
Talking About Money - craigkerstiens
http://www.kalzumeus.com/2015/05/01/talking-about-money/
======
marktangotango
>> Most important takeaway about salary negotiation, by the way: disclosing a
previous salary is almost always against your interests because it pegs your
new salary to that plus 5% rather than your value to the new firm minus a
discount, which is a brutal mistake

I had a phone screen with an HR drone once (Cerner Inc. to be exact \waves)
part way thru she asked me my current salary. I declined to provide that
information. She replied "we can't continue without that information". I
replied, I'm sorry, but I won't discuss salary at this point. She said, "good
bye" and that was all. I had a job so was not desperate at the time. I was
still shocked at how abrupt it was.

~~~
IkmoIkmo
Crazy. I'd definitely send a quick note to someone higher up if you can get a
hold of him/her. I know, not worth the time, a hassle etc. But a typical CEO
worth his salt will crush something silly like that in no-time, if you really
want to hire good people this is the type of person you want to fire.

I mean, hell, asking the question is one thing. I can live with that. But
turning that into some kind of litmus test where declining to share private
information completely 100% immediately disqualifies you, that's insane.

Anyway, never experienced it. Question for you all, are there any negatives to
bluffing?

i.e. say you said your previous salary was $110k while it was really $90k,
will HR say 'you're overqualified' or something to that extent if they were
hoping to pay you say $90k and had a max of $100k in mind?

As in, can you recover from that and say 'oh but $100k is fine, too', or would
that also send a signal of weakness where they won't hire you because you seem
desperate (taking a $10k cut from their perspective, when you actually get a
$10k raise)? Ugh the mindgames! haha. Would love to hear your experiences on
this issue.

~~~
marktangotango
Yes, one might think so, but this was the CEO in question[1]. Edit, and so far
as bluffing, could an employer legally ask for W2's to verify?

[1] [http://www.nytimes.com/2001/04/05/business/stinging-
office-m...](http://www.nytimes.com/2001/04/05/business/stinging-office-memo-
boomerangs-chief-executive-criticized-after-upbraiding.html)

~~~
civilian
They can't legally ask for proof, no. Bluff away! (I'm not a lawyer and this
does not constitute legal advice.)

I did a small bluff to try it out, just 5k above what I was making. The
recruiter was surprisingly skeptical! I know I've done an good job of bumping
up my salary in a short amount of time, but it was kind of off-putting to have
him question it.

~~~
bobjordan
I'm a bootstrapped entrepreneur CEO with ~30 employees in my company now,
growing quickly, expect to have ~60 in next 12 months.

I am not so interested in previous salary. Rather, I always directly ask "what
is your salary requirement". I think it is good business sense to not underpay
what people think they require, though sometimes this means we must pass on
what could otherwise be good employees, so requesting moonshot salaries is
definitely a filter for us.

Furthermore, when I ask applicants their requirement, if they just deliver a
number to me using logic that does not include salary levels at previous jobs
to justify, then I evaluate how close it is to my budget target for the
position, and if feasible, I make an offer at that requested level.

However, if the applicant uses a previous salary to justify their current
salary requirement, and it's a lot higher than I expected or had targeted for
the position, I have on a few occasions offered jobs with compensation to
match previous salaries, so long as applicant proves to my HR they are not
lying about the salary.

So far, all offers I’ve made predicated on proving their salary claims, my HR
has proven the applicants were lying to significant degree, except for one
person. Those that were caught lying had job offers rescinded. The one person
that wasn't lying only lasted 90 days because he clearly couldn’t add value to
justify.

From my point of view, the best strategy for negotiating a higher salary is to
get in front of a person that cares if you can help them make them more money
than it costs to pay you, regardless of your previous salary (an HR manager is
usually not the person that cares about this). Then present a clear vision to
them for how you will deliver that added value.

~~~
Osiris
Why ask for a salary requirement? Why can't an employer just say "We're paying
$X for this position, does that work for you?"

Just pay what the position is worth to you. The only reason to negotiate is to
pay less than the position is worth if possible.

~~~
nitrogen
Above a certain point, and most programming jobs are above that point, there
is no fixed position with a fixed value. The right person in the right place
can easily be worth 2x or more than originally anticipated for an opening.
There's no way to predict that in advance, so at best the employer could give
an ideal range and let candidates demonstrate their value if they want to
exceed the range.

------
pipermerriam
I wrote a small application a while back to allow a team to figure out what
their average salary was without exposing individual salaries. Seems relevant.

[https://are-we-being-underpaid.herokuapp.com/](https://are-we-being-
underpaid.herokuapp.com/)

It generates unique URLS for each participant and stores almost nothing on the
server. Only a party that was actively monitoring web traffic has enough
information to divine someone's salary. No tracking of emails, salaries, etc.

Source code here [https://github.com/pipermerriam/am-i-
underpaid](https://github.com/pipermerriam/am-i-underpaid)

~~~
qzcx
Very cool. This looks like a solid answer to a simple question that many
people would like answered. Now if only I could think up good side projects
like this to do. : )

------
Todd
I always appreciate your transparency and believe that you're helping drive
our industry forward. I often search for ideas on how to help within my area
of influence. The closest I've found is Stack Exchange's salary matrix, and
the related approach at Fog Creek.

I think publishing salaries has several benefits. For one thing, it removes
the used car salesman approach to hiring. One result, which is more important,
is that it can help eliminate wage disparity due to differences of gender or
level of negotiating skills. It can also help prevent the corrosive effects
that can occur if people do find out actual numbers (the morale-sapping that
you discuss).

The problem with this approach, and one I'm trying to figure out is, what
about the non-developer jobs? Assumedly, each group gets their own matrix. But
if the admins can browse the matrices of the other groups, like the
development team's, then there can be a similar corrosive effect. One option
is to only discuss the salary matrix within your group and with HR. But then
we're back to a different version of the tired old story. (Don't discuss the
matrix outside of your group!) This leads me to believe that it's best to be
completely open. It might also serve as an incentive for people to make an
effort to grow into different areas. Any ideas appreciated.

