[nekochanwork]

I am an engineering manager for a large team of developers. Part of my job is to estimate the cost and potential revenue of big projects. I have a spreadsheet of everyone's salaries (including bonus compensation, other perks).

I've done the math at my own company: average developer salary is approximately $100k. Our largest teams have 10 developers, so about $1M in labor costs. These teams work on projects that bring the company $10M every year.

We literally earn $1,000,000 for every $100,000 developer salary. Developers are some of the most productive workers in the world, but only keep 10-20% of the fruits of their own labor.

I am shocked that developers haven't figured this out. Almost all of the value they create goes into the pockets of their CEO.

[Mo3]

I'm sure many of us have figured this out, it's just that there's no alternative for most.

I live in Europe and we are all unionized and I hate to break it to you but we're still creating much more value than we earn for someone else. Our work conditions may be significantly better - I work 40h/week with unlimited vacation (within reason ofc) and sick days - yet still burnout happens frequently and necessitates costly rehabilitation trajectories.

We deal with the consequences better, and I'm grateful for the conditions here, they may well be much worse elsewhere, but the core issues remain. Humans aren't built to work mentally straining jobs for 8 or more hours per day, and the fruit baskets and vacations only do so much. I believe a four day work week would help some of it.

[namaria]

Turns out when your work is thinking, you end up thinking a lot about the alienation of your labor's fruits.

Burnout isn't about pace of work or ability to take vacations. Burnout is about a disconnect between effort, meaning, and rewards.

[rhubarbtree]

I disagree.

Burnout is caused by your body running on adrenaline and cortisol for too long as you’re pushing past what is sustainable. Eventually your body says - enough! And it forces you to stop.

The _symptom_ of burnout are as you describe: essentially you no long see the point of what you’re doing.

Speculatively, I believe the drop in motivation is your body’s way of stopping you pushing it any further. It’s a defence mechanism.

[namaria]

Hm I see. You have a point that the causality is not necessarily how I described. But I am not convinced it is the opposite.

What causes the workplace to make you have high adrenaline and cortisol for too long? Stress is perceived by the body as a threat and it subsidizes when the body perceives that the threat is overcome. If we exert ourselves for a while but then we have a good outcome and we celebrate with our colleagues, we will have dopamine and oxytocin levels rise and adrenaline and cortisol subsidize. Something one might say makes the exertion meaningful.

So I hear what you're saying but I think we're both describing the same thing from two perspectives and not actually different causality directions. I described the subjective interpretation and you described the biochemical process underlying it.

[MichaelZuo]

What is “the alienation of your labor's fruits.”?

I haven’t heard of any way for objectively measuring the value of anything, or whether that is even a logically coherent concept.

[namaria]

> I haven’t heard of any way for objectively measuring the value of anything

Really?

[MichaelZuo]

If you know of some way that is logically coherent, and can demonstrate it via standard proof notation, then you should definitely publish it.

And become the most famous human being to have ever existed…

[namaria]

There's no need to be snarky. The values of things can most definitely be objectively measured, otherwise there would be no transactions. Objective is not absolute, the objective evaluation might change when the agents involved have new information.

I also don't thing it contentious that the stockholders pocket some of the results of the workers labor. That is the whole point of employing people isn't it?

[nickpinkston]

Though you'll need to deduct a lot of SG&A, etc. overheads from that as well, and it often looks far worse.

Big Tech companies (ie ones close to monopolies) still extract a ton of net cash flow that ends up going to investors and top management, though you could then ask why those monopolies extract cash from their customers as well, etc.

My worry with tech unionization is that generally it slows productivity increases and change. I get why bus drivers, etc. in stable systems should organize and could do so without adversely affecting system performance, but in tech/startups, I don't think those companies would exist in unionized form for very long before being put out of business.

Now they're just saddled with too much bureaucracy and politics, and that's already led most of them to underperform, at least on an innovation basis.

[nielsbot]

> My worry with tech unionization is that generally it slows productivity increases and change.

Do you have examples?

