
Tech firms shell out to hire and hoard talent - prostoalex
http://www.economist.com/news/business/21709574-tech-firms-battle-hire-and-hoard-talented-employees-huge-pay-packages-silicon-valley
======
xenadu02
Translation: hey all you other crabs, LOOK! One of you is making it out of the
bucket! Pull them back!

Am I the only one who has started to see media hit pieces for what they are?
One way to lower personnel costs is to make it socially unacceptable to
attempt to profit from a business transaction (aka job).

People were angry because Wall St bankers raked in bonuses while the economy
tanked, Wall St got a massive bailout, and people were losing their houses.

Silicon Valley isn't looting people's retirement accounts and doesn't need
bailouts. The money is also spread slightly more equitably than Wall St
(individual companies vary of course).

~~~
exstudent2
Yes, it's becoming unrelenting. On the one hand you have pieces like this
lamenting the "high" pay of engineers. Nevermind how much value they add or
CEOs that make orders of magnitude more money. On the other we have articles
like the one yesterday saying how _so many_ qualified women are being passed
up on engineering positions due to the patriarchy (technical interviews) --
directly contradicting this article stating talent is being aggressively
hoarded.

There's a push by the media and investors in every direction to lower
engineering salaries (through shame or increasing the supply of engineers).
Some is profit motivated, some is probably motivated by jealousy but together
there's a theme that engineers are in some way privileged and undeserving of
what they earn. Given how incredibly difficult and time consuming it is to
become a good engineer I suspect all this whining will not accomplish much.

~~~
walshemj
Yes the other professions don't like it when us greasy engineers start getting
a slightly bigger share of the pie.

And remember the Economist is a UK publication and the status of engineering
is now where near what it is in the USA

~~~
gaius
Yep an Engineer no matter what the prestige of their university or their
degrees will always be considered "blue collar" in the UK. Everywhere apart
from the City that is, ironically.

~~~
Kurtz79
I think this is due to the fact the word "Engineer" historically was meant in
the sense of "Technician", "Repairman", if I'n not mistaken.

From Wikipedia:

"In the UK, "engineering" was more recently perceived as an industry sector
consisting of employers and employees loosely termed "engineers" who included
the semi-skilled trades. However, the 21st-century view, especially amongst
the more educated members of society, is to reserve the term Engineer to
describe a university-educated practitioner of ingenuity represented by the
Chartered (or Incorporated) Engineer. However, a large proportion of the UK
public still sees Engineers as semi skilled tradespeople with a high school
education."

~~~
walshemj
Yes that talking about the UK's perception not the actual historical meanings.

And I though the origin was military engineers you know like Leonardo

------
lordnacho
If you want some resource as an ingredient to your business, you have to pay
for it. The price mechanism is what society uses to decide where the resource
goes. It may well be that it's better (by whatever definition) to send these
people to work in the large firms rather than startups.

Wrt startups, it's also a signal that this is perhaps not where value is, ie
turning coders which are already expensive into some product which needs to be
even more valuable. You could for instance start a business that takes
unskilled labor and turns it into something else offering high ROI. It's just
a matter of developing such a business.

The fact that it's expensive also skews the founding teams towards having
coders. Which IMHO makes it more likely they'll succeed, at least in coding
intensive businesses.

As a coder I'm not so worried. For the moment it appears demand is
outstripping supply, and I'm somewhat sceptical that the marginal supply is
particularly good. The first guy to sign up for CS really, really wanted it.
The last guy, he might be smart, but he was just as likely to go into
management consulting or banking. And coding in particular seems to reward
people who have real interest. I'm sure a lot of other fields are like that,
but coding especially so. You're sitting in front of a machine that allows you
to practice and look up advice 24 hours a day. Other fields are typically
limited, eg you can only practice sports for so long each day. That will tend
to advantage people who are interested, rather than those who need a paycheck
(which isn't a terrible reason either).

~~~
forgotpwtomain
> You're sitting in front of a machine that allows you to practice and look up
> advice 24 hours a day.

I don't think you become a better coder by going on sleepless coding sprees.
Sure, sometimes its necessary and productive - but over all I think it has as
little impact on your development as an engineer as a researcher binge reading
academic articles (sure, sometimes you need to when approaching a new
area/problem) but I don't think that's what defines you as a researcher
either.

------
jim-greer
> "It’s gone too far,” says one venture capitalist...

This investor is probably making more than the vast majority of the people
building technology. It's not clear to me why society benefits from that.