~~~
ljoshua
At the firm that I work at everything is in the open, even between groups, and
it works very well. It is a formula-based compensation given your department
(basically consultants and back-office) and stated level. With that, I know or
can calculate exactly how much my manager makes, how much an entry level HR
employee makes, and how much the CEO makes.

I love it because it removes any problem with politics or shadowy discussions,
and I know what I can expect when a promotion comes. The only downside is that
it leaves the firm with little leverage when it comes to compensation: I can't
simply get a bump without a promotion, nor are there extra bonuses that can be
given out either for hiring or retaining. (This has its benefits as well
however.)

~~~
Todd
That's enlightening and encouraging. A formula-based/matrix approach might
make it more acceptable because it isn't personal. One thing I haven't seen is
how to handle COLA. I'm sure that can also be added as an additional factor,
though.

~~~
ljoshua
(Late to the reply, sorry.) COLA is addressed on a per office basis. Our
headquarters is in a relatively inexpensive large city, and so other offices
in pricier places like SF or DC get a blanket COLA adjustment, with the
percentage bump based on some particular survey's index or something.

------
L_Rahman
As a recent graduate about to go into his first ever salary negotiation, I'm
really grateful for the perspective this provides. My dad was a taxi driver
(now drives for Uber) and my mother a stay-at-home mom. I was raised with the
notion of earning enough to support myself. Anything beyond that is something
I'm expected to figure out myself. Posts such as these are very helpful.

A question though:

1\. If I've had conversations in quarterly reviews that involved numbers but
nothing was ever formalized, are those numbers open to renegotiation in a
formal conversation?

2\. How do I ask for equity and how much should I ask for as the first hire
(technical employee of a non-technical founder)?

Edit: I'm aware the user who posted this is not the author, but I'm hoping
patio11 or someone else comfortable offering negotiation advice will stop by
the comments section.

~~~
saryant
Re 2), you should make sure your salary is at market-level and more or less
ignore equity. Chances are you'll be let go or the company will collapse
before it's worth anything.

If you have a reasonable salary, equity is just a cherry on top, but if an
employer tries to get you to trade cash today for a startup lottery ticket,
say no.

This is especially important early in your career given the time value of
money. An extra $10k/year in the first five years of your career, properly
saved, could add north of $600k to your retirement when you get to that stage
in life. That's an almost-certain payoff against a roll of the dice on a
sliver of ever-diluted equity.

~~~
beambot
Since L_Rahman didn't mention "startup" per se....

The Equity / RSU package from many big (publicly-traded) tech firms can be as
much as 30% of total compensation. I generally account for this portion the
same as "cash with a discount" \-- when negotiating for my current role, I
used a 30% discount on the present share price.

For startups... it's a mixed bag (as saryant mentions).

~~~
saryant
L_Rahman may not have used the word "startup,", but he did say "first hire" so
it's reasonable to assume we're discussing a startup.

Obviously the negotiation will go differently if we're talking about, say,
RSUs at ExxonMobil which are as good as cash once they vest.

------
ransom1538
Posting your company salaries does a few things:

1) It promotes mediocrity. 2) Creates a political cesspool. 3) Ties the hands
of hiring team.

1 - Excellent people want to go places where they can make more. When
excellent people learn about public salary postings the first thing they will
worry about is the perception of other employees. I suspect they will just
avoid conflict and work somewhere else. Really think about the current open
salary systems: state governments, federal systems (cia, fbi..), school
teachers, college systems, military..

2 - Will you help the "next" person above your salary grade? Why? Your goal is
to be higher than he/she - so this promotes extremely bad behavior. This is
how yahoo is setup. People will be trained to create little moats to protect
power, inflate budgets, hide data, hurt other employees.

3 - Really want that new hire? Well, now you have no negotiation power. If you
pay this employee salary X. Anyone who gets less than X (Call this Y) will be
pushed down in the employee chain. So now, instead you want to minimize Y.
Sublimity, you will hire less and less capable people to avoid conflict with
the current team.

~~~
eellpp
> Excellent people want to go places where they can make more

The issue with engineers is that we don't do that and are bad at negotiations.
Once at job people rarely look out unless they realise that they are grossly
underpaid. This may be true for other job profiles like sale/biz-dev etc where
the day to day jobs hone their skills for best deal extraction.

~~~
ransom1538
You are totally correct. They avoid conflict. If engineers are told at the
interview - "Your salary will be this, it will be posted online for all the
other employees to see"

I suspect the engineer to not be there Monday.

------
keeran
The problem I have with this #talkpay thing is that it assumes everyone I
connect with is in our lucrative echo chamber. I'd feel like a asshole talking
about my income as a contract developer knowing I have followers who are
really struggling to find work / decent pay outside of technology.

Conferences, tech meetups etc I'm usually the first to be championing
developer solidarity and pushing the message that we can and should all be
demanding more money, everywhere else I try and keep it low profile to not rub
peoples noses in it.

~~~
BSousa
I fully agree with that sentiment.

