sakky

Well, nobody is saying that it's "easy" on an absolute scale. What we are saying is that it is relatively easy, that is, relative to other undergrad majors you might choose.

And besides, that context in which you are using the word 'insurance' is not the way I was talking about it. I was talking about insurance in the sense that if you can't get a consulting/banking/whatever job right after college, you can still get an engineering job. THAT is the 'insurance'. Contrast that if, say, you had an English degree, and you don't get a consulting/banking offer. What are you going to do now ?

Uh, no, that's false. Current CEO Paul Otellini does not hold a PhD, has never worked as an engineer, and does not hold an engienering degree. He has a bachelor's in economics and an MBA from Haas, and his background is in sales/marketing.

Other Intel CEO's were not PhD engineers, at least in the sense that they don't hold engineering degrees. . Robert Noyce, the first Intel CEO (and co-founder) does not hold any engineering degrees. His degrees are in physics. Gordon Moore, the second Intel CEO (and the other co-founder) also does not hold any engineering degrees. Rather, his degrees are in chemistry and physics.

Well, THAT I don't know about. Have you seen the early Microsoft employees? Do you really think they could have all gotten jobs in finance or consulting? Honestly? Just look at them:

http://i5.tinypic.com/14ni5op.jpg

Be honest, how many of these guys really would have fit in in an environment like a management consulting firm or an investment bank? Let's face it. These guys were deviants. And I don't mean deviants in a pejorative way. Rather, they were deviants in the sense that they couldn't fit into a regular business environment, and in fact, that is precisely why they were able to thrive in a startup.

This is especially true of a guy like Gates. Part of the genius of Gates is that he is simply not willing to abide by the status quo. He is always looking to do things differently. That's part of what makes him such a successful entrepreneur. As said by Paul Graham.

"Someone like Bill Gates can grow a company under him, but it's hard to imagine him having the patience to climb the corporate ladder at General Electric—or Microsoft, actually."

But in general, I happen to agree with you that entrepreneurship and startups are an exciting path that more engineers should consider.

But the rejoinder is that you can't crack the top 100 by joining the large established engineering firm of the kind that BassDad and I have been discussing. Can you really become a billionaire in your 30's by working as an engineer for GE? Or Boeing? Or Ford?

Heck, can you become a billionaire by joining Microsoft now? In the 1970's or 1980's, sure, but now? I think we can all agree that Microsoft's days of hypergrowth are long past.

The Power of the Marginal

Actually they aren't. Not really. I wish they were. But they aren't.

To whit:

Microsoft - CEO Steve Ballmer is not an engineer and never was. He's really a marketing and general management guy.
IBM - CEO Sam Palmisano is not an engineer and never was.
HP - CEO Mark Hurd is not an engineer and never was. He's really a finance and accounting guy.
Cisco - CEO John Chambers is not an engineer and never was. He's really a sales guy.
General Electric - CEO Jeff Immelt is not an engineer and never was
General Motors - CEO Rick Wagoner is not an engineer
Boeing - CEO Jim McNerney is not an engineer
Oracle - CEO Larry Ellison is not an engineer and didn't even graduate from college. His 2 Co-Presidents (Phillips and Katz) are former investment bankers
Sun Microsystems - CEO Jonathan Schwartz is not an engineer. He's a former McKinsey consultant.
Intel - CEO Otellini is, again, not an engineer
Apple - CEO Steve Jobs is not an engineer, heck, he didn't even graduate from college.
Dell - Michael Dell didn't even graduate from college.
Verizon - CEO Ivan Seidenberg is not an engineer


Now, to be fair, there are other engineering firms that are headed by engineers. But not as many as you might think. That's actually part of the problem. People see that and realize that if they want to make it to the top of even an engineering firm, maybe they shouldn't be engineers. In fact, many engineers I know have expressed frustration that they management jobs that they coveted were instead given to outsiders who parachute in from the consulting/banking industries who have never worked a day in their lives as engineers. For example, one of my friends, who works as an engineer at a major company (which shall not be named) just learned recently that his new manager is a guy who came in from BCG. Now my friend is grumbling that he should have worked at BCG instead of as a consultant.