High salaries encourage young people to enter the field. That's a good thing.

High housing costs are another matter...

~~~
sfaf
A pretty ridiculous statement given that a VC pays close to 20% income tax
while these well paid engineers are taxed at almost double that %. The VCs
carried interest tax loophole has gone too far, not market competition for
engineering salaries (which was previously priced fixed through non-poaching
agreements).

"The engineers are getting paid too much so my startups can't convince them to
work for equity because of the free market while my entire industry avoids
paying taxes and stiffs America." Cry me a river, vc.

~~~
wolfgke
> A pretty ridiculous statement given that a VC pays close to 20% income tax
> while these well paid engineers are taxed at almost double that %. The VCs
> carried interest tax loophole has gone too far, not market competition for
> engineering salaries (which was previously priced fixed through non-poaching
> agreements).

The problem rather is that it is (from bureaucratic-legal-financial overhead)
hard for an "ordinary" person to become a VC. That is where you should demand
change for more justice.

------
abc_lisper
I don't see it as a problem as an engineer living in bay area. If not for my
current employer, there is no way I could afford a home here.

Having said that, this feels like somebody got butthurt that they couldn't
find cheap labor who will work 80 hours a week. Tough luck!

~~~
arcanus
> this feels like somebody got butthurt that they couldn't find cheap labor
> who will work 80 hours a week

Precisely. The article acts as if employees receiving excellent compensation
is bad, yet cannot put its finger on why.

Meanwhile, a few guys were paid millions of dollars to play baseball last
night.

~~~
prostoalex
> yet cannot put its finger on why

They do, down towards the bottom:

"The rising cost of talent has also pushed up the level of funding startups
need to raise. The idea that it is cheap to launch a firm is a myth, says Evan
Williams, who co-founded Twitter and set up Medium, an online-publishing
platform. “It’s harder and more expensive than ever to make a startup
successful.” The more money young companies raise from investors to pay their
employees, the harder it is for them to break even or become profitable."

> a few guys were paid millions of dollars to play baseball last night

Which significantly raises the bar on entering the baseball team market. The
world is unlikely to suffer from the shortage of baseball teams. Shortage of
new tech companies does seem to have stronger negative effects on the economy.

~~~
arcanus
> Which significantly raises the bar on entering the baseball team market.

I disagree. Baseball is a legally enforced monopoly in the united states.
([http://www.swcollege.com/bef/policy_debates/baseball.html](http://www.swcollege.com/bef/policy_debates/baseball.html))
If not protected by antitrust laws, all major sports would arguably be prone
to disruption and price undercutting.

The SF megacorps are not similarly protected. These salaries are market based
pricing.

~~~
walshemj
Doesn't seem to happen in soccer the premiership pay bill is immense.

~~~
lordnacho
That's effectively a cartel as well. You can't just set up a team and join the
EPL.

~~~
walshemj
But you can go from a lower division to the premiership its not a closed shop
with no penalty for failure in the way the American football teams are.

For example Leicester's run from third tier to the championship 09 - 16

~~~
lordnacho
Sure, it's a bit different from the US sports. But you still cannot just set
up a business and compete. You'd either start at the bottom of the football
pyramid, meaning a multiyear barrier to entry, or you buy a club, which is
paying an incumbent for their seat.

------
wolfgke
Where is the problem? If one founds the company in the Silicon Valley, one has
to pay the salaries that are usual in this region. There are lots of places on
earth where you can get cheaper engineers; and they will even often be
satisfied with lower salaries when the living costs, particular the housing
costs, are much cheaper, too. Since what you, as an engineer, are interested
in is the difference between salary and necessary expenses.

~~~
HarryHirsch
You are also be interested in time between jobs, that's where the real problem
lies. In Dallas, during the last downturn, you'd be looking at 6 - 12 months,
in SF it was more like 3 months.

------
20years
"Some startups are already moving elsewhere to hire cheaper engineers and
reduce other costs. They don't have to go very far from the Bay Area, perhaps
to southern California or other states."

^This. Or hire remote, which is a perk in itself.

~~~
gaius
_Or hire remote, which is a perk in itself_

How is it a perk? You provide your own equipment, give up some of your
personal space, do your own support, the company saves on rent, cleaning,
utility bills, equipment, furniture, security... and they convince you its
such a perk you should be paid less too! Remote workers should be more highly
paid! The boss is laughing all the way to the bank!