I have a lot of non-tech folks ask me about money (when they ask me what I do
and if it pays well) and I always try to avoid giving numbers and go with a
more generic 'I can't complain, things are ok/good'. I earn a lot (and I mean
a lot) compared to non-tech folks where I live: 20x difference in some cases.
I had a friend recently in a conversation mentioning that buying X (one of
those cheap android tablets for kids) as a birthday present was 3 days worth
of her work. In my case, it is less than 1.5 hours of my work.

I'm very happy for earning these values, and I try to give back when I can,
pick up the bill here and there (enough to help, but not enough for people to
resent it) but I know we developers are quite lucky with the luck of the draw
we got in this little slice of time and IMO, we should be more considerate of
others in these cases.

~~~
saryant
I feel the same way as a 2012 college graduate. Most of my college friends are
still unemployed or working in marginal work (temps, office admins, phone
support). On top of that, most are buried in student loans (private college)
whereas I had parents able to pick up the tab. More than one has turned to
webcam porn to make money while I'm charging $$$ as a software contractor.

I post photos on Facebook from Tokyo or Berlin and sometimes wonder if I'm
pissing off my friends.

~~~
BSousa
Sorry for the late reply.

I don't think you should stop posting photos from your trips just because you
are 'afraid' you will be pissing off your friends. They can always unfollow
you (or whatever FB allows you to do, I'm not big on social networks) if they
find it 'offensive'. I just think it is a balancing act between sharing parts
of your life, and sharing absolute numbers or boasting.

Anyone that knows me for more than 5 minutes, knows I'm doing well (I live in
a nice place, in a very expensive area for example and I don't hide this), but
at the same time, I avoid letting (outside of very close friends) people know
how well exactly. I never talk about money or salaries or what not. That
doesn't mean I won't invite them over for dinner/a swim in the pool just in
case I 'piss them off'.

------
learnstats2
Something which I think is only hinted at here: negotiating pay requires a
willingness to lose the job if the negotiation doesn't go well.

If hirer has an equally good candidate or consultant who quotes a lower rate:
you're out of the running. Even if you're better, you have to be better value
according to the employer's own assessment.

There are few employers who are price insensitive and you have to be in an
overwhelmingly lucky or privileged position to find them.

~~~
freyr
> _negotiating pay requires a willingness to lose the job if the negotiation
> doesn 't go well._

That's why, if possible, you negotiate when you already have another offer. I
negotiated a +50% annual pay raise at my last job because I was completely
willing to walk away for another job.

I also got the raise because I was playing an important part in a high value
project at that time. I felt a bit guilty about the possibility of leaving the
project in the lurch, or negotiating when my value was at its highest. I
thought it would lead to resentment from my managers if they thought I was
strong-arming them.

But they agreed to the rate, and never showed resentment. Every successful
business person or trader knows to sell high, but sometimes the rest of us
forget.

> _If hirer has an equally good candidate or consultant who quotes a lower
> rate: you 're out of the running._

If you can easily be replaced by a new hire or a consultant, you don't deserve
the higher salary.

~~~
jacquesm
Negotiating without a BATNA is like jumping out of a perfectly good plane
without a parachute.

~~~
zo1
What is a BATNA?

~~~
walterbell
[http://en.m.wikipedia.org/wiki/Best_alternative_to_a_negotia...](http://en.m.wikipedia.org/wiki/Best_alternative_to_a_negotiated_agreement)

------
calcsam
"Salaries are not just internally transparent at Japanese megacorps but so
predictable that any middle-class adult in central Japan can accurately
predict my salary history. I mention this partly to say that salary
transparency by itself does not guarantee happy outcomes for employees."

Yes. Salaries at Buffer might be transparent but also quite low.

~~~
dkrich
Yeah, I actually prefer a lack of transparency. I fully recognize the right of
others to discuss salaries openly and support their ability to do so. However,
I think aside from benefiting companies, a lack of transparency around
salaries benefits those who are good at negotiating, whereas complete
transparency helps those who are not good at negotiating.

If for example, you know company X's highest paid software developer makes
$110k, and the lowest makes $90k, (and such a narrow banded salary range is
probably likely if everyone knows exactly what everyone else earns), you
probably aren't going to get them to pay you far north of $110k simply because
that would carry the likely result of increasing everyone else's salary since
they now know you are making more than they are and they want a salary
increase too.

But the lack of transparency should really go both ways, ideally if you want
to get the best terms. That is, if you can inflate your previous salary or not
disclose it at all while asking for a number significantly above it you are in
a much better position than laying bare your entire earnings history.

~~~
15155
Correct.

Transparency benefits the company for this exact reason.

There is a non-zero cost (headache, dollars, what have you) in leaving an
organization. This means that salaries can be at market rate, drift below, and
people still may not see enough value to leave.

Good negotiating means you will always see market rate or above. Transparency
means salaries will drift below market rate until someone deems you worthy of
a bump.

Buffer salaries are outrageously low: for that reason alone, I would never
advise anyone to work there.

~~~
nulltype
Salary is only one part of a company's compensation. For instance, in the
Buffer case, they do remote working, so some people could find that to be
worth quite a bit.

------
brador
If consulting is making $30k/week/job then why keep running the personal
businesses? Why not take the consulting and branch it out, and drop everything
else as a distraction?

~~~
patio11
Because I enjoyed running the software business more than I enjoyed running
the consultancy. Partly that is for difficult-to-explain personal reasons (I
feel the sense of satisfaction with operating a software company that some
people feel when painting things). Partly it is because of reasons which are
endemic to consultancies, even successful consultancies. Feel free to ask if
you're curious.

