I've definitely felt the challenge of hiring in a startup as a result of these kinds of numbers. I'm curious what others think will come of this seeming bubble in compensation.
Its not a bubble. $240k is a reasonable salary for a professional with good grades from a good university working for a highly profitable private company. In fact as long as there is such a gap between revenue per employee, and compensation per employee, there will only be upward pressure on pay and conditions.
In reality, software engineering salaries outside of established tech environments are kept artificially low because there is no "guild of software engineers", and therefore anybody can get hired no matter what level of skill they have.
I too run a software startup. The most common and serious error I see in my fellow startup founders is expecting to build better technology with worse pay and conditions. You might be able to wrangle something decent out of some poorly qualified yet smart people, but its a bit of a long shot.
I was more looking at the differential between FB -> Alphabet -> Rest. As a member of the Rest in the Bay Area, hiring has become quantitatively more challenging in the last 12 months as FB continues to gobble up talent. Perhaps it's not so much a bubble as it is a deep, likely irreversible change to SV.
When I attended Facebook university day, 100% of the students I spoke with were from top schools. The majority I spoke with were from Ivy League Universities, of the non Ivy League students, one was from MIT, two from UMD, one from UCLA, and one from UT Austin. This is not a bubble, this is them hiring the best. I have been in class with students who chose to enter software engineering at major companies rather than investment banking.
Why is it a bubble when they have an incredibly successful business that prints money where the people building the service are being rewarded for helping build such a successful outcome?
That's sloppy thinking. Here's and example why: what if a new regulation new banned targeted advertising? That would kneecap FB's business model and unique value proposition while making it easier for new entrants, since they won't have to compete with FB's now-legally-useless data trove.
Because that was exactly the argument banks used before 2008. Not that salaries in Finance are low now but a lot of the excesses have been cut back following the crisis. Banks also made a ton of money pre-2008 but that didn't come out of nowhere.
So far, there has been no industry that just continued making high margins over decades without any cut backs. I doubt tech will be the first one.
If you live in a first world country, try to find out what your mid-tier technology consultancies (Accenture, Deloitte, CGI, etc) are charging customers. It is almost certainly around 250-350k per year, even if they are working for an unglamorous, boring, traditional customer. The real issue is that outside of leading tech environments, too much rent is being extracted from the wages of software engineers.
Great point, although said rent is being driven largely by FB and GOOG. I remember the first time I was outbid for a flat in 2016 when a small group of googlers paid cash for the entire first year of rent. I should have moved to Seattle that afternoon :)
Pre-2008 not all banks were hugely profitable. Some investment banks were and some smaller companies. The tech sector isn't that dissimilar. Salaries in SV show that not only Google and Facebook are willing to pay $200k+ for engineers, most of the industry will (and usually can).
As tech can't print money, these salaries must come from somewhere. And at some point those sources won't be able or willing to provide it. Maybe that's a soft landing, maybe harder. I don't know but as I said previously, I'd be surprised if tech's the first industry in centuries that channels wealth into the hands of few (including SV landlords) without any consequences.
Salaries in SV show that (...) most of the industry will (and usually can).
Yeah, that's what I doubt. SV is not the tech industry as a whole. The average salary for a software developer in the US is less than half than that, and if we removed those top outliers, it'll be even less. So I'm skeptical that this is out of the ordinary; doesn't seem that different from other well-paid white-collar professions like lawyers.
And, even in SV, most of the industry cannot; certainly the AirBnB/uber/lyft's of the world can, but the smaller companies seem to be falling behind (based on anecdotal conversations at least).
Why “bubble”? Their business is more profitable than crack cocaine, and their profit per employee is over a million dollars. Seems like fair compensation for once.
It's not a bubble by any stretch of the imagination. Facebook pays a lot because they have to pay a lot to get quality people to want to work at Facebook.
Compare this against companies like SpaceX where the median compensation is quite awful for the industry made even worse by the area (compensation is well below $90k in most cases). This poor compensation is made even more peculiar at a glance by the incredibly high standard of employee they have. But they have these incredibly well qualified people lining up outside the door wanting to work for them.
Of course refuting my argument is companies like Netflix. I don't entirely understand why they pay so much. But at least just taking examples like Facebook and SpaceX, compensation is mostly just based on supply and demand - rather than massive ongoing bubble of inflating salaries.
In reality, software engineering salaries outside of established tech environments are kept artificially low because there is no "guild of software engineers", and therefore anybody can get hired no matter what level of skill they have.
I too run a software startup. The most common and serious error I see in my fellow startup founders is expecting to build better technology with worse pay and conditions. You might be able to wrangle something decent out of some poorly qualified yet smart people, but its a bit of a long shot.