~~~
jackmaney
Who the hell works for a company (remotely or not) and uses their own
equipment? I'm not a lawyer, of course, but a developer exposing their
personal system to company data could be a significant liability risk to the
company.

In particular, my last employer gave everyone the option to use an app[1] for
easy access to email on their personal phones. I refused to install it, since
it gave my (then) employer the ability to remotely wipe my phone at the press
of a button.

[1]:
[https://play.google.com/store/apps/details?id=com.good.andro...](https://play.google.com/store/apps/details?id=com.good.android.gfe&hl=en)

~~~
elcct
Depending on relationship if you are a contractor usually you have to provide
your own equipment and software. I prefer it that way - if company provides
equipment it is usually minimum to get job done which doesn't make it pleasant
most of the time.

~~~
jackmaney
That's a fair point. I wasn't thinking of contractors when I wrote my reply
above. Hmmm, in that case, are there protections other than an NDA that are
employed to minimize the risk of exposure of company data to a contractor's
personal systems?

~~~
elcct
For example you don't have access to production servers and work only with
dev/staging environments

------
nappy-doo
The people who get rich in a gold rush aren't the miners, it's the people who
sell the shovels.

I ask HN, who are the shovel sellers in this goldrush? Is it the tech
superstars who can "touch millions", the VC, the founder? Who is hocking
shovels in our current scenario?

~~~
SteveNuts
Also, recruiters take a huge chunk of the hourly pay/salary of candidates they
place. I was offered a job that paid "$90/hour" but I'd see about $60 of that.
That means the recruitment agency would make about $60k per year off of me,
all while not really doing anything but checking in monthly with me.

Not sure what it's like in the SV but here in the midwest I know a lot of
people are hired through third party recruiters, and even a small team can
place hundreds of candidates per year.

EDIT: Sorry for the confusion, in this case I have no idea why the recruiter
revealed the "true $ amount" to me, rather than just the amount I would make.

They wouldn't be taking the $30/hour from me, they'd be charging the company
I'd work for obviously.

99% of the time you only see the amount after the agency takes their cut.

~~~
jackmaney
Reputable recruiters charge employers, not candidates. Any so-called
"recruiter" who takes their cut directly out of your salary (as opposed to
charging the employer a percentage of a candidate's salary in a lump sum
payment) is a con artist. Period.

~~~
SteveNuts
Sorry, yes you're correct - edited my comment.

They wouldn't be charging me, they're taking a 30% cut of the hourly rate and
giving me the rest.

My point was that the recruitment agencies will benefit from the rise of
salaries

~~~
jackmaney
No, they still took the cut directly from your pay. Sorry, but you were
scammed.

~~~
SteveNuts
How else would it work? The recruiters need to take a cut somewhere, whether
it's a lump sum up front or a cut per hour is fine with me.

I agree that it's annoying that a company would pay a recruitment agency
90/hour to have me, but would never pay me directly that much.

~~~
jackmaney
They take a cut from your employer. The employer pays the recruiter _above and
beyond_ what they are paying you.

------
elitro
I see nothing wrong with paying premium salaries for premium talent.

I'm not in the know here, but if i'm allowed to throw my 2 cents, i feel the
article focuses too much in money as the only way of attracting talent. Maybe
smaller companies can attract top talent with different strategies? Remote
work option, family benefits (health and education packages).

Some creativity would have to be thrown in the mix, but going the extra mile
could play a big role in getting people's attention.

~~~
BurningFrog
Smaller companies attract me by the absence of bureaucracy and the ability to
get a lot of productive work done.

------
gist
> Google, Facebook and Amazon alone probably hire around 30% of all American
> computer-science undergraduates, reckons Roelof Botha of Sequoia, a venture-
> capital firm.

What kind of bullshit is this? "Reckons Roelof Botha". Number coming out of
his ass with no basis whatsoever. Not even a meaningless study to back it up.

~~~
temuze
Maybe true at Stanford or a top school?

~~~
stale2002
Yeah, I went to CMU, and 30% sounds about right to me.

------
yankyou
Don't want to pay for engineering work? You can get it for free!

All you need is to rack up a decade of experience, then put in 60 hours a week
plus 20 hours of professional development to keep current on the latest
technologies. If you're reading this you already have everything you need.

What, that doesn't sound very appealing? Alright, here's my card.