I also have a quirky relationship to money as a goal. Rather little would
change about my life if my salary increased by $800k. My hobbies would remain
books, video games, taking my wife and daughter on walks, and posting too much
on HN.

~~~
bcg1
Not snark... serious question... its not clear to me what sort of services
anyone could offer for 30k per week... what sort of thing commands that kind
of price tag?

~~~
patio11
Making $20 million a year SaaS companies into $22 million a year SaaS
companies. If you have reasonable expectation that I can actually deliver on
that, then you're pretty much willing to say yes to any rate I quote.

If you're curious "How does one turn a $20 million a year SaaS company into a
$22 million a year SaaS company?", there exist many options depending on the
specifics of the company and virtually all of them are doable. For example, if
you increase the rate at which the SaaS company closes deals by a modest
amount, that could reasonably hit that by itself. You could do that by some
combination of A/B testing, better email marketing, tweaking sales processes,
etc, alone or in combination. I've blogged pretty extensively on all those
topics if you're curious.

These are not necessarily all that technically complicated. If you can figure
out ActionMailer, an if statement, and a for loop, you have every technical
capability you need to be an engineer in charge of email marketing. The
interesting bits are "What emails do I decide to send?", "What words go in
those emails?", and "What goes in the if statement?"

The actual work is _exactly_ as dominated by meat-and-potatoes execution
ability as you think it is.

~~~
robinhoode
What books can I read to, at the very least, attempt address the questions in
your 3rd paragraph, given how unique every business is? Isn't anything you
find a book on sales or marketing so abstract that it's 2 or 3 layers of
assumptions before you can talk about projections? How does one begin a career
in SaaS sales / marketing? What makes for a good "portfolio piece" in that
domain?

~~~
kasey_junk
One of the things that has made Patrick a "tech. celebrity" is that he has
written extensively and openly about this very topic. In particular his brand
of uniqueness was to take a lot of things that engineers don't like and then
turn it into an engineering problem. He didn't guess, he tested.

Here is the amazing thing, he also did all of us a huge service and wrote it
up and put it on the internet for everyone to find!

If you haven't yet, spend as much time as you can diving in his blog. Every
post he's written is worth the price of admission, but you could definitely
limit your search to the ones that focus on the SaaS sales and marketing
aspects.

~~~
galfarragem
I wouldn't call Patrick a 'tech celebrity', I would call him a 'marketing
celebrity' in tech. His writings on how to market yourself are without doubt
the best essays I've ever read on the subject.

~~~
tptacek
See you guys only put it like this because you haven't heard him sing along to
TLC. He's really just a straight-up celebrity.

------
meraku
_Most important takeaway about salary negotiation, by the way: disclosing a
previous salary is almost always against your interests because it pegs your
new salary to that plus 5% rather than your value to the new firm minus a
discount, which is a brutal mistake_

Completely agree with this, though I made a mistake that was even worse than
this. A friend hired me a couple of years ago to join his small company as the
first developer, during which I disclosed my salary and also mentioned that I
was willing to take a pay cut (as I wasn't happy where I was, and he was a
tiny company still finding his footing). Fortunately, he matched my salary, so
I didn't end up making less money as such, though it also didn't take into
account of the value that I brought to the business, being the only developer
on the team.

As a result, it certainly feels like I've sabotaged myself, where I should be
making more than I am, with the only solution being to find better compensated
employment elsewhere despite being reasonably with my current role.

------
dkrich
_Most important takeaway about salary negotiation, by the way: disclosing a
previous salary is almost always against your interests because it pegs your
new salary to that plus 5% rather than your value to the new firm minus a
discount, which is a brutal mistake_

I used to believe in this adamantly, however recently I think it requires a
bit of refinement.

First, it depends on where you are presently. If you are in a job you really
don't enjoy or are not performing well in, for whatever reason, your top
priority is finding a job that better utilizes your talents. A lot of people
believe that once you start a job at a certain rate of pay, you can't
negotiate it up significantly because you will always be anchored to that
initial amount. That isn't really true. Once you start if you perform well you
become a valuable asset, and companies don't like to lose valuable assets. One
option is to find another company that will offer you the amount you want to
make and take it back to your company and ask them to match it. Very often
they will and without much argument. However the important thing is to start.

Now if you are in a job you enjoy and have no real desire to leave except pay,
then you definitely should not disclose your salary, as you have a powerful
negotiating position as you really don't need to move. However if the company
is really pressing you to give them a number and won't move you on unless you
do, it's okay to tell them the number _if you are up-front and steadfast_ in
that you are looking for amount $X which could be 1.5x, 2x, or any multiple of
what you are presently earning. If they claim they can't match it then move
on.

Finally, never negotiate salary with a recruiter before meeting with the
hiring manager. Many times (certainly not always) recruiters do not know much
about the job requirements besides what was written by the hiring team in a
bulleted list. They don't have the authority to grant salary requests, but in
many cases hiring managers do. I have had several job offers come in well
above what the recruiter told me the job paid. No matter what you are told the
salary range is, if a team really wants you, they will pay to get you.

------
throwaway90000
> (Most important takeaway about salary negotiation, by the way: disclosing a
> previous salary is almost always against your interests because it pegs your
> new salary to that plus 5% rather than your value to the new firm minus a
> discount, which is a brutal mistake, particularly in the years of your
> career where natural growth in capabilities/experience/the market/etc causes
> you to bring vastly more to the table with each new job.)