> Now they're just saddled with too much bureaucracy and politics, and that's already led most of them to underperform, at least on an innovation basis.

Who?

[nickpinkston]

Yea, it's more complicated than that, but in the US context unionization (like in the automotive and steel industries) was shown to slow innovation. [1]

The counter to this is that Europe actually has better outcomes because it takes a more collaborative approach vs. the adversarial approach in the US, and this better approach has shown to improve some outcomes.

[1] https://www.fraserinstitute.org/sites/default/files/Unioniza...

[nielsbot]

The linked paper is strongly biased towards the ownership class--and the think tank is labeled "libertarian-conservative" on wikipedia, so I'm skeptical of the conclusions.

[nickpinkston]

Yea, almost anyone in the US asking about the productivity implications of unionization will be coming from the ownership class, as US unions don't see that as their problem vs. building worker power.

I couldn't find a paper about US unions increasing productivity. Can you?

[nielsbot]

Fair. And I didn't look for other papers. If the discussion is simply "unions decrease productivity" however that's defined, that may be true. But by how much? Is that a problem? To whom?

I suspect unionization is better for more people overall.

[ArnoVW]

Interesting approach. Did you ever try to include other factors into the model ? Such as :

  * cost of sales (and crm, and billing)
  * cost of infra
  * taxes (on income and profits)
  * taxes (on salary)
  * cost per employee (office, PC, software licenses)
  * cost of loans needed for the investment

Would be curious to see how big the ratio remains.

[billy99k]

The alternative is to start your own company or start consulting. I've been doing this for over a decade and make great money compared to a salaried employee.

Doing this has also made me realize that development is only a small part of the overall process.

Most developers just want to code.

[ZeroTalent]

10x is purely on payroll, which is not that great. there are a lot of other things you have to account for. There are companies that do 100x or more.

the other commenter said it better: https://news.ycombinator.com/item?id=43436688

[Nemi]

This is overly simplistic. I don’t fault you for it, but it shows a lack of understanding how a business functions.

There is a lot of overhead that goes into running a business, as others have mentioned. Taxes. Rent. Utilities. Licenses. Certifications. HR, testers, project managers, product managers, people managers, directors, marketing, customer service, sales, C suite, and on and on.

I know right now you might be saying “those people don’t even do anything! Developers are the only people making the damn product!”. Again, a business is kind of like a product of its own. It takes many moving parts to take a usable product and get it to market, fight off competition, work with government for regulations (or keep from getting regulated), find and get customers, etc.

Once you try and “go it alone” you will realize that creating the product is only one small part of making a functional and profitable business.

I run a small business. I don’t use half of those roles I mentioned and there is still a lot of overhead. It is very easy to underestimate the amount of extra work involved.

[ever1337]

And yet you still turn a profit at the end of the day, i.e., money that's not going to 'overhead'. Let's not kid ourselves. Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit.

[AdieuToLogic]

> Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit.

Business owners are also responsible for ensuring their employees (and payroll taxes) are paid whenever revenue dips into the "L" part of "P&L".

Wise owners ensure some portion of profit is retained such that temporary market adversity does not immediately result in terminating their employees.

People who have never had these concerns make sweeping statements such as the one quoted.

[ever1337]

You are correct that the interest of a business owner is not to kill their firm.

[Nemi]

As it should be. I am not begrudging anyone of that. As a matter of fact, I often mentor employees on treating their career as a business, and build it accordingly. Just like a strong business, you should be selling your services for as much as reasonable, and if your employer is not paying the appropriate price then find another “buyer”.

To maximize the price you can sell your ‘product’ (you), you should be making career decisions that strengthen your offering. This can be taken too far (those that only look for promotions at the expense of real work), but it can be done ethically very easily.

[h2zizzle]

>As it should be.

No, this is just the (insane) status quo. Ideally, however, businesses exist to carry out a mission (beyond making money). Part of this mission is supporting the livelihoods of employees; part of it is giving a return to investors; part of should be some social net good (maybe within a larger societal context, if not unilaterally). Much as "maximizing" the price at which you sell yourself (ick) often ends in workaholism, broken personal relationships, unhealthy relationships to material goods, and a generally deleterious existence as the opposite of a happy, upstanding, and well-loved member of society, "maximizing shareholder value" usually ends in a business that is either a hated monopoly or a bankrupt shell (often both, in that order). In both cases, hyperfocus has lead to the loss of the entire reason for pursuing the venture in the first place.