Uh, Carly isn't the exception. In fact, she is the norm. For example, Carly was replaced by another non-engineer (Mark Hurd).

Uh, we're not talking about that. We are comparing engineering vs. consulting/banking. You can easily graduate debt-free through consulting or (especially) investment banking internships even if you go to an expensive school.

I think you've confused the comparison. Plenty of engineering jobs are grinds. You mentioned working for tech startups. Well, tech startups are notorious for long hours, to the point that an 80 hour work week might be considered a vacation. Heck, even to this day, Microsoft and Google are not exactly known for short hours, and they're not startups anymore.

As another case in point, Electronic Arts became so notorious for long hours that they were sued for violating labor laws.

Electronic Arts faces overtime lawsuit | CNET News.com
Gamasutra - Programmers Win EA Overtime Settlement, EA_Spouse Revealed

The point is, we need to keep in mind that plenty of engineering firms demand long hours too. And they do so without even paying the sorts of salaries that consulting or banking firms do. Many people figure, quite reasonably, that if they're going to be working consulting/banking hours anyway, they ought to be paid consulting/banking salaries.

BassDad

You are starting to answer some of your own questions here. Engineering firms are treated as commodities because most of them produce commodities. As you point out, it does not take top talent to accomplish most of what engineering firms do. Take some reasonably smart students with a mathematical bent, put them through five or six years of an average engineering school and you will get competent engineers who can quietly go about the task of producing reliable, useful, safe, consistent and repeatable products and services for the masses. Sounds like a commodity to me. It would indeed be mismanagement to pay more than the going rate for that kind of work.

I realize that you are talking about a different part of the industry - the startups that hit the jackpot and the big name consulting operations, but those guys would not be around if it were not for the infrastructure and the commodity type of goods and services that their industries rely upon.

Startups, even the ones that are run by very smart people with excellent ideas, fail much more often than they succeed. The ones that pay their employees with stock options and promises can hire as many people as they can convince to share their vision of the future. The ones that raise enough cash to offer decent salaries for a while are generally spending someone else's money. Either way, they are mostly living on borrowed time and can't last long without a big score. Every now and then, the stars align and a good concept comes together with its target market, a decent business plan and enough initial funding to get it off the ground. If they happen to get the right management team to handle the transition from small to medium sized business and then from medium to large, and if the partners and investors can agree on a common direction rather than going the easy route of cashing in and selling out to a competitor, then you may just get one of the kind of companies that you have been talking about.

Even then, the inertia that you correctly identified usually takes over and a company can fade from industry leader to producer of commodities to irrelevance to non-existence in short order. You've mentioned the decline of Microsoft and Motorola Semiconductor as examples. It would be easy to add dozens more like Bell Labs, Chrysler, IBM, US Steel, and on and on. So when you tell me how Google is doing everything right today, I wonder how long they can stay at the top of their game. Sooner or later their growth will be slowed by some sort of limit on the income side of the ledger and then they will have to start thinking about working the expense side to keep their investors happy. At that point, you can bet that the company-sponsored five star meals and free dry cleaning will be things of the past, at least for most of their employees.

Perhaps some other startup will come up with something better and manage not to get gobbled up along the way. Perhaps some other established company will decide to give them some real competition. I realize that Google has a nice head start and some very smart people. They can indeed crush and take over other companies for a while, but if they are not brought back to Earth by capable competition, they will eventually be limited by their own success. In that case, the federal government will decide that they have gobbled up one too many competitors and will change the rules of the game to restore some semblance of competition.