This is terrible advice. If a prospective employer asks how much you are
making, respond with your desired salary at minimum. If they are serious, the
negotiation point will be that plus whatever raise you claim to be looking
for. If they want paystubs, you seriously don't want to work for them, because
no professional should suffer that indignity and they're probably turning away
great people as it is. I've only had one company ever ask for paystubs in my
career and I got a weird vibe from them early on anyway.

~~~
tptacek
If you tell HR "I won't tell you what I made last job, but I'll tell you what
I want to make", then you're basically following most of Patrick's advice.

If you can lie convincingly, lying might be an effective negotiating strategy.
Lying convincingly here generally involves you knowing as much about the job
market as employers do, though, and that tends not to be the case: employers
talk to 10 people for every 1 hire they make, and so they get a pretty good
snapshot not just of the field at large, but of what other people at your
current firm make.

Lying _unconvincingly_ is a very poor strategy. It broadcasts both naivete and
insecurity to your counterparty, both of which are exploitable
characteristics.

~~~
radicalbyte
In the current market you don't need to lie: just get multiple offers.

Also, you can use recruiters to your advantage. Give them much higher salary
demands (i.e. 20-50% higher than your current wage). They'll come back to you
if they find someone willing to pay. If they question you, then the reason
you're expensive is your specialist skill-set.

------
interesting_att
There has been a recent trend in tech discussions to have greater transparency
in compensation, and more importantly, removing negotiation from employment
procedure (see recent changes at Reddit). I fear that this move would
dramatically hurt startups, who need all the flexibility they can get.
Moreover, this move could dramatically kill any form of cohesiveness in
startups. Lastly, this move would de-emphasize the importance the skill of
negotiation, which would be a detriment to the company.

To those who don't know, most large companies already have a structured pay
table. Try working at AT&T or McDonalds, and you can probably predict where
your salary will be in the next 5-10 years. Real negotiation for most people
in most positions mainly happens in small firms and startups.

Lack of salary negotiation will only scare away well qualified candidates who
don't fit some arbitrarily made rubric (which will almost always back out to
years worked, which is a terrible standard). Imagine if by paying 20k extra,
you can get one of those mythical "10x rockstar" engineers. Would you remove
your ability to hire him?

By opening up everyone's salaries, it will only hurt the startup culture, as
it will only make people dislike each other. I often found engineers and
business development people devalue each others work, in large part because
neither party can understand the work of the other. Imagine them knowing each
others salaries! Each side can find a justification on why they are being
under-compensated while the other over-compensated. Startups need cohesiveness
to survive.

Lastly negotiation is a valuable skill in the workplace. Interviews reward
people who can handle stress and negotiate. Imagine a shipping date is imposed
upon you, and not all the features can be included. You're going to want a
leader on the engineering team to negotiate with the strategy makers to find
an equitable solution. De-emphasizing negotiation is de-emphasizing a critical
human skill.

~~~
derefr
Publicizing salary just requires, as a prerequisite, publicizing the objective
value each employee is adding to the company. Which requires everyone agreeing
on an objective standard for _calculating_ that value. Once you have that,
kbowing salary isn't nearly as scary.

On the other hand, once you have that, people will start actually thinking of
their peers in terms of being high- or low-ROI...

~~~
dylanjermiah
Most will not see not see if as their coworkers objective value. You're
dealing with people of emotion, not objectivity.

------
evanpw
Objection 1: In most of the instances I'm aware of (please comment if you know
of counterexamples), salary transparency only happens in places where
compensation is based on a few obvious parameters like years of experience and
job title, with little room for individual variation. In cases where there's a
large variation in productivity between employees with the same role, it's not
going to be possible to pay them commensurately in a system with fully
transparent salaries. So this seems to only really make sense in roles where
individual contributions are too tied up with group performance to
disentangle, or where they're very hard to measure.

Objection 2: To the extent that perceived relative pay is the variable that
actually matters for determining how happy someone is with their compensation
(ask someone in NYC versus someone in Mumbai with the same cost-of-living-
adjusted salary how rich they each feel), then releasing salary information
can be welfare-reducing even if it does cause salaries to rise in general.
This is one of the strongest arguments opposing income inequality: the
existence of very rich people makes everyone worse off by making them _feel_
poorer.