Profit is just a KPI for something else that you're supposed to be doing (and often a bad one, depending on what that something else is).

[mrangle]

This is cringe idealism. It bears no resemblance to the way things work.

[SR2Z]

> Ideally, however, businesses exist to carry out a mission (beyond making money).

I mean, sure, but the defining difference between a business and a nonprofit is making money.

It's important for companies to provide value to society but the way we measure that is by how much they earn. Despite several hundred years of people trying to come up with better ways to do this, this is the only one that seems to work.

[h2zizzle]

Non-profit organizations are often colloquially called "non-profit businesses" in recognition of the fact that they are organized and operate as any other business would - in developing business plans, filing with the IRS, hiring employees, minding balance sheets, etc - except in ways related to their purposely not seeking a profit (though revenue is another matter).

>but the way we measure that is by how much they earn

Again, it's a flawed heuristic. Military contracting is wildly profitable. Value to society is questionable.

>this is the only one that seems to work.

Analysis of the subtle successes of social democracies and "Gross National Happiness" are just two examples that put the lie to this myth.

[d0gsg0w00f]

> No, this is just the (insane) status quo. Ideally, however, businesses exist to carry out a mission (beyond making money).

Well, that's the beauty of the system. You can go and be the change you want to see in the world.

[dns_snek]

That's the standard conversation line that sounds oh-so optimistic but it's not actually true, is it?

As soon as you need to raise money, or as soon as you need to compete, the system will either beat you into submission or you'll get out-competed by companies that don't concern themselves with any missions other than making the maximum amount of money possible.

The most ruthless, dirtiest, immoral players can cut the most corners, grease the most political wheels and offer products and services at the lowest prices.

[ever1337]

I appreciate your frankness, and I am not an idealist who is proposing that the market 'should' be this way or that way for purely moral reasons. But the topic at hand is unionization. An aspect you neglect in this post is that another way to raise wages (or 'total compensation') is via collective bargaining. If tech workers really do care, and have a collective interest, and are able to overcome countervailing forces, this is an inevitability. No longer will the ball be purely in your court as an employer to solely determine the value of labor.

[collingreen]

I don't agree that the worker's interest is or should be in minimizing company profit - this is a very zero sum approach that doesn't really cover companies that aren't stagnant or dying.

I agree with your general point that a business CAN increase profit by reducing costs, including by reducing employee compensation (and there are lots of shortsighted, greedy people out there) but increasing revenue instead is often much more significant and, in theory, can increase both employee take home and company profit.

A business is a mechanism to turn labor and other resources into revenue and often aligns with paying for more expensive talent in order to provide more valuable revenue. Businesses that are failing or stagnant can't grow revenue anymore and have to cut costs instead.

I don't think the imbalance between workers and companies is in a zero sum, adversarial relationship. I think the imbalance is in who gets to decide what to grow and what to cut (which is one place where collective bargaining helps a great deal).

[ever1337]

The aim of the worker is not usually to kill the firm, I assumed that went without saying, as that would ultimately 'minimize' their wages. But the reason to work in a society where one needs money is to receive a wage, as maximal as possible. These incentives will always contradict whatever real but necessary need there is for 'genuine interest' or 'social tendencies'. Constantly businesses attempt to harness this value, (which is the source of revolutions in productivity beyond the daily rote labor) through trying to present the relationship as anything but transactional. But as their interest in this value is ultimately a monetary interest, what the worker returns to them will be done on a transactional basis. An inhuman force rules over all.

[Xmd5a]

>I don't agree that the worker's interest is or should be in minimizing company profit - this is a very zero sum approach

You misunderstood the post you're replying to. Workers vs CEOs (not companies).

