Early executives at those companies did very well. Early employees did well, but risk-adjusted , not really. I know people who were fairly early at those companies and they own nice SFH in the Bay Area but they're still working as Directors or whatever.
Consider that if you could make 400k (including liquid stock) in compensation at FAANG but you take 180k at the startup, you're basically betting 220k a year on the company. Except unlike any other company you bet 220k on, you won't get a board seat, you won't get access to key metrics, your influence will be dominated by "real" investor's influence.
If your NW is less than 10M, which presumably it is, anyone who's heard even heard of the words "Kelly Criterion" would tell you your nuts for betting 220k a year on one startup. And yet, you get treated like "an employee" and not like "an investor" for taking that insane risk.
So YC has invested in 5000 companies, and you can name 3 that had top-notch outcomes, thats 0.06% success - and you had to work like a dog to realize it! And that money was locked up. Those same early employees could have taken that $220k/ year, put it on Bitcoin or Apple stock, and retired off that. And Bitcoin and Apple were much easier "picks" than an given startup.
The math simply does not add up and the whole system runs off mystique and naivety. And I've worked at startups that gave me a hard time about asking about outstanding shares, about asking about the cap table, about asking about liquidation preference. This is _critical_ information before you invest a significant portion of your life and net worth on a company and that they're guarded about and it should raise the ultimate alarm bells that they don't fall over themselves to explain every part of it.
There's a bunch of propaganda out there "Explaining ISOs, written by a16z" that's a smoke screen of the truth. The math does not add up.
The dream startup employee is really really good at Transformer architectures and really really bad at personal finance. Fortunately for startups, a shocking amount of these people exist. But it doesn't change that if sharp financiers looked at employee equity packages at startups objectively, every single one would agree it's a scam deal.
This is the “startup myth” that lets the scam perpetuate.
The world has changed. Google IPOed just a few years after it founded. Now Stripe, objectively one of the most successful startups ever, still hasn’t IPOed after 15 years.
Liquidity preference
Dilution
Even the F in FAANG had a major movie made about early employees getting shafted by dilution!
FAANG is 5 companies founded a long time ago. Since then VCs have completely rewritten the rules of the game. But they’ll still point to extreme outliers in the old rules. The fairy tale of the Google masseuse has probably cost tens of thousands of engineers millions in compensation.
You need to get things in writing and do the math and startups make it as difficult as possible to do that and then the math never adds up. So they resort to fairy tales.
You’re obviously overstating the FAANG SWE lifestyle.
But beyond that, it’s interesting you picked FAANG SWE and not startup SWE as the basis of your comparison.
The whole premise of the article is that startup employees are often sold a bag of goods about equity and upside that’s simply a terrible deal. Not terrible in the sense that it’s highly risky, but that it doesn’t even come close to compensating for that risk premium. Its sold as FAANG is low risk medium upside but startup SWE is high risks high upside but really its extreme risk and almost no upside because VCs find dozens of ways to carve it out. And people will say startups pay “market” compensation but they almost always mean base salary only, and the equity is such a horrible deal, it’s borderline fraudulent scam on the part of founders to sell startup employees on the equity as a fair deal.
As an aside, when people think SWEs don’t need unions/ professional associations, they think of teachers unions or autoworker unions where pay is standardized on seniority. Instead, we could have something where our lawyers in our camp could review equity terms and we could collectively advocate for things like liquidity deals. That will never ever happen if you only trust the deals the VCs and founders offer.
I’m only excited to work on a product that’s my baby but by my definition , startups that I’m not la founder /exec of can’t offer that.
A stranger can’t tell me how to dress my baby. So if CEO overrides me on how my product looks it’s not my baby.
If you have a baby, you don’t hyper focus on just one aspect of raising it. But even the tiniest startups rarely let engineers do things like work on marketing and customer development, so it’s not my baby.
A baby can only be taken away from you in extreme circumstances of neglect. But a startup job can lay me off at any time so it’s not my baby.
For me the only real job that fulfills this desire is bootstrapped founder. Being a startup employee is more like being a nanny than a parent.
Google will pay a senior engineer 200k base and 250k in liquid stock a year for 450k TC. That stock is also incredibly low risk.
If a startup paying market means 450k cash, absolutely there’s no need for equity. But if it means matching the 200k base then obviously you’re screwed with no equity. And I’m theory it should be a lot of equity given the much higher risk premium.