Back when AT&T had over a million employees, the facilities were pretty cushy (particularly at headquarters) and their list of benefits was quite impressive. In the boom years of the 1970's and 1980's, their R&D facility, Bell Laboratories routinely hired scores if not hundreds of top engineers at the bachelor's level from dozens of the best undergrad programs throughout the country, then sent them to places like Stanford or MIT for a full year or more of grad school paying tuition, living and commuting expenses, plus textbooks and furnishing an incredible stockroom from which to requisition absolutely top of the line supplies. They did this while continuing to pay these folks about 75% of a full time salary, plus all standard fringe benefits, and there was no commitment at all placed on these new hires to remain with the company after earning their Master's degrees. There was another program for those who wanted to go on to get a PhD, yet another for the budding MBA's and still another for degrees in patent law. Perqs provided to all employees included in-house classes taught after hours by experts on a very wide range of non-work related subjects with tuition and textbooks paid for by the company. There was a cinema club showing weekly films in the auditorium. Organized lunchtime activities sponsored by the company included a symphony orchestra, a bocce league at most larger company locations, a model railroad club, a gardening club and many, many more. Each of these clubs had space and an annual budget provided by the company. The resources available in the company library made many major universities pale in comparison. Employees were allowed to write technical books on company time without having to sign over the royalties earned from the sales of those books. In short, the benefits that they provided back then would make Google's current package look positively stingy. The Labs made the model of hiring the very best and paying accordingly work for longer than any place I have ever heard of. They averaged a patent per day for a over a century and produced quite a roster of Nobel prize winners.

AT&T was dismantled by the government in 1984. Soon thereafter, Bell Labs was a shadow of its former self, offering salary and benefits comparable to most everyone else in the industry. Come back and tell me about Google when they have been at the top of the heap for a couple of decades.

sakky

Certainly I do not disagree that what much of what the engineering produces are commodities. But what about all of those engineering products that are not commodities? Numerous engineering products, i.e. Microsoft Windows or the Apple IPod, are extraordinarily profitable. Apple charges about double for the Ipod what a competing Mp3 player of comparable specs costs, and Apple can clearly get away with it, as evidenced by their 75%+ market share. Hence, engineering products do not always have to be commodities. Probably sold and marketed, they can be premium, 'luxury' products.


And besides, I would argue that much of management consulting work is basically a commodity. Much management consulting advice is little more than what you could get out of a basic MBA program. In fact, many management consultants at even the best firms like McKinsey are in fact just guys with MBA's but who have never actually worked in the industry for which they are now consulting. For example, one of my old friends just got his MBA, joined a top management consulting firm, and is now consulting for the auto industry despite never actually having worked in the auto industry ever. Yet he's now telling auto executives and engineers with decades of experience what they should be doing. I believe it comes down to good marketing: that those auto execs believe that my friend knows what he is talking about (even though he confided in me that he really doesn't) and is therefore worth the high fees that the consulting firm is charging (even though my friend believes they are being vastly overcharged).

But of course we have seen time and time again how businesses can charge high prices for what are ostensibly commodity goods. Remember the Pet Rock? $3.95 for a rock? {Sure, it was a short-lived fad, but the inventor of the concept, Gary Dahl, became a millionaire from the idea).

I would also harken back to what I said before: that at any engineering firm, some engineers are simply more productive than others. You've seen it, I've seen it, I think we've all seen it. Some engineers produce a lot of work, and others produce very little. Hence, that seems to be an opportunity to rationalize your costs. Just get rid of some of your low performers (or pay them less) and shift some of those savings to the high performers by hiring more of them and/or paying them better. For example, instead of just having 1 high performer and 9 mediocre engineers, why not have 2 high performers and 2 mediocre engineers? You can manipulate the ratios as you wish, but the point is, productivity would be the comparable, overall costs would be the same, and the high performers could be paid better. The low performers would have fewer jobs, but so what? They're low performers, so they don't really deserve to have a job anyway. As things stand right now, the system is basically Communist in nature, in that the pay is not linked to performance and you have engineers producing mediocre work yet getting jobs anyway.

Thirdly, I would point out that the 'going rate' is a fungible quantity also. Like I asked before, why do firms insist on operating in expensive parts of the country? For example, why do Silicon Valley tech firms stay there? SV is one of the most expensive places in the country. Engineers are expensive, land is expensive, taxes are high, basically everything is pricey. Why doesn't Cisco, Yahoo, Ebay, Adobe, Oracle, and all these other companies just relocate to, say, rural Mississippi? Things would be far cheaper there. {Similarly why do all the investment banks insist on staying in Manhattan, one of the most expensive slices of real estate in the world, and not just also relocate to Mississippi?} I think that shows that the going rate is something that you choose. It is an endogenous strategy decision. Cisco believes, rightly or wrongly, that there are great benefits to be had in being in the middle of SV despite the costs.

