[dragonwriter]

> If you're paying an engineer $100k to add 150k worth of value to your product, the true value of their work is $300k

If you pay engineers $300K for every $150K in value they add to your product, your cost will exceed value and will accelerate as you add more engineers. It's therefore eminently clear that there is no meaningful sense in which the true value of an engineer's work adding $150K to your product value is $300K. (It's $150K less the necessary support costs that allowing them to work imposes on the company.)

[anthony-james]

The true value of the employee to an organization in a non-monopoly industry is 300k, in this example, because of the opportunity cost of the employee (assuming they could provide the same value at other firms).

The true value of the employee ==/== the total compensation of the employee. As I said above, the total compensation would be as close to $150k as possible - because at $149,999.99 the firm still makes a profit (of $.01) and gets product features shipped.

[dragonwriter]

That only makes sense and in the case where added product quality in the market doesn't expand the total market, it cannibalizes, dollar-for-dollar, sales that would have been made elsewhere. This also means all the marginal value in your industry is actually being captured by your customers (this might make sense if you have a competitive market on your side, but are selling into a monopsony.)

If you find yourself in that unusual situation, your concern probably isn't with paying your engineers properly, it's with reorienting your business so it's not locked in that kind of market.