rich and all of your employees will be better off. What's stopping you?
If Amazon had had a competitor back in the day that had done just that - everything Amazon did, only shared more, then probably we would all be buying from ... err ... Mississippi.com. But this competitor would have had to pull all the right moves - as well as sharing differently.
And one day, yes there will be some innovative new company that will do to Amazon what they have done to Walmart. And maybe that company will have a competitor that will be a co-op and maybe they will have the edge. It has worked ok in the UK for John Lewis. But the lesson from John Lewis is they have to be good at all the basic stuff - and only then do they get to pick staff based on the nicer governance / culture / slight pay gap.
Building a company is hard. Building something like Amazon is freakishly hard. Which is why this "treat employees well" is basically never left up to the market and just tacked on afterwards in regulations.
And finally - yeah would Bezos exactly be hurting if he was half as wealthy. Neither of us think so - which kind of is my point. If there was some (weird) regulation that meant no-one can become richer than 10 billion dollars, and would need to improve share grants when they go over, guess what, Bezos would still have started Amazon, still done it all, and still have a yacht and a second wife.
The phase space available to us is larger than we think.
> Building a company is hard. Building something like Amazon is freakishly hard.
And that's the point.
> If there was some (weird) regulation that meant no-one can become richer than 10 billion dollars, and would need to improve share grants when they go over, guess what, Bezos would still have started Amazon, still done it all, and still have a yacht and a second wife.
I don't want to fixate on Bezos in particular, but there are probably a lot of founders who would be hesitant to start a company if, once that company became valuable enough, they would be forcibly divested from it by law and therefore be at risk of losing control. Even if you're a vision-focused founder who is intrinsically motivated by wanting the company you are founding to exist in the way that you want it to exist, with no regard to your own personal wealth, you're going to be hesitant with that sort of confiscatory regime. And that's setting aside the fact that building a large company is not only "freakishly hard" but also tremendously risky. If you have a wealth cap of 10 billion dollars thinking "10 billion dollars is enough motivation for anyone", sure, but there's a risk premium involved and the expected value is nowhere close to that number.
That's the easy part. Though I doubt investors will ever again allow 90s era Microsoft level of profit sharing
Amazon's secret sauce was cheap capital. Both tax holiday/avoidance and persuading Wall St to forego profits. A combo that's unlikely to be repeated any time soon.
There were hundreds of other e-commerce companies that were started around the same time, all of which had those exact same benefits. Most of them died in the dotcom crash.
I used to work for Amazon. I did not give Jeff Bezos $100,000. In fact, I actually made money out of the deal.
If you were a fairly senior SWE then customers gave Amazon a few million dollars for the work you did. Jeff got $2.8m, you $200k. On paper it's unfair, unreasonable, and unbalanced, but you agreed to it, and without Jeff you would have earned less. Maybe it's fine.
> If you were a fairly senior SWE then customers gave Amazon a few million dollars for the work you did.
This was early in my career, and I didn't work on anything customer facing, but there's still no guarantee of that. What if I'd worked on the Fire Phone?
I used to work for Amazon. I did not give Jeff Bezos $100,000. In fact, I actually made money out of the deal.