Nobody is denying that somebody has to do the commodity work. But the question is, should that 'somebody' be the guys from the top schools? Basic economics dictate that an economy is most productive when people are working at the tasks for which they are the most productive. 99% of Americans don't grow their own food and have no idea how to do so. It is far more efficient for highly specialized farmers to grow food for everybody so that others can get on with working on the tasks that they know how to do.

Keep in mind that I'm talking about the issue from the perspective of the engineer. The engineer cares about his own career, nothing more, nothing less. So if he joins a startup that gets acquired, he gets rich. Sure, not as rich as if the startup went IPO. But still, he gets rich. He ends up with millions instead of tens of millions or hundreds of millions. But so what? That's still rich. That's a lot better of a deal than what a large engineering firm can offer.

Take my former roommate. His startup just got acquired by Google. His complete payout (after 2-year vesting) will be something around a million. Sure, if he were to instead have made it to IPO, he would be far richer. But I don't think he's complaining.

Now there is no doubt that most startups will fail. But so what? Your startup fails, then you just join another one, or create your own. Ford Motor Company was actually the third company that Henry Ford founded, the first two (also called "Ford Motor Company" having failed). Bill Gates & Paul Allen's first company wasn't Microsoft, it was a company called Traf-o-Data. Gates has said that the real value of the company was not the money they made (for the company was not highly successful) but rather the experience that he gained from running his own business; experience that would prove to be extraordinarily handy during the early days of Microsoft. Gates would probably argue that his time at Traf-o-Data was more valuable than the career training/development programs at most engineering firms.

And even if your startup does fail and you end up having to join a big company, again so what? To quote Paul Graham:

Even if your startup does tank, you won't harm your prospects with employers. To make sure I asked some friends who work for big companies. I asked managers at Yahoo, Google, Amazon, Cisco and Microsoft how they'd feel about two candidates, both 24, with equal ability, one who'd tried to start a startup that tanked, and another who'd spent the two years since college working as a developer at a big company. Every one responded that they'd prefer the guy who'd tried to start his own company. Zod Nazem, who's in charge of engineering at Yahoo, said:

I actually put more value on the guy with the failed startup. And you can quote me!

So there you have it. Want to get hired by Yahoo? Start your own company.

Hiring is Obsolete

Now, I realize that Graham was just talking about starting your own company rather than just joining a startup. But the principle is the same. Startups offer excellent career development opportunities because everybody has to do everything. So you have no choice but to learn the whole business. They offer you chances for great responsibility quickly. They offer you the chance to become very rich very quickly. The chance is admittedly small, but it is there. And the experience is highly regarded by many leading tech firms. I think it is therefore not surprising to find many MIT/Stanford engineers preferring this route.

At which point the best employees are probably well advised to join other firms that are on the growth path. For example, right now, Google's biggest competitor for talent are not any of the big companies. They rarely lose any potential hirees to Microsoft, Yahoo, Oracle or even to McKinsey. Google's biggest competitors are startups. Every year, a significant percentage of Google engineers leave Google to join a startup. Recently one of the most vigorous competitors of Google for talent has been Facebook.

Nevertheless, I am not as pessimistic as you seem to be. Inertia does take over, but it can be fought. Microsoft has indeed declined but it is still one of the most desirable employers in the world, in fact, arguably being the most desirable tech employer compared to others of its size. Cisco, Texas Instruments, Qualcomm - these are all rather large tech firms that also score highly in terms of employer desirability. Now, are they are as good as they were back when they were startups? No, of course not. But they're still pretty good relatively speaking. So instead of getting an A+, they're now getting A-'s. That's still pretty good. You could do far far worse than being an engineer at Microsoft. There are plenty of other companies that truly treat their engineers like garbage.