[try_the_bass]

> Your interest as the owner is to maximize that profit and minimize expenses, and our interest as workers is to maximize our wage and minimize your profit.

Is it? I know a handful of small business owners, and generally their interest is running their business well and keeping their customers happy. Sure, they want to be profitable, but profit isn't their primary motivator.

Ditto on the worker side.

Your outlook on this is wildly cynical

[ever1337]

They may have a moral sentiment and so too do employees - but the market is the ultimate condition for any moral sentiment to survive. You have no company, you no longer 'satisfy' customers. I am not referring to a moral idea, but a cold reality of business.

[try_the_bass]

... What? I can't follow what you're trying to say here. It sounds like you're contradicting what I was replying to?

[ever1337]

It's not that profit is one 'motivator' among others, it is the sole and ultimate condition for the survival of a business.

[mrangle]

Before maximizing wages and minimizing profit, your interest as workers is to assure that the owner is provided with enough financial motivation to both stay in business and not find substitute employees or solutions for the work that you do.

[ever1337]

When I use the word maximization I am not referring to an abstract idea, I am referring to a negotiation with material necessity.

[musicale]

Can you estimate the actual overhead rate? Maybe 100%-200%?

[Nemi]

It varies greatly per company and industry. You are talking about Net Margin and it can vary a lot.

A company like google has a 28% net margin. That means that after paying all expenses for employees and rent and everything, they have 28% left over from revenue as profit. This is very good.

Amazon (being a hybrid retailer/tech company) has 9.29% net margin.

Target has a net margin of 3.84%.

Believe it or not, many public companies have a negative net margin, meaning they spend more than they bring in. Lyft had a negative net margin until just this year. A few years ago, they had a negative net margin of -70%! That means if someone didn’t keep putting money into the company they would have “ceased as a going concern”, as they say. Their most recent year they had a 0.39% net margin. Go Lyft!

[musicale]

If "employees" includes the CEO, then low net margin would not refute GP's claim that

> Almost all of the value they create goes into the pockets of their CEO

[rufus_foreman]

>> We literally earn $1,000,000 for every $100,000 developer salary.

Start your own company, hire the developers for $200,000, double their income and get rich.

[hnbad]

> Start your own company

Okay, that seems easy enough and affordable with most tech salaries.

> hire the developers for $200,000

And you've just applied an unspoken filter. What founder can afford paying someone $200k a year, let alone multiple people? So that means you need to either be filthy rich already or to get investors - who will likely have very strong opinions about whether you should be paying devs double their market rate even if you still make a profit.

Not to mention that this assumes "your own company" can earn $1,000,000 for every developer it employs. Because "your own company" likely has a completely different value proposition, different customers and different tech.

The profit (read: surplus value not paid out to employees) of a company doesn't directly translate to market success or competiveness, but it can affect factors that do (e.g. availability of investments, bank loans, etc). It's not necessary to exploit your workers to operate a sustainable business, it's just very difficult to compete with companies that do because they can tap into those profits to cut you off (e.g. by cutting prices below cost) or leapfrog you (e.g. by acquisitions or hiring more people).

The existence of a company willing to pay its employees 2x the market rate doesn't impact the ability of other companies to hire enough sufficiently talented people at or below market rate to squash that company if it is small enough. "We live in a society" - or in a market in this case. The market wasn't created yesterday so if you join it today, you're starting at a disadvantage, not an equal level playing field.

[maerF0x0]

Funny how competition and a free market makes it all possible

[jjmarr]

Tech CEOs will do anything to reach FAANG market caps and revenue except pay FAANG-level salaries.

[m463]

Isn't this how business works?

For example, walmart revenue per employee is $300k but they mostly make minimum wage.

starbucks is $94k/employee

[BriggyDwiggs42]

It is funny when middle class salaried employees notice the same thing that every minimum wage worker knows intuitively, but that’s part of how this system remains stable is a lack of awareness.

[mrangle]

This is how the monetary system works. While your math is inaccurate in terms of the spirit of what it is attempting to show, correcting for that, its still the way of the world until money is no longer a thing.

[dragonwriter]

> This is how the monetary system works.