One thing people need to remember is the world runs on incentives. And on this topic, there is a HUGE incentive to mislead people.
The facts are:
1) Tech startups usually need a bunch of good engineers
2) Investors and founders want these engineers for as little money as possible, as almost every owner-labor relationship in history has gone
3) Stock options have mystique from once-in-a-lifetime companies like Google but are overall very complex financial instruments
4) Many engineers are a combination of poorly informed about these complexities and easily impressionable to be “sold” that these options are a good idea.
The end result is a massive amount of effort expended to hoodwink engineers on this topic. The existence of the term “founding engineer” is exhibit 1, they are an employee and could simply be called software engineer, the term was invented to add the mystique (and workload) of a founder to what’s just a regular employee without founder equity.
Exhibit 2 is this idea that being a founding engineer is a path to being a founder , this gets repeated ad nauseum despite being easily disproven by 5 minutes on linked, a slim percentage of hot startup founders had previously been “founding engineers” . Of course some startup experience might be useful but just as often you’re the code monkey hired precisely so that the actual founders have more time to do the founder stuff you’re not doing and therefore not learning.
YC is basically a VC firm so it’s like taking Exxon Mobiles PR about climate change risk at face value. There’s a huge potential for bias. And even by VC firm standards YC has been shown to be exceptionally employee- hostile in their communications to founders and the behavior of their portfolio companies.
Once again, people ask “what would a union do” and once again, here’s an answer. It could hire lawyers with a collective budget to review startup option terms and make them less likely to screw over early employees. Because the lawyers that the VCs hire are working to protect the VCs, not you. And the blog posts they publish on employee equity are written to serve their interests, not yours.
So tired of companies that raise hundreds of millions from some of the wealthiest and most powerful people in the world trying to pull the “we’re a startup” card. You’re not two dudes eating ramen in a garage and you don’t get to use that image to excuse your shitty behavior.
Also tired of the “other people in poverty are exploited even worse! You asking for basic labor protections shows your lack of empathy for them!”
I’m seriously having a hard time imagining any of this was written in good faith.
The real solution is, and always will be, collective bargaining. These VCs aren’t going to make sure you have healthcare. They could give it to you directly, or they could use their wealth and power to make sure the government gives it to you.
People ask “what can a union do? My office already has free kombucha”. Imagine if all the SWEs at all these VCs backed companies went on strike unless the laid off Convoy employees got six months of healthcare (it would have been in the initial employment contract). The money for this stuff would magically materialize. It doesn’t materialize because there’s no organization to advocate for it, it’s that simple.
Silicon Valley used to have engineering managers who managed engineering.
As the money got bigger we got more grifters / professional manager types. First thing they do is rebrand middle management as “leaders” and the other thing they do is make management non technical.
This has even bled into making higher level IC engineering roles being “above” coding. “Staff engineers don’t code, they set high level architecture “.
This is toxic to an engineering org in many ways. Firstly you now have a bunch of highly paid technical employees completely removed from how things actually work. But what’s worse is you created a culture where you’re incentived to follow - a senior engineer who wants to get promoted should write less code because coding is associated with being a low level employee.
The fundamental root cause is a misunderstanding of code as low level factory work and not intrinsically tied to the design and architecture. But it’s one of many ways in which traditional business structures and software engineering do not mesh and you need an extremely strong engineering leader to keep software culture on track, which very few organizations have.
That’s the opposite of what would be better. We need more engineer solidarity not more divisiveness. Give me a list of your past employers and I can guarantee I can find some sketchball business practice you indirectly contributed to and make some tenuous argument for you to be blackballed.
95% of shitty tech industry practices can be root caused to people identify more strongly with their employer than with their profession. We desperately need a professional organization / union with teeth and the main thing that should be shunned is rhetoric that divides rather than unites it
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A lot of "rich" tech CEOs don't have massive amounts of cash, they have big equity stakes in their companies. It's paper wealth strongly tied to their company's share price.
Many of these companies' share prices is heavily influenced because a handful of hedge funds own a majority of the shares. For example, look at Pinterest: the general public makes of 11.7% of share owners while institutional investors make up 74% of share owners.
If those hedge funds all decide they're unhappy with the "rich CEO's" decision, they can dump the shares all at once, it will tank the price, and the CEO's are no longer rich. Most of these tech companies also have compensation structure where employee income is also significantly in stock, a price dump could cause mass attrition which can trigger a death spiral.