Again, I don't doubt that Google will be subject to the forces of inertia and will probably lose most of its cushy benefits. But if it just regresses to the level of Microsoft, that's still pretty good. Like I said, Microsoft isn't as good as it was in the old days, but relatively speaking, it's still better than most other engineering firms, despite now being over 30 years old.

But besides, that point isn't relevant anyway. Google will decline, but something else will come along. The key is to then find that something else and jump to it.

For example, I know many people who work at Google or will be working there shortly. Not one of them has indicated that they actually plan to stay there for the long term. Not one. They're just looking at their time at Google as a career booster. They're using Google to develop high quality experience at a unique work environment. They're also going there to network with other ambitious people and to get the Google brand name on their resume. {In that sense, it is like getting an elite MBA, with the major difference of course being that they are getting paid, as opposed to having to pay.} Some of them are already thinking about creating a post-Google startup.

BassDad

Now you are coming nearer the mark when you say that much of what passes for high end consulting at premium prices is smoke and mirrors and marketing. That model works for a while, makes a few people rich and drags down the rest of the system. Eventually someone points out that the Emporer is naked and then they hire a different set of charlatans. You may dislike communism, but this is an example of capitalism at its worst.

In terms of products, I do not begrudge paying a premium for a product that delivers premium performance when I actually need premium performance. Personally, I do not think a product like the iPod qualifies as such, but I will admit that a lot of people own the things. iPods provide lower sound quality than a CD player at a higher initial cost. What makes them popular is that they look really nice, have a slick user interface, provide convenience by being small and carrying many hours of music and video. What really makes them popular is that they allow users to steal >90% of the material they used to have to buy with very little chance of ever being caught. As a musician as well as an engineer, I have some issues with that business model.

I have certainly seen the phenomenon where one engineer seems to be more productive than his or her colleagues, but I think you are oversimplifying the situation. If a company could simply hire another productive worker and fire a half dozen losers, they would do just that. In fact many have tried it at some point. What they generally find is that they have not really been measuring productivity and that at least four of the people that they thought were losers were actually pretty important to the company in some way. They wind up with a couple of prima donnas who do not get along very well and are producing exactly what is being measured and nothing else, then they have to go out and rehire people who see and do what is really needed rather than whatever it is that is being measured this month.

You got yourself a chicken and egg conundrum when you ask why engineering firms get established in high cost of living areas. As you point out, even average engineers have it better than most Americans. If they can afford to live and work in a nice place, why shouldn't they? If companies want upscale workers, they have to locate in places that will attract them. Those places tend to be higher cost of living areas. As more companies enter those areas and start paying salaries that allow even more workers to afford to live there, you take another spin around the inflationary spiral. Eventually you get Manhattan or Silicon Valley and things get so ridiculous that the companies that really do not need to be in those places either move out voluntarily or get forced out by the costs.

When you say that an engineer cares about nothing more nor less than his or her own career, I find that offensive. Indeed there are some individuals who are that greedy and short sighted, but to tar the entire profession with that brush goes too far. If you really believe that statement, I think that you are far more pessimistic than I am. Personally, I have to believe that what I am doing has some greater good. I think that the vast majority of the engineers with whom I have worked would agree with that concept.

I have no argument that startups can be a very attractive way to either start a career or to continue a successful one. Again, we are necessarily talking about a small portion of the entire industry. I have also said right along that engineers who want any sort of job security must be prepared to move on when the conditions demand it. From my viewpoint, the process of corporate evolution appears to be speeding up. It takes much less time than it used to to run a successful industry leader into the ground and there are entirely too many people around who would happily contribute to that process for personal gain. Heaven help us if all the engineers want to join in the feeding frenzy rather than doing something more useful.

merper68

I find it hard to believe that you really get a sense of working for the greater good as an engineer in a large corporation. Certainly, you're working for the greater good of the firm, but it's hardly noble to be working on a new patch for Windows or a slightly modified heat sink for a processor (though I guess Civil Es do get the chance to gaze upon their bridges and skyscrapers). In most engineering companies though, maybe the research team gets that sense of purpose, but a lot of the really innovative ones like Bell Labs, like has been said, are being axed. I know engineers who really get behind the companies they work for and enjoy their work - which is a separate thing from purpose - but is Ford really about innovation and making the world better? Or are they just trying to do enough to get some market share back from Toyota? Is it really that much more greedy to go work for an investment firm?

