In the vast majority of cases, I agree. If someone is working at CompuTech for $100K per year, and gets an offer from TechuComp for $110K per year, that's market forces working in favor of the developer. This is a good thing.
But there is the possibility for entities the size of Google to ignore market forces entirely in order to better position themselves. For example, a guy working on self-driving cars might command a salary of $400K in most cases, but Google or Tesla or someone might offer them $600K just to prevent competitors from having access to them.
Most companies couldn't afford to do that, but FAANG are so vastly wealthy that they can hire entire engineering teams as a loss leader.
This is still good for the developers involved, at least in the short term, but it isn't so great for the market, or society, overall.
Yes, literally speaking, it's "worth it" to Google, or they wouldn't do it. Being so large, Google can throw advertising money on their self-driving car division, no problem. They can take a loss for 5-10 years, no problem. However, it's extremely anti-competitive, which is the problem others are pointing out here.
This is not possible according to the usual definition of "market rate".
If Google is willing to pay X, that is the market rate.
I don't think what you're describing is anti-competitive behavior, rather it's omni-competitive. Pretty much all the money Google throws at anything is "advertising money" but if they are really trying to make self-driving cars, what's wrong with that?
Should my Brad Pitt Summer Blockbuster profits not be able to bankroll my Teletubbies Christmas Special?
There's plenty of antitrust fodder already with their stranglehold over the web and the behavior they've taken to protect their search/ad business. But if they're hiring people away in cutting edge areas of research simply to destroy startups, that's abhorrent. That means they're pouring their obscene wealth from advertising into unrelated fields in order to dominate them.
Monopoly.
This doesn't mean that the market price of a McDonalds burger is $0
If all I can afford to pay a developer is minimum wage, is he or she now obligated to work for me at my "market rate?" At what point does it go from not having enough money to afford a highly qualified developer to becoming "poaching?"
ed: Toned it down a little. I think tech is making an absurd amount of money and it's exasperating to see people complain about paying their workers too much.
The market will correct very quickly, as competitors will immediately head over to McDonalds to purchase $\infty$ burgers at $0, killing MCD dead in seconds.
The moment McDonalds applies a purchase limit (Free burgers! Limit 5 per customer), the burgers have non-zero cost, as they require a person's time in order to purchase.
If McDonalds does have enough capital to buy long-term customers and kill off competition with free burgers, perhaps they should consider it. I assume that they've considered such a strategy on occasion and concluded that it isn't worth it. Burgers are probably worth more than $0 to McDonalds, too.
If walmart takes its surplus capital and decides to sell toilet paper at a loss, to run everyone else out of business (till they're the last man standing), I'm not sure its correct to say that the market value of TP has reduced during that time period. Walmart has undercut the market value (the point where buyer and sellers generally meet) -- it hasn't actually changed the market value, except temporarily, in whats effectively a hack. The permanent shift in this case would occur when the dust has settled, and all competition has been eliminated
All market values are temporary. Walmart absolutely has changed the market value in this scenario. It might be anticompetitive in the Walmart example, but in the case of one company paying their staff better than another I don't think the company paying less and complaining about it is going to get much sympathy :)
I think the S&P is overvalued today. The market thinks otherwise. No matter how much I would like to purchase reasonable stocks at P/Es of 15, by and large, I can't. If someone else wants to buy them at P/Es of 21, they are going to attract every single seller.
https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
And if a bunch of homeowners are willing to drive up housing costs and prevent building out an adequate supply of housing in an area, that's just the market.
I don't have a horse in either race, but I think there is an appreciable difference between paying a premium for a resource that you use, vs paying a premium solely to prevent someone else from having access to it.
but as a contrapoint; in capitalism there's a trend of selling a product or service substantially below market rate as a way of gaining significant adoption, once you have significant adoption- you raise the price as best you can.
This is called: undercut, corner and squeeze.
Often this results in monopoly positions or at least significant leads which are hard to overcome. (Uber, is a famous example).
Obviously this is only possible with significant financial capital, which google have.