No, its how capitalism works. The monetary system is largely orthogonal.

[mrangle]

No. Respectfully, you don't understand how money works and the proposal of vaguely applied ten cent terms can't make up for that. Ironically, this means that you also don't understand socialism.

Capitalism is simply the innate nature and structure of the monetary system. The maintenance of the properties of money require capitalism. Otherwise, you will begin to not have money. No matter what word that you use for it. I'm not saying that this is a good thing. It's just a concrete thing.

The more socialism that you apply, especially in terms of shelf goods, the less actual money that you have. Due to how prices will react, what you begin to have is something akin to allotted credits or even just de facto allotted goods. The former which necessarily implies price controls. The only question then is how much food each person will be allotted.

Tell me which companies, ahem, I mean "socialist countries" aim to maximize free GDP allotment (in this case for food) to each individual citizen instead of minimize it to the lowest possible level? Consider a hypothetical wherein this socialist country has 300 million people.

The negatives of capitalism are not because of capitalism. They are because of the structural nature of money, which only maintains value roughly relative to the degree to which a large amount of people don't have it.

Smart countries attempt to maximize socialist benefits without affecting their currency value, in order to control and promote social stability to the best of their ability. But this generally excludes socialism for common goods, or else the characteristics of money begin to change.

[milesrout]

The income of the company is not the "fruits of the labour" of the people that work there. There is no logical connection there.

You don't "create" all the value just because you work there.

Also the total cost of employment is much higher than salaries, and there are big overheads in any business that aren't wages.

[hnbad]

If every single person paid to work on AWS leaves the company overnight, what happens to the value of AWS? Sure, Amazon could eventually hire enough people to replace those who left and maybe even keep AWS running and develop new features but it would be a catrastrophic loss of value and take a long time (and a huge investment) to recover.

You don't create value by having capital either. Labor converts capital into value. Labor can also transform capital (e.g. produce code which can then be used to provide a service for money). Plenty of people have "ideas" but ideas are worthless in a vacuum. If you pay someone to turn your ideas into capital you can use to generate value with cheap labor, your idea didn't become valuable by itself, you literally paid for labor to refine your capital to become better at generating value - you may legally own that refined capital the same way you owned the initial capital but the transformation had nothing to do with you other than your means to pay someone to perform it for you. Your money didn't create value, it merely facilitated the transformation of your capital and the creation of value. Your individual ownership of that capital is entirely unnecessary in this.

The tech, knowledge, software, etc of a company is a multiplier for the value labor can produce. It still requires labor to produce that value. It also requires labor to maintain that multiplier, much like literal machines require maintenance. The industrial era analogy still holds true (and arguably even more so given how specialized individual jobs can become).

The total cost of employment is generally not an order of magnitude more than salaries. Wages are the biggest cost factor in most companies, especially in companies built on knowledge work (e.g. software). The biggest employee expenses (though usually defined in terms of easily obtainable bonuses and often with severance packages other employees don't have access to) are CEO and other CxO-level positions. This isn't because of a natural value of these positions to the company, this is almost entirely the result of years of advocacy to investors and boards promoting the idea that these positions should be paid several orders of magnitude more than everyone else with very little factual evidence to support that idea - it's pure ideology and it's fairly recent.

The overheads are irrelevant for the general point, too. Corporations need to make a profit to function. Corporations don't need to siphon that profit almost exclusively into CxO-level benefits and shareholder dividends. You're right to argue that if a company makes $1,000,000 per $100,000 employee, that doesn't mean it makes $900,000 in profit per employee. But even if the operating costs are so high it only makes $100,000 profit per employee - that's still money left on the table (which the individual employee has no leverage to demand a fair share of).

[albertogimeno]

Well if it's that simple go ahead and start a company, generate $1M per employee and pay everybody their fair share. If you're right you'll get the top 0.1% talent in that market, no question.

Let's see how you do, best of luck.

[coolThingsFirst]

And how will you leverage that as a developer? Only making a startup seems to work.

[odiroot]

And then it gets even worse in Europe.