The general consensus seems to be that startups are the best opening move for a sufficiently talented engineer. A start-up necessarily has to be innovative, to do something better or different. And by joining one and putting in that time and effort, you really have to believe in the product, believe that it can really make the world measurably better in some fundamental way. Chance of pay off, both economically and "spiritually(?)" is better than guaranteed drudgery IMO.

BassDad

Greater good is where you find it, although I will admit that sometimes you have to look pretty hard. It could be in writing that patch in such a way as to reduce the power consumption of the processor, or to reduce the amount of unnecessary stuff that gets printed, thus saving some paper. Maybe it is simply in eliminating a bug that has been annoying a lot of people and wasting their time. When you modify the heat sink, maybe you can make it do more of the work passively so that the fan does not have to run quite as fast or quite as long, or maybe you can specify a material that is not as poisonous to the environment when the computer gets thrown away. If you work for Ford, perhaps you can squeeze out another couple of tenths of a mile per gallon on the average fuel economy. When you start multiplying these effects by millions or tens of millions of copies, you really can do some good even in mundane situations.

sakky

Yeah, but at the end of the day, whether we like it or not, engineers work mostly for capitalistic firms. Only a minority of engineers work for the government or in academia or in other noncapitalistic institutions. Most of them work for profit-oriented firms and hence the goal is to make money. Therefore I ask - if management consulting firms successfully package their offerings through slick marketing, why can't/don't engineering firms do that?

Again, I don't think it's a matter of ethics or principles. We had previously agreed that engineering firms are just as greedy as consulting firms. Microsoft, for example, has arguably broken, or at least bent, numerous ethical rules along the way to success. You said it yourself - firms like Apple may be enabling music stealing. Intel, GM, Boeing, these firms have all had their scandals, with Boeing a few years ago being caught in a procurement tampering scandal with the Department of Defense, culminating in the CFO of Boeing even being sent to prison and the CEO of Boeing resigning, and last year, Siemens executives were convicted in a bribery/kickback scandal. Hence, I see no evidence that engineering firms are any more ethical than are consulting firms.

A lot of things, frankly, don't qualify as such. Microsoft Windows, for example, is in my opinion not a particularly high quality software product. But it is by far the most successful software project in the world. Until recently, Intel's microprocessors were not as good as AMD's. But it didn't really matter as Intel could still vastly outsell AMD not only in terms of units sold, but also in terms of price per unit. Cisco's routers and switches are really not that good. They're not bad, but they're not as good as their price might imply, and you can arguably get a better set of routers and switches for cheaper from other vendors. But it doesn't seem to matter as Cisco enjoys dominant market share in the datacom sector.

The truth is that quality does not always win out when you're talking about technology products and technology markets. Many technology markets are characterized by network effects where the highest quality product does not always 'win', rather, the product that just so happens to win quick market adoption is the one that wins regardless of whether the product is the highest quality or not. MS Windows didn't win because it truly was the best operating system at the time of launch (for the Apple Mac was and arguably still is better). Windows won because MS was able to establish it as a de-facto industry PC operating system standard upon which all other market players would converge. Hence, you as a customer had to buy Windows even if you didn't really want to just because most of the software and the peripherals that you wanted to use are compatible with Windows but not necessarily with some of the other OS's. Similarly, if I want to sell something online via an auction, I have little choice but to use Ebay and pay their fees. Even if I can find a better and cheaper auction site, it doesn't matter because Ebay has the millions of potential buyers who I need to access. Ebay isn't necessarily 'better' as a technology, it just happens to be the standard locus of connection between buyers and sellers, just like MS Windows happens to be the standard locus of connection between users and applications/peripherals.

Well, frankly, I don't know that you should blame just Apple for this. Let's face it. Music stealing was highly popular for years before the Ipod became popular. Napster was launched in 1999. The Ipod wasn't launched until 2001 and didn't really get big until 2004 (people seem not to remember that Ipod sales were fairly mediocre for the first few years after launch).