Related hypothetical question: If every worker were paid exactly proportional
to their actual productivity, how much would the standard deviation of labor
earnings increase?
([http://econlog.econlib.org/archives/2015/04/meritocracy_ble....](http://econlog.econlib.org/archives/2015/04/meritocracy_ble.html))

~~~
lifeisstillgood
Objection to objection 2 - are you seriously suggesting that basic market
functions like price transparency will be a bad thing because it will make
well paid people feel less well paid? They can cry all the way to the bank.

Paying people proportional to their productivity is one measure - paying
relative to marginal contribution is probably more accurate - so a CEO of
100,000 people who manages to get them all to work 1% harder has made quite a
valuable contribution. Edit: this presupposes the PR / in house magazine
publisher is not really Responsable ...

------
mallyvai
Patrick's got a ton of great insight into salary negotiations, and this post
is no exception. Everybody (especially engineers) - needs to get comfortable
talking about compensation and wages in safe spaces. This shouldn't come from
a sense of ego, but from a much more humble and sincere sense of information-
sharing.

The people who are hurt the most by keeping compensation info secret are
precisely the ones that need the information the most - folks from low income
backgrounds, people worried about making more than their parents, etc.

As a practical tip, one thing I encourage _everybody_ who's a client to model
their equity grant in a simple excel spreadsheet. You need to know

* your strike price * preferred share price * company valuation * total # shares outstanding

As a rule of thumb you can assume your shares are "diluted" (that is your
total % ownership relative to valuation) will decrease anywhere on the order
of 15%-40%) after each funding round depending on company's performance.
Plotting this beforehand, along with where you believe the company will end
up, will give you a great sense of what your equity is worth.

[Source: I founded [http://OfferLetter.io](http://OfferLetter.io) \- We help
engineers and other tech workers get what they're worth. If you're interested
in free data, you should join Offer Drive
([http://offerletter.io/drive.html](http://offerletter.io/drive.html) to learn
if you're paid fairly]

------
tikhonj
I've always found the taboo about discussing salaries weird. In my experience,
it's almost nonexistant among Russian immigrants to the US—at least the ones
my family knows—and yet hasn't caused any real problems.

Sure, there are issues of status and perceived worth around salary—but hiding
the numbers doesn't help. People still know your job title, understand your
company and see your lifestyle. That's more than enough! Numbers only matter
if you want to talk about relatively small differences—ones that matter far
more for salary negotiation and evaluating a position than they do for
cocktail party

Now, perhaps I'm just being simplistic, but the way I see it is genuinely
simple: markets are about transferring information. To do this well,
participants have to know what the prices are elsewhere. An arbitrary cultural
taboo around the prices does nothing but impede the flow of information. The
fact that it's asymmetric just makes it doubly worse.

Transparent salaries are about as capitalistic and idea as can be.

Unfortunately, by character, I'm also unlikely to take my own advice: I fear
awkwardness disproportionately. Just one more reason why I deeply dislike
arbitrary social rules.

------
retrogradeorbit
It's like no one has every heard of a salary survey, and thinks the only way
to get that information is for everyone to reveal their pay!

Just go buy a salary survey! The information will be far more detailed than
just random salary tweets from people in different roles, with different
capabilities and different experiences in different cities in different
countries.

Hey, someone doing my job in San Fran gets $200k! I'm going to go and ask my
employer for that! A quick check of a salary survey might sober me up.

Also a salary survey is far more potent data to present in a salary
negotiation to convince people to pay you what you want, rather than "Someone
on twitter said...".

------
yason
Meanwhile, in Finland, you could just tell the company that: "If you really
want to know, then please visit the tax authorities' office and look up my
previous year's taxable income from their public terminals."

------
error54
I found this spreadsheet[1] to be pretty interesting. Obviously it's anonymous
so take the data with a grain of salt.

1-
[https://docs.google.com/spreadsheets/d/1F9e8DrWv5_rx3il0r2Sg...](https://docs.google.com/spreadsheets/d/1F9e8DrWv5_rx3il0r2SgE3TO0usN_uEWq46d0R3M73w/edit#gid=0)

------
ivan_ah
The part about 2X total lifetime of business earnings made me think of a good
Serbian saying (could be Montenegrin, not sure): _when negotiating on price, a
good deal is when you 're ashamed of your offer._

------
AndrewKemendo
Hmm. We just ask people how much they want to make and give them as much time
as they need to respond.

If it's higher than we can pay, then we say sorry we can't pay that. If it's
way lower than we would expect we usually tell them that we wouldn't expect to
pay less than X for their skills and experience.

This has worked great so far because if someone came back with a really low
number and we just took it, then a month later they will realize they
undershot and then they feel awkward about bringing it up - so, best to avoid
that.

My ethos is: Pay people enough for them to not think about money. If you are
only working for me for the pay then it's probably not going to be a great
working relationship. They are better off going to work at megacorp where they
can sham.

~~~
zerr
On the other hand, when someone states much more than you can afford - don't
you think to just pass on this candidate, because she might feel unhappy even
if she accepts the offer?

Also, to follow Patrick's advice - if someone doesn't give the answer but
instead asks the same question to you - "what's the budget/range for this
role? ", do you answer honestly?

~~~
AndrewKemendo
For the first question, no. That has happened twice and they both seemed upset
but weren't going to budge.

As for the second question, yes I always say what our budget is if asked.

------
ochoseis
Interesting use of the term Rack Rate in the article -- I had to google it:
The published, full price for a room in a hotel that has not been pre-booked
[1]

[1]
[http://en.wiktionary.org/wiki/rack_rate](http://en.wiktionary.org/wiki/rack_rate)

~~~
to3m
"the official or advertised price of a hotel room, _on which a discount is
usually negotiable_."

~~~
bdcravens
Look on the door in the room, and it'll show the rate, which is typically far
greater than what you paid (typically 2-3x)

------
kmf
Posts like this, and the #talkpay on Twitter, is the kind of stuff I would've
loved to have a couple years ago, starting in the industry. Here's hoping this
sparks a conversation across the industry between employees and managers on
salary over the next couple months.

------
fmela
As a wise person once told me: people don't get paid what they are worth, they
get paid what they can negotiate.

------
skizm
If people knew everyone's salaries there would always be discontent. There
will be people making less thinking that are better/more experience/worth more
than person B making $X more than them.

~~~
tomp
I think it's reasonable to believe that the employer should have a good answer
to the question "why is s/he making more than me, what does s/he do better?"

~~~
icebraining
Yes, but let's not be naive enough to assume that people would be satisfied
even with a good answer.

~~~
tomp
Well, a good answer would be "because s/he is familiar with codebases A, B and
C and has skills X, Y, Z", and I would expect the employer to follow-up with a
raise if the employee in question also learns all of the above.