------
Futurebot
In order to be a developer you have to:

\- Be willing to sit in a chair for 8-12 hours a day, staring at characters on
a screen, paying attention to tiny details that would drive many non-devs mad,
and work in deeply-focused, high-concentration mode

\- Be willing to keep with the latest technology trends on your time and often
on your own dime. For many people this means essentially jettisoning the idea
of a healthy social life

\- Have the financial resources, talent, and drive to get through challenging
academic material for 4-8 years at a university or spend all your free time
teaching yourself everything you need to know, which can even harder, meaning
again, no healthy social life

\- Live in an area with an incredibly high cost of living that only gets
higher each year (occasional pullbacks notwithstanding.) This can mean
spending 30, 40, even 50% or your income every month just on rent or living
with a gaggle of roommates through your twenties, thirties, even forties.

\- Be part of an industry that, despite fierce competition for talent, will
decline to hire qualified candidates on that basis of age, perceived "poor
culture fit," having attended a "bad/wrong" school (or no school)

Devs are also value multipliers; they're worth more than some marginal value.
When you hire a dev, you're hire them to bring in 2,3,5,10 times what you're
paying them in value, not 120k so that they can bring in 130.

The fact that devs are paid high salaries is good and makes perfect sense.
It's part of the reason doctors are paid so much (and if we were really fair,
currently underpaid professions that are similarly demanding would be paid far
more than they are now.)

Now, the "this hurts startups" issue is something to be concerned about, but
not at the expense of workers. What can be done here?

\- Get used to needing more VC money. Adjust expectations

\- Figure out ways to make startups cheaper (#1 on the list should be massive
housebuilding. If rents were 1/3 of what they are, we would likely not be even
reading this article. Right now all that would-be "extra" money gets directly
funneled into the pockets of landlords. Tech bigwigs should be pouring massive
resources / clout into changing this. Density, public housing to take pressure
off the low end, all of it: [https://medium.com/@spencer_th0mas/fixing-the-
nyc-rent-crisi...](https://medium.com/@spencer_th0mas/fixing-the-nyc-rent-
crisis-or-the-rent-is-still-too-damn-high-edb13ca853cc))

\- Get used to having fewer, but better capitalized startups

------
matchagaucho
What's not mentioned is the toll for high comp:

42% of RSU earnings withheld to cover taxes.

90 minute commutes to work _one-way_.

Stack ranked performance reviews.

Open office space, cramped quarters, and distractions.

Off-hour email and texts. Implicit expectations to be "on-call".

------
gedy
If there were more decent housing to rent and buy within a short to medium
commute within the Bay Area, I and plenty of other engineers I know would
gladly relocate to there without insane salary requirements.

~~~
xenadu02
I really wonder why the tech companies and startups don't pour money into
lobbying, grooming candidates for public office, etc. Spreading the cost over
many companies would make it much more feasible.

Lower housing costs would slow salary increases and make recruiting easier.

Maybe they think the increase in infrastructure (requiring taxes) and lobbying
costs would be more than they would save?

Or maybe they see their personal property appraisals increasing and decide not
to do what's best for the firm?

~~~
crdoconnor
Google is building its own housing (and fighting to do so). We're seeing the
return of company towns.

I don't think they're interested in lowering housing costs for the whole
valley though.

------
the_watcher
This article seems to imply that Facebook, Google, etc are behaving
nefariously in offering high compensation to employees. Startups have always
been at a disadvantage here, and employees should not be made to feel poorly
for looking after themselves first.

------
kafkaesq
... but comparatively little to train and nurture said talent. From another
article crossposted here recently:

 _" The perceived skills gap is because companies have stopped training and
developing people internally," says Peter Cappelli of the Wharton School, who
was interviewed for the report. "Before the 1980s, 90% of vacancies were
filled internally and 10% were hired outside. Now, 65% of vacancies are filled
from outside," Capelli says._

[https://news.ycombinator.com/item?id=12865971](https://news.ycombinator.com/item?id=12865971)

------
mc32
Since a few of these firms already over-hire for positions (where talent is
underutilized), can we expect eventually it will morph into hiring people to
simply keep them from being available to competitors and thus pay some people
to simply stay home?

So cut-throat.

~~~
arcanus
"Google, Facebook and Amazon alone probably hire around 30% of all American
computer-science undergraduates, reckons Roelof Botha of Sequoia, a venture-
capital firm."

This is far more pervasive than the cream, they are getting at best the top
third. That is just high demand for programmers, not a talent war.