If you look at activist investors letters to Twitter, Pinterest, Google from hedge funds like Elliott Management, their pressure to cut employees compensation, employee perks, etc....this isn't some conspiracy theory. Wall Street hedge funds absolutely have massive influence on Silicon Valley tech companies because ultimately they do still control the purse strings.
Let’s not forget that Flexport is one of the darling representatives of YCs portfolio. YC has some verbiage about ethical behavior on their website, but when it’s come to actual tough ethical situations like DoorDash pocketing drivers tips, Flexport reneging on signed offers, or all sorts of insanely narcissistic behavior by other YC founders, it’s been shown their “ethics” are words and not actions.
This shouldn’t just reflect poorly on Flexport leadership but on their investors. Especially because the more time you spend in Silicon Valley you learn that your “scrappy startup” is really a product division of the VCs who really call the shots.
Pay close attention to what you hear from pg, Garry Tan, Michael Seibel, etc on this issue. Very very easy to talk ethics in the abstract. Real ethics and integrity are defined in exactly tough times like this. And if you see the cowardice that I expect like we saw with DoorDash, keep that in mind before you “Work at a Startup”
First, moving from an engineering role to a management role is not "career progression", it's a lateral career switch.
Secondly, you don't have to explain anything. Smart hiring managers will understand that you focused your career mastering a craft and that you're still working on that craft you mastered. As for the dumb hiring managers, it's best if you can avoid working for them. One thing you'll learn as you get older is that you can't please everyone all the time and if someone is foolish enough to hold stupid things against you, good riddance to bad rubbish. If you look around a bit, you'll find there's far, far more opportunities for intelligent old coders than unintelligent old managers.
Yeah given the author’s expertise in job markets I’m shocked she wrote this as well.
I don’t think there’s a single other profession with as much compensation variability as software engineer. I’ve heard it described as bimodal or trimodal, but I’m not even sure that captures it.
There was a YC company on the hacker news homepage recently looking for senior AI engineer for 60k. Even by international standards that’s absurdly cheap , but this is a YC backed company, I don’t think their head is in the sand (though I do suspect YC coaches founders to play moneyball with hiring as YC companies as a whole seem to pay far below average).
There’s many companies that consider 150-200k as “standard”.
And there’s still many companies paying 400-600k for senior engineers. I thought in the “tech recession” with the interest rates up this wouldn’t be available for a while but an acquaintance who got laid off from Twitter did the “grind interview prep and interview a dozen companies simultaneously” strategy just this summer in 2023 and got multiple competing 500k+ offers (all liquid) for staff SWE including from some companies I didn’t realize paid that much like HubSpot.
Despite many great offers he also encountered many companies that tried to lowball by claiming “salaries are going down for engineers” but that turned out to be wishful thinking and/or a bluff on the company’s part given his final result.
So basically there is no “market rate” for senior engineers but to the extent there is one a huge percentage look to massively go under it. I don’t blame them as it’s part of the game but just be aware many companies say things like “we want the best and are willing to pay for it” but then lowball and try to bluff engineers into thinking “the market” is much lower than reality. Which they do because many many engineers fall for it.
A big part of the reason it failed for decades is because of the challenges of remote work. It can be difficult to onboard, you need higher documentation standards, more asynchronous communication processes.
Now many people are gung ho on solving these problems to enable wfh. And I personally view that as indirectly solving a lot of the reasons that international offshoring failed.
Even things like challenges with taxes and local labor laws - there are now brand new companies to address exactly that.
In the end the only barriers will be timezones, and even that the aforementioned async flows seek to address.
People keep saying “they tried outsourcing for decades and it failed, it’s a bluff” as if nothing has changed. Lots of stuff changed like improved video tooling. But perhaps the biggest change by far would be the remote first culture people are trying to build. Pre-Covid, every single FAANG company was office-centric to a degree. Bringing in international teams and integrating them would be effectively impossible. Remote first changes that.
Hacker news has so many wfh zealots you won’t even see much discussion around it since people tire of getting downvoted. But worth noting in my experience talking to IC SWE it’s closer to 70/30 preference for remote but based on online convos you’d think it was 99/1.
I personally quit a FAANG job with FAANG comp precisely because my org went remote first. The culture was alienating, the camaraderie was zero, incident management was a coordination nightmare , documentation for onboarding was a mess, and best of all, all my new teammates were Brazilian but since they were contractors they didn’t do on-call.
