Underpaid Programmers
Capital Versus Labor
When I read the above quote I was incredulous, then furious, then contemptuous, & then I was at peace. I found a frame in which the above statements make sense: the returns to capital versus the returns to labor.
Under the bluster & confusion, Mr. Friedberg’s underlying point is clear—more of the profit of technology companies should go to investors & less to the workers. I disagree, despite my recent bourgeois status.
How did I wait until 61 to become a Marxist? I don’t know. And just when I become a member of the rent-seeking capitalist class, too. Great timing, right?
The “slippery slope” Mr. Friedberg references is one of increasing returns to labor. To qualify as a slippery slope, however, there must be no counter-balancing force short of disaster. If tech compensation was truly a slippery slope, then salaries would have risen so far that the business of technology as a whole would have imploded. The business of technology didn’t implode. QED.
I haven’t seen examples of companies that went out of business because they paid programmers too much. (I have seen plenty that went out of business because they couldn’t actually charge for their product or service, or they couldn’t stick to a reasonable strategy, or they abused employees or customers.) This is a market in search of a margin.
When I was a kid I was aghast at the rise in professional sports salaries. Ricky Henderson gets a million a year for six years? I love Ricky & his steals & his leadoff dingers, but sports as whole is going to vanish if players get paid this much.
What happened? Sports teams in the US now pay out roughly half of revenue as player salaries. The rest of the business of a sports team adapted—merchandise, tickets, media revenue. Sports grew explosively.
What if the market for talent led tech companies to pay out half of revenue as compensation? Less return to capital, more return to labor. My predictions:
We’d see less capital flowing into technology. Would that result in fewer successful companies or more? Companies have been over-funded over the last decade. I’m guessing more success.
We’d see greater emphasis on personal development among technologists & better quality of execution (compare the average skill of a baseball player today versus forty years ago).
We’d see higher diversity & inclusion as companies hunted talent starved of opportunity.
This doesn’t sound like a disaster to me. Maybe I just don’t have enough capital to see the picture clearly, though. I’m ready to experiment.
The business of technology didn't implode simply because in our industry there is still a HUGE disparity between the returns for capital and the returns for labor.
Regardless of how much money is invested in salaries and perks, a developer still profits WAY less than the investors.
This scenario leads to my next argument: the peripherals of our industry didn't develop as much as sports because they don't need to. The margins are still extremely high and it continues to be a crazy profitable business (when done right) despite all money invested in high salaries and great perks.
One of the things I feel is missing from a Marxist analysis of labour vs capital in software, is just how little capital is needed, and how little ongoing labour is needed to maintain the revenue stream. I kind of feel that most of the capital can’t differentiate the talent (the talent distribution is possibly similar to sports, and it’s definitely different than a factory). I am no fan of how Elon Musk has behaved during his time at Twitter, but I think that one result that will show in time, is that the platform is quite capable of generating revenue with considerably less labour.