Hacker News new | ask | show | jobs
by partizanos 1379 days ago
Can you please define the difference between average and marginal productivity?
1 comments

Average productivity is exactly what it sounds like. If google is making one million dollars in a year and has 1000 employees their average productivity is $1000.

Marginal productivity is harder to pin down empirically, it's the first derivative of productivity with respect to inputs of labor. Not all labor is productive to the same degree, it was hired at different times, and there's variance in negotiation so your comp definitely doesn't (===) your marginal productivity. It's also probably greatly distorted for startups that are banking on a unicorn valuation where the expected productivity is something like (0.99 * 0 + 0.009 * 1 million + 0.0001 * 1 billion). But for Google et. al where they're in a relative steady state, they have a good idea of how much revenue grows when they add an employee and they'll be willing to pay up to that.