------
Roy78
As someone who works for the government and makes almost more than 50% less
than those in the private sector doing the same thing (according to national
studies for my profession at my level) this is depressing. I don't know, in
the back of my mind I want to launch my own startup and get out of where I am
now. My equal co-worker just left a month ago and is making 5x what she was
making (in a senior capacity to myself) really makes me question myself.
Although, I am getting by just fine and living 10 minutes from work is hard to
let go.

~~~
NonEUCitizen
Don't you get a very nice risk-free pension (defined-benefit)? Most of private
industry has switched to 401K (defined-contribution).

~~~
Roy78
Well in theory yes, but who knows. I still have a roth and 457 IRA just in
case. My state has repeatedly declined cost of living increases for retired
state workers for several years now. The gains in the pension system have
steadily been above 10% but that has not stopped the state from putting its
hands in its pension funds (I am in Louisiana).

------
angersock
I'm all for transparency, but it is easy to get weird results from the current
range of "small startup bootstrapping" to "valley darling throwing money" to
"high salary with no equity" to "<insert odd thing here>".

I'd love to have a notion of what the real work rates and long-term rewards
our for our industry, but it's so hard.

Also, I note that nobody here is sticking their username next to their salary
and equity stakes. :P

~~~
jacquesm
It's a function of company size. You can get North of $300K + options from the
larger valley companies if you're good at what you're doing (though they will
attempt to lowball you and they definitely discourage you from sharing that
bit of info with your colleagues), somewhat less than that at smaller
companies (but if there are options involved you'll get a larger chunk of a
(much) smaller pie).

At even smaller companies you can be co-founder with substantial risk and
associated rewards if it works out well. It's basically a risk management
issue, if you don't want a lot of risk and a reasonably high pay with a
potential upside you can't beat the giants, if your needs are small and you
can deal with the occasional loss it may pay off to gamble.

------
jsumrall
It's a great article, but does anyone know where I can find similar
information about pay in Europe? The Netherlands specifically, where I live.

------
beambot
> I recently sold my first SaaS business, Bingo Card Creator.

Patrick, was that already well known? Do you have any plans to discuss that
experience?

------
moron4hire
When they ask me what my previous salary was, I tell them it doesn't matter
because I won't accept an offer based on it.

------
arbuge
>>The business is modestly successful. I have a particular number in mind for
it, which I’d be crazy to quote publicly prior to selling it, for the same
reason that you’d be crazy to quote your desired salary in a salary
negotiation. If a buyer pitches me on 2X my desired number I will, naturally,
say “That’s an interesting number. If you were offer insert 2.2X here I think
we’d have a deal.” No buyer will pitch 2X if they know what X is, though.

There is sufficient information there for a buyer to calibrate to some extent
what X is from the author's response, assuming (a) the offer is reasonably
close to 2X and (b) the author displays no unreasonably nonlinear
discontinuities in emotional state as the offering price is varied.

~~~
TheCoelacanth
Presumably he would do the same if pitched 3X or 4X

------
MyNameIsMK
@Patio11, I met you once on a trip to Tokyo. When/why did you decide to live
in Tokyo other than the fact that your wife is Japanese? Any takeaways in
terms of culture and operating a SaaS business from that region?

Thanks.

~~~
patio11
We live in Tokyo, as opposed to Ogaki, because a) my wife did not enjoy living
in Ogaki due to social isolation and b) we recently greeted a daughter in
October and were worried about the sociocultural implications of her growing
up in Ogaki.

We live in Japan, as opposed to the US, mostly because I've been there for my
entire adult life and kind of enjoy it. We might at some time decide to split
our time between the US and Japan.

I wrote a long blog post about doing business in Japan which talks about
running a SaaS company here in more depth than I can reasonably go into in a
comment: [http://www.kalzumeus.com/2014/11/07/doing-business-in-
japan/](http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/)

------
FLUX-YOU
Those rates make me go wat. I make $20/hr. :(

But can we apply this to the skills we'll need for starfighters.io? It's very
easy to point to money (or even companies) lost by data breaches and say "I
can help you prevent this", but the money you save may be whatever they pay
for breach insurance or it may be literally everything they own. Case studies
and deliverable targets (+millions of dollars from SEO and stuff) are really
great when they're positive, but how do you negotiate this when you're selling
protection against income loss?

~~~
czbond
Part of my background was doing and selling security engagements. Up until a
few years ago, it was difficult to get senior leaders to wrap their head
around security being anything but a cost center - even though it was always
framed as "savings". That has changed in the past year alone. CiSO's are still
hounded daily about security products which will "save money / prevent theft"
\- but the risk to the business is now clear to leaders without security
background. I still believe the adage [paraphrased] "People don't pay for the
prevention, they pay for the cure"

------
philip1209
I wonder if you could have all interviewers fill out a brief survey and give
the results candidates for reference - e.g. checkboxes of:

* This interviewer is comfortable talking about their salary

* This interviewer is comfortable talking about diversity and equality efforts

* This interviewer is comfortable talking about the visa and immigration process

* This interviewer had children during employ and is comfortable talking about the process

As an interviewee, knowing that I could ask direct questions instead of
skirting around issues due to trying to be sensitive would drastically improve
the experience.

------
hkmurakami
One thing I have noticed is that while "wage information" (including equity
grants) are taboo and "net worth" is also taboo, "wealth management
strategies" (and at times philosophies) are not nearly as taboo amongst the
wealthier folks, perhaps because the conversation revolves around relative,
rather than absolute, numbers.

------
morpheous
As someone about to start doing some consulting work, your advice couldn't
have come a t a more fortuitous time. Thank you!

