Is FAANG pay anti-competitive, more than necessary, meant to starve competitors of talent?
There is a huge gap in pay between FAANG, unicorns that recruit from FAANG, and everybody else. At the same time, so so many people want to work for FAANG that they have to reject many good engineers. Therefore I see a discontinuity in the supply and demand of labor for FAANG and yet these companies pay double or nearly double what everyone else (old tech: ibm, hpe, dell, intel, oracle; defense contractors, pre ipo startups, private companies, banks and finance) pays. What gives? Are they overpaying smart engineers to keep the supply of labor for competitors low?
I want a raise
There was a great article on this wrt to the 🇨🇦 market: https://www.theglobeandmail.com/business/article-canadian-tech-companies-in-a-global-struggle-to-attract-and-hang-on-to/
When the economy goes into recession, with jobs being shed, the pay will change. It is simply supply and demand; currently there is more demand for engineers than supply.
They're not paying that much to keep the supply low. They're paying that much because this is how much it takes to actually be able to hire good engineers with any decent degree of certainty. Sure, they do reject many good engineers, but that's because they set up the system to weed out the bad ones, while the good ones will get in if they interview a few times. The premise maybe would make sense if FAANG didn't also take like half a year to fill any job posting.
As our dear lord Chamath has said, it’s not to prevent tier 2 companies from poaching talent, but rather to prevent tier 1 employees from creating competing startups.
There is a false assumption that there are many good engineers. Look at any modern tech company (Airbnb, Square, Stripe…) and you will find hundreds of openings that take months to fill. I was on the other end interviewing and most engineers out there are not “good”. Classic supply and demand is the primary driver for high swe salaries. I don’t see this trend ending any time soon. If it were up to me, I’d rather pay 2-3x for 1 good engineer than hire 3 subpar engineers. Heck I’d even pay 5x / use all my hiring budget for 1 good engineer than 5 bad engineers. To add on to this - if there were an abundance of good engineers, then other tech companies wouldn’t be starved of talent.
How sure are you that there are few good engineers out there? I’ve been rejected by like 6 companies in a row due to LC I haven’t sufficiently practiced and/or formulaic interview processes that I haven’t sufficiently gamed, yet I have 8 years of consistent stellar performance reviews and am highly, highly regarded by everyone I’ve interacted with at my employer at every level. And I know that sounds cocky to you, but I keep these facts to myself in interviews because I know the interviewer won’t believe me and will just think it’s cocky to say and that I’d be an arrogant dick. In reality, the interviewing process takes too much preparation for a super closed minded, narrow process that everyone’s gaming by practicing for 6 months and/or paying for mock interviews and they have the time for it because they have no kids and/or no hobbies. How sure are you the interviewing process effectively allows you to determine who’s a good engineer?
You shouldn’t be focusing 100% on LC, but unfortunately those types of questions are a component of interviews. The 3 companies that I listed above actually have very practical interviews all things considered. I broke into FAANG from Cisco years ago and my eyes were opened. You have your share of average / good engineers, but there’s also a large percentage of truly amazing engineers that you rarely see in legacy tech companies. The premise that higher salaries are anticompetitive and starve other companies of talent is already flawed - if there truly were good engineers everywhere then other companies shouldn’t be starved for talent, right? The oversupply of good engineers that don’t make it to T1 tech companies would then be working in legacy tech - hence not starved. If instead the title of the post was - “FAANG interview processes needs an update”, then my response would be different. I simply disagree that high pay is anticompetitive when supply is low.
Yes.
this is a false dichotomy. There are plenty of tech companies that are not FAANG but pay near FAANG salaries. Definitely not close to 50% less. Lyft Uber Adobe Stripe Etc In fact, there are probably at least 20-30 companies that pay close to FAANG salaries at least up to some (really high) Nth level. I’m at ServiceNow, the only FAAMGs that would’ve beat my current tc was Meta/G and that would’ve been by ~20% max. It’s a similar case at tons of tech companies. In fact, I’d say the gap between FAANG and other tech companies has decreased since now there’s plenty that pay a shit ton. If they really wanted to be anticompetitive, they’d have to start paying a lot more, because their offers are not unbeatable. If by FAANG you simply meant all of the 20-30 companies I’m talking about, then yes there’s a huge gap between them and the rest. But within those aforementioned companies, it’s a spectrum.
Very true! But even 20-30 companies is tiny. Are there really only that many companies worth of engineers? Talent is an exponential continuum, therefore, in a perfect market, the distribution of pay among companies, or the distribution of pay within a given company, should be an exponential continuum
It’s all about reducing false positives than optimizing for false negatives. I know some people hate the process but I’d say it’s democratizing. Anyone with whatever technical background can break into something else and get a huge bump in TC. Having worked at the ”lower” tier companies before, I do see a pretty big gap in talent. If you are really good, then it shouldn’t be that hard to prepare for a test that you basically have all the answers to. I don’t see why it’s anti-competitive when there are so many open positions and not enough people to fill them. We’re literally interviewing people all the time and hoping they pass so we can throw money at them.
If you whisper this to Elizabeth Warren, you sure will get support. 😉 “They should pay the employee tax and the ultra rich big tech should pay for 20% of employees of “the others” annually!
This is a non political question. What are your thoughts in why there is such a huge pay gap despite so many people wanting to work for FAANG?
Because big tech’s existence depends on software Engineering. You are talking with very one dimensional view - if you go to finance the investment bankers and traders get paid the highest, if you go to tech, the software engineers get paid the most, if you go to top 5 management consultancies those management consultants get paid the most in the top tier. Also, isn’t it wonderful to share profit with employees and let their wealth grow through RSUs? Boomer companies believes that only those at directors or above are worthy to have slice of a company.