[feral]

If you're paying an engineer $100k to add 150k worth of value to your product, the true value of their work is $300k: $150k worth of value to you, and $150k worth of value that isn't added to your next closest competitor.

That model seems to assume:

- every employee who leaves will go to close competitors

- their work for that close competitor will be perfectly zero-sum to their work for your company

- the next best replacement employee your competitor would otherwise hire would be worth 0 to them

[anthony-james]

It does assume these things - but they're relatively reasonable. If your next closest competitor is doing worse than you, then your best employees, on average, must be better than their average employee. If an employee leaves your company for your competitor, they're adding value Day 1, whereas you have to go through the process of hiring a replacement, and hoping that they're just as good.

It also assumes that you don't pay your employees well enough to retire immediately after leaving ;)

[azernik]

That second one? Work being perfectly zero-sum with your closest competitor? Not at all reasonable.

Some of that extra business will be taken from other companies. In fact, unless it's a duopoly or you're by far the largest player in the market, probably most of that extra value will be taken from other companies.