Management absolutely plans to replace Americans with much cheaper foreigners but there’s still just so much friction with remote-first. The only reason this big outsourcing push might work this time is because of the number of Americans hellbent on overcoming the challenges of remote work and simplifying their own eventual redundancy.
Bitcoin as "digital gold" that's easier to procure, store, move around, and split into pieces is clearly a "killer app". Gold has intrinsic value but it's market cap far exceeds that - it requires a "shared delusion" to accept that it's a store of value. I wouldn't say that Bitcoin as a store of value has society wide acceptance but 1T market cap is still very significant. I keep reading on hacker news that crypto bros lost all their money in the bubble that's now over, but the bitcoin I bought just 2 years ago is still way up. The real losers were the tech stocks I bought - maybe paying engineers 500k a year was the real bubble?
Then again, never try to convince someone of something when their salary depends on believing otherwise.
Uniswap likewise has billions in daily volume. Again, that's significant. I really don't understand how the hacker news groupthink can see a piece of technology that enables something completely brand new - decentralized market making - getting used daily to move billions of dollars around and say "there's absolutely nothing there".
Maybe you think there's no killer app because you hang out on upvote-centric site like hacker news and reddit where people downvote the hell out of things that contradict their narrative. Hacker news is a groupthink bubble.
There's many other examples. Look at how often people brought up energy usage and GPU shortages when NFTs get brought up. Then look how often it gets brought up when LLMs get brought up. It's night and day. None of these people cared about the environment. They didn't like crypto so it was a talking point against it - that's it. Because now, ETH is on proof of stake but everyone and their dog are buying 4090s so they can make waifus with Stable Diffusion. And all those "you're melting the planet people!" are conspicuously quiet.
What exactly is the killer app of LLM? A bunch of writing tools for SEO spam? Does anyone seriously read what ChatGPT writes and think this thing could do real literature or journalism? Everybody wants to use AI to write, nobody wants to read what AI writes. The only real "killer app" I'll give it is Github copilot. Most everything else is froth.
When NFTs were trendy, I read constantly on here they were beanie babies, that they were naming a star, whatever. You know what bubble I saw excited about them? Not the tech bros, but artists interested in a new way of monetizing their work. Go read Grammy award winnner RAC's twitter - he addresses people saying he "scammed" people by @ mentioning those he sold NFTs to and asking if they feel scammed. Fans of his bought the NFTs so they had a digital collectible representing his album, he got money to make art.
When Babe Ruth signs a baseball, it's still just a dingy baseball, but it has emotional significance to people. NFTs were the digital equivalent of that. I'm not surprised techies that have no art in their lives struggle to wrap their head around that.
But what is disappointing is that now Stable Diffusion takes a bunch of art that real humans tirelessly made, uses some neural net to rejigger it, and tech bros will die in the trenches making sure we legitimaze this quasi-plagriasm. For all the talks of NFTs being scams and generative AI being substance, I see one technology that incentivized real humans to make real art and another technology that does the opposite, takes money out of artists pockets so people can use algorithms to lift their style.
I'm not trying to oversimplify these topics but it gets tiresome reading the exact same tired talking points about generative AI being substantive and web3 being all scams when there's strong arguments indicating otherwise. It's just impossible to read them when on sites like these they get faded out because you're not allowed to have divergent opinions without a bunch of defensive dorks downvoting you into oblivion.
There's one last important point I want to make. Sites like Reddit and Hacker News and especially mainstream media are unduly influenced by big corporations. True blockchain use cases give power back to the individual. Sure, there's plenty of VC pump and dump shitcoins in crypto such as Solana and NEAR but the long term real utility is about the individual. Meanwhile, LLMs are almost exclusively trained and served by massive corporations, the same massive corporations that can influence the media you read. If a journalist wants to write an article about crypto energy usage, they'll write it. If they want to write about LLM energy usage, you have some of the richest, most powerful people in the world with some of the premier PR firms in the world who can influence that journalist and that publication in all sorts of ways. So critical stories about AI are more likely to get buried than critical stories about crypto. Keep that in mind.
To me, the biggest difference between the AI hype and the crypto hype is that crypto had the skeptics and the critics in the room - as it should. But AI is badly, badly lacking those skeptics and critics.