~~~
sadface
Maybe 30% of graduates of top 30 universities. There are lots of CS grads from
lower ranked schools that are definitely not getting fought over by the likes
of Google/FB/Amazon...

~~~
JoelBennett
Agreed. I've got an MSc, and the only contact I've ever had was a practically
spam message for an Amazon recruiter (who contacted half the province I live
in, as near as I can figure).

------
crdoconnor
>“It’s gone too far,” says one venture capitalist

I bet he wasn't quite so outraged at the illegal wage fixing cartel.

------
acchow
> The price of housing plays a part in pushing up salaries.

I'm 100% sure it's the other way around.

~~~
crdoconnor
It's probably a bit of both. After all, people do leave/not come to SF because
of the housing costs and that restriction in the supply of labor will
naturally push up the price of labor that does live there.

------
gxs
>>> A famous example of this occurred in 2011, when Neal Mohan, a senior
Google executive, was considering leaving for Twitter. Some say he was offered
a bonus of $100m in stock to stay at Google.

I imagine this has more to do with keeping company secrets within the company.
It has to, right? Is one person really worth 100M?

I guess if an athlete is worth 400M over the course of his career to a
franchise (thinking of an A-Rod), it makes sense in this case also.

------
mamcx
I have talk to some of the people that try to push the startup scene here in
Colombia that the day some good VC come here, them will sweep with all the
talent for a dime (from the POV of USA).

The thing is that too much is centered around a few spots. That increase the
"scarcity perception" because them are in a island and don't look across the
ocean.

------
pascalxus
And yet, tech firms still try locate themselves in the most expensive parts of
the world: San Francisco, and Palo Alto. There's so many tech hubs other than
SF, where they could hire talent for less than half as much, but they choose
not to.

The article states the cost of living is 41% higher. That's a large
underestimation. In Palo Alto and SF, the average house prices (keep in mind
these are mostly dilapidated tiny lot and barely livable) for 400% to 700%
higher than the national average.

Taking into account the cost of living, I'm surprised that bay area salaries
and compensation are not increasing more than it already has.

~~~
eitally
I think this is something non-locals don't really understand. Not so much that
houses are insanely overpriced, but that in the most desirable cities for
homebuyers (let's call them Palo Alto & Cupertino for argument's sake) the
average house is a total piece of crap. It's not like you're getting something
nice for your $2m. The people who are buying them are either buying them to
tear down or significantly remodel, or they're tiger parents -- usually both
working in tech -- trying to buy into the top public school districts ... but
who then either don't care about the property quality or don't have any money
left over to make improvements (hence all the detached garages converted into
rentable studios). The property quality in a lot of relatively cheaper parts
of the region are a lot nicer than what you find in some of the most
expensive.

------
gorbachev
If these folks were really worried about high salaries and interested in
reversing it, maybe they should be talking about education policy and high
cost of living in the US tech hubs.

Additionally if they were on the evil side, they could also advocate for open
borders and removing visa restrictions for high tech workers.

But no, instead it's just whining. It's particularly hypocritical since it's
coming from a bunch of rich folks, who typically became rich by owning a
successful tech company.

------
pascalxus
And let's not forget, there are engineers line up around the block, trying to
work in SF and palo alto, but there's simply not enough housing. I'm sure
these companies would be able to attract a lot more talent to the bay area, if
they just solved the housing problem: but that would be politically illegal.

------
thesimpsons1022
>>Google, Facebook and Amazon alone probably hire around 30% of all American
computer-science undergraduates

that is so wrong i don't even know where to start.

~~~
CalChris
Let's see. Department of Labor says there were 55,367 bachelors in computer
and information sciences in 2013/4.

[http://nces.ed.gov/programs/digest/d15/tables/dt15_322.10.as...](http://nces.ed.gov/programs/digest/d15/tables/dt15_322.10.asp?current=yes)

.3 * 55367 = 16610 or about 5000 per company. Google employs 57,100. Facebook
employs 12,691. Amazon employs 132,600. It's hard to say how many of those are
CS grads. Yeah, count me as incredulous.

~~~
spyspy
There's no way any of them hire 5000 newly graduated programmers every year.

~~~
mrep
That does seem a little high but not too ridiculous. My company has over a
thousand interns every summer and we have interns all year round.

------
sonabinu
It's not just the CEO's and VP's who get handsome rewards. The rank and file
do as well.

------
walshemj
equating stock options to to a wall street bonus is just silly bonus are 100%
cash I bet the amount of options that actually are in the money is no where
near 50%

~~~
swalsh
They actually talked about stock grants, which is pretty close to cash.

~~~
walshemj
Apart from taking account of the time value of money,dilution or being forced
out and lose any unvested stock.