------
simonebrunozzi
I am in support too. The problem is that most companies take implicit
advantage of data obfuscation. Some people would ask to be paid more if they
only knew.

It is great for employees, but not all companies are ready to do that, and I
would guess most would not surive the moment of truth.

------
icedchai
It would be interesting to see networth along with the salary numbers.

~~~
patio11
That would involve a whole lot of making stuff up, since valuations for
privately held tech companies dominate my net worth at for the last ~8 years.
They only time you _know_ know what they're worth is when they are sold.

The liabilities side of the balance sheet is less complicated: I owed $22k in
student loans at graduation, paid that off, incurred a fair bit of debt back
in ~2013 (raided the 2012 tax fund to pay for my wedding and then 2013 ended
up being radically less lucrative than expected), and anticipate paying it off
this year.

~~~
wonderthrowaway
At the end of the day, I have to believe you mentally calculate this net worth
line (say, with a conservative 1x ARR on the investments) if you're to the
point of talking to accountants about becoming an accredited investor.

Although props if you are conservative enough not to even entertain the
thought of counting unhatched chickens. That's responsible, disciplined
behavior. The kind that gives you the confidence to go launch Starfighter...

------
Omnipresent
>$20k a week! is astonishing. What kind of consulting service are you
providing for the clients for that sum of money!?

~~~
minot
I think the context is that OP is very conversant with both Japanese and US
corporate/startup culture. That can't hurt.

~~~
jpatokal
No, he does (did) software marketing:
[https://training.kalzumeus.com/newsletters/archive/consultin...](https://training.kalzumeus.com/newsletters/archive/consulting_1)

Japanese startup culture would be a _terrible_ niche to try to make any money
in.

------
AdrianRossouw
for the longest time i was kind of unnerved by how quickly previous employers
said yes during negotiation, so I pushed my price up much higher hoping to
have a better footing.

so far they've all said yes to what I considered very high.

------
meritt
If the #1 rule everyone should know is 'Never Talk to Police', #2 should be
'Never Reveal Your Salary'.

------
paulhauggis
Talking about your salary as an employee will eventually take away your
negotiating power. If everyone knew everyone's salary, salary would be
minimized to the lowest possible market rate, so nobody gets upset.

~~~
paulhauggis
It's the truth. If you look at countries like Sweden and Denmark where
salaries and tax returns are public information, most salaries are all the
same.

~~~
alkonaut
That's not really because of the tax rates being equal, there are many other
reasons. For example, higher education is free, and labor organization is very
high. This keeps blue-collar pay closer to white collar, flattening pay
structures.

~~~
maaku
He didn't say anything about tax rates. What he said was that tax returns are
public information, meaning you or I can look up anyone's income.

~~~
alkonaut
Yes. And I argued that in order to claim that this is what flattens structures
rather than the many other factors, you need a control sample that has
Scandinavian labor market structure (High tax, free higher education, single
payer healthcare) BUT with non-public income. I'm not sure such a country
exists.

------
Dewie3
> The movement is rather Marxist in character, but this capitalist encourages
> you to [...]

> I’m not a Marxist —

Yes, you said that in the opening sentence... Americans are very defensive
about coming off as "Marxist"/"socialist".

~~~
aptwebapps
American politicians are, for very good reasons, defensive about coming off as
Socialist (except Bernie Sanders). Coming off as Marxist is completely out of
the picture.

But 'patio11 is not a politician and I expect his language reflects strength
of feeling more than anything else.

~~~
Dewie3
> But 'patio11 is not a politician and I expect his language reflects strength
> of feeling more than anything else.

Yeah... strength of feeling of being perceived as "un-American".

~~~
aptwebapps
If I meant that I wouldn't have bothered commenting as that is what you were
saying in the first place.

------
RIP
[https://twitter.com/CHOBITCOIN/status/594238763880075264](https://twitter.com/CHOBITCOIN/status/594238763880075264)
claims MCV co-founder started the talkpay hashtag and she was racist. Notice
how only Silicon Valley Americans are participating in the twitter hashtag.
This hashtag will only help the shrill feminists, not the women who toil away
in hardware factories in China and the outsourcing firms in India.

~~~
jacalata
So what did you do today to solve those problems? Why do people in Pittsburgh
count as "Silicon Valley" to you anyway?

------
calibraxis
For anyone curious about the _real_ roots of #talkpay, software developer
Lauren Voswinkel kicked it off on Model View Culture:
[https://modelviewculture.com/news/lets-talk-about-
pay](https://modelviewculture.com/news/lets-talk-about-pay) (Background:
[http://www.theguardian.com/us-news/2015/may/01/talkpay-
hasht...](http://www.theguardian.com/us-news/2015/may/01/talkpay-hashtag-
twitter-worker-wages-titles-lauren-voswinkel))

So basically, a software dev announced a Twitter campaign on a Silicon Valley
startup's website. Naturally, it only hits Hacker "News" when some white man
placates fellow uninformed ideologues with _" I’m honestly troubled by joining
a Marxist movement on May Day"_.

(Translating #talkpay into market theology — is this analogous to how Soviet
commissars made bold ideas safe for consumption?)

BTW: May 1st commemorates the Chicago Haymarket affair, where workers went on
strike for the 8-hour day. And four anarchists were martyred by the state via
hanging.

~~~
ricardobeat
He links to the MVC article literally in the _sixth_ word of the post. Patrick
McKenzie is a very known figure on HN and runs several technology business.
I'm sorry but there is nothing about gender or skin color here.