I can provide two specific examples of "widely held beliefs" that have been mass-banned on Reddit. I also want to note I don't endorse or subscribe to either of these beliefs but I felt neither were deserving of a ban and I was open-minded to hear arguments in their direction.
1) Reddit banned /r/NoNewNormal and "Covid misinformation" after activist moderators started shutting off subreddits. I personally got a Covid vaccine and complied with mask regulations, but I was interested in hearing coherent arguments related to lockdown / mask / vaccine skepticism. Obviously these skeptic views were very widely held beliefs, and some of them like the "lab leak theory" went from "misinformation" to "possibly true"
2) Reddit banned /r/GenderCritical which was a subreddit representing feminists who expressed skepticism over modern transgender ideology in the spirit of JK Rowling. Again, JK Rowling has millions of followers so this qualifies as a widely held belief. While I want to be inclusive and supportive of transgender people, I'm interested in hearing skeptical arguments related to things like whether it's really a good idea to give puberty blocker to teenagers .
I believe both of these bans happened not for good reasons but because of ideological crusades from Reddit power-moderators who skew heavily on certain political and ideological topics.
I'm not trying to start a flamewar or debate on either of these topics, I'm not endorsing either of those subreddits, I'm addressing your critique that specific examples were not provided of "widely held beliefs" that have been unfairly censored.
I think the opposite is true. An experienced engineer not as versed in interview prep might hear the question to design something, and go ahead and show how they would design it based on their experience doing it in the real world.
The leetcode grinder would almost certainly ask clarifying questions since it’s heavily emphasized as part of the rubric in pretty much all system design interview prep material.
Of course, the non leetcode grinder might ask those questions, but even the social cues that you’re allowed to ask clarifying questions might not be understood.
In my experience, I’ve seen a lot of people say that systems design test the seniority of a candidate, but then stick to a rubric that the leetcode grinder has memorized and the senior engineer might miss several important points on despite having the experience because they didn’t understand all the unwritten rules of the song and dance.
People regurgitate “they overhired during COVID and now they’re making the prudent decision to cut costs”
The first part of the sentence implies poor decision making by weak leaders, so they lose the benefit of the doubt they’re capable of prudent decisions.
You can’t have it both ways - they made a stupid copycat decision to overhire but now layoffs are smart and thoughtful.
Occam’s razor - they made stupid copycat decisions both times because in both cases execs act with a herd mentality.
I can’t tell you the number of times the “leaders” of big tech companies I’ve worked at cited decisions by researching “peer companies”. Management wants to self identify as leaders but their decision making is literally based on following the same decisions of other companies. They think “if company A is doing it, it must be smart “ the only problem is that the peer companies they’re copying are themselves copying others.
All of these big tech companies have been overtaken by professional politicians incapable of leading , with perhaps Apple as the lone exception.
This is a golden time to launch a startup as the big companies are putting their lunch money on the table and cowering in fear.
Consider that if you could make 400k (including liquid stock) in compensation at FAANG but you take 180k at the startup, you're basically betting 220k a year on the company. Except unlike any other company you bet 220k on, you won't get a board seat, you won't get access to key metrics, your influence will be dominated by "real" investor's influence.
If your NW is less than 10M, which presumably it is, anyone who's heard even heard of the words "Kelly Criterion" would tell you your nuts for betting 220k a year on one startup. And yet, you get treated like "an employee" and not like "an investor" for taking that insane risk.
So YC has invested in 5000 companies, and you can name 3 that had top-notch outcomes, thats 0.06% success - and you had to work like a dog to realize it! And that money was locked up. Those same early employees could have taken that $220k/ year, put it on Bitcoin or Apple stock, and retired off that. And Bitcoin and Apple were much easier "picks" than an given startup.
The math simply does not add up and the whole system runs off mystique and naivety. And I've worked at startups that gave me a hard time about asking about outstanding shares, about asking about the cap table, about asking about liquidation preference. This is _critical_ information before you invest a significant portion of your life and net worth on a company and that they're guarded about and it should raise the ultimate alarm bells that they don't fall over themselves to explain every part of it.
There's a bunch of propaganda out there "Explaining ISOs, written by a16z" that's a smoke screen of the truth. The math does not add up.
The dream startup employee is really really good at Transformer architectures and really really bad at personal finance. Fortunately for startups, a shocking amount of these people exist. But it doesn't change that if sharp financiers looked at employee equity packages at startups objectively, every single one would agree it's a scam deal.