I can see how the undercutting analogy has synergies with overpaying for talent. It's worth making a loss on hiring me if it means that someone else doesn't get the (lesser) value of me.
Arguably. But, if 10 average people are worth $200k and one exemplary person is worth $500k... and the company pays the 10 average people $100k instead, then the company can hire two exemplary people where it only needed one.
Scale it down to minimum wage and you end up with people who are worth way more than they're paid -- you literally don't have a business without their work -- who are held under by telling and treating them like they're worthless.
That's what predatory behavior disguised as a market looks like.
On the other hand, does it mean that some employers won't have money to hire talent? And will that result in some businesses failing? And is that ultimately bad for developers? I don't know, but it feels like it's such a big system that it will balance itself if that is the case.
Long term, however, there's a risk of a monopoly forming, which isn't good for developers or society. FAANG are willing to pay big salaries because they are competing. If they use their power to destroy the competition, that market force goes away.
Big companies have been overpaying developers for almost a decade now. It is not going away. It is not some short term thing. Instead, that is what these elite tech companies pay.
It is not some singular company, that is buying up all of the tech talent. Instead, it is a whole bunch of elite tech companies, paying lots of developers lots of money.
The idea that there is one singular company, that is a monopoly on developer talent, that is false, given that there are a whole bunch of them doing it.
If the companies sell ads, ads get more expensive. Then the items those ads promote get more expensive, working its way down to the rest of the population again.
Those developers will also see the increasing prices, but the extra cash will hopefully keep them happy for a while.
On the other hand, capitalism has this great thing where going bust is not the end of the world (or life), compared to previous eons.
A system which allows (and encourages) failing is great.
After the first $100k or so in salary - enough for living expenses, soft things like culture fit, are able to become more important to employees, and by offering services like on-site massages directly, employers are able to offer more value than employees could capture themselves. (On-site massages are also used to keep employees on campus longer, but once you start getting "free" massages, they're hard to give up!)
I'm not sure I think this is bad but I believe this is the argument.
This arguments fails on so many dimensions that it must just be a meme. I’ll use Google as the example. For it to work Google has to be able to monopolise the buying of talent.
Most damning, the premise itself is self defeating. Somehow Google is picking the most talented people (delivering far in excess of say $1M marginal returns), yet somehow it is paying well below that to steal that talent and furthermore Google is then wasting that talent (employee delivering value below their pay+overhead). To assume Google chooses to waste talent merely to achieve some low value outcome (damaging a competitor by $1 doesn’t magically enhance Google’s returns by $1 so the factors are way out here) seems to assume the Google is somehow acting against their best financial interests. I don’t think Google is as poorly run as that.
Also:
1. Occam’s razor: Could it be that a Google is actually getting good value by paying very high salaries?
Yes. The average revenue per person for Google is about 160G$ / 115kiloemployees = 1M4 per employee. I do note that using an average is silly because the value distribution is not flat, but neither is the employee salary distribution flat. But the figure is so large, average does say something useful for back-of-envelope calcs.
2. Can Google monopolise by buying power alone?
No. Other companies have similarly high returns per employee (Apple is 260G$/160kiloemployees, Netflix is 20G$/20kiloemployees) so for Google to outbid them, it needs to outbid above the marginal revenue per employee, which clearly is well above a 600k$ salary.
3. Can Google corner the market for talent by restricting supply?
No. We know that there are plenty of talented developers because Google isn’t the only company making over $1M revenue per employee. Google employs about 115000 people. Let’s say 50000 of those were “overpaid“ to remove them from the competitors. If the total pool of equivalent talent were as small as 250000, then Google couldn’t monopolise talent. Yet other companies with high revenues per employee have a sum total of employees higher than 250000. Furthermore Google’s returns per effective employee become ~$2.8M/employee, so Google can obviously afford to pay $1M for talent it really wants!
> just to prevent competitors from having access to them
They don't ignore the market, they use their resources earned from participating in that market to keep and/or improve their current market positioning. Which is exactly what their shareholders want, and is fair game until treated as a monopolist.
Those are still market forces. They aren't paying the worker value, but the damage they will cause to competitors. Welcome to capitalism.