If nothing else, at least Apple has created a market for legal digital music downloads through its Itunes store and Apple is now the largest vendor of legal downloads. The P2P sites don't do even that.

So then what you can do is produce better measurement schemes. Or, even better, simply create work roles that are autonomous. That's what firms do with sales roles. If you consistently fail to hit your sales quotas, you will be fired. But if you consistently crush your quotas, you will be richly rewarded. That's as it should be.

But that's exactly what I am talking about. These engineering firms "decide" that they need upscale workers. Ask yourself - why do they decide that? Why couldn't they just "decide" that they don't need upscale workers and can just take lower quality workers instead (and pay them less)?

But regardless of the answer to that, the bottom line is that these firms have decided, for whatever reason, that they do need upscale workers. That's why high tech firms like Cisco stay in Silicon Valley. So if you've already decided that you need upscale workers, then what's stopping you from deciding that you need "really upscale" workers - i.e. the very very best engineers coming out from MIT and Stanford, and will pay them the very very best wages, i.e. over $150k a year to start? Lest you think that's outrageous, I would point out that the private equity and venture capital firms are paying the very best grads out of schools like Stanford and MIT over $150k to start, sometimes over $200k to start. If they can do it, why can't you?

Again to be clear, I am not talking about paying every Stanford/MIT engineering student that kind of money. I am talking about paying that to the very best ones. In short, you would be forging a small, highly elite team of engineers, that would be highly highly productive.

If you still think this is ridiculous, then I would point out that many startup firms are already effectively doing this. But they're not paying high salaries, instead they're paying "high stock options" such that if the firm does produce a successful product in a short period of time, all the engineers become instant millionaires. Google, for example, effectively paid millions of dollars a year to each of its original core team of engineers. For example, I heard of one engineering student who joined Google in 1999 right after graduating from Stanford, and ended up being worth around $50 million on the day of the Google IPO in 2004. Hence, Google effectively "paid" him $10 million a year. Hence, if that can happen, I don't find it ridiculous that firms can pay $200k a year of starting salary to the very best engineering students.

Now, one might say that the guy took a big risk by joining Google because nobody knew that Google was going to become successful. That's true. But it's not like that guy was working there for free. He was getting a regular salary from Google in addition to his stock options, so even if Google had become unsuccessful, he would have still made his regular salary anyway. He was having his cake and eating it too.

The bottom line is that if you're not paying people well, or at least not even providing people with the chance of getting paid well, then the best people are going to look elsewhere for employment.

Uh, I see nothing at all wrong with the concept, and in fact, I think that's exactly the way it ought to be. Exactly. For the truth is, you can't trust anybody else but you to look out for your career. You certainly can't trust your employer. Employers are not your friends and they're not really out to help you. Countless times have companies provided an implicit job guarantee for life, only to later lay thousands of people off. That's what happened at IBM. Never fall in love with your employer, because you never know if the employer will fall out of love with you. We know how employers are: they operate on the principle of 'What have you done for me lately?' People can and should adopt the same attitude. Like it or not, that's how business works.

I would actually argue that this sort of job mobility (which you call the feeding frenzy) is highly productive for the economy. It shifts labor from less productive and mature areas to more productive areas. For example, right now, I see that a lot of Americans want to shift from manufacturing industries to, say, the energy industry (i.e. petroleum exploration or alternative energy) which offers better pay. I don't think that's bad. On the contrary, I think that's good. The country needs more energy innovation right now, and the way to get that is to attract talented people into the energy industry.

For example, I know a couple of MIT engineering students who turned down jobs at big firms in order to join a solar energy startup that was offering them not only above-average salaries ut more importantly, huge stock option packages. If that startup succeeds, they'll be millionaires. Even if it doesn't succeed, they'll still have made an above-average salary.


So think about that. They get to join a high-tech startup where they'll wield great power very quickly and where they'll get to work on cool projects with little bureaucracy. They get a relatively high salary. And they have a chance to get filthy rich. Sounds like a jackpot to me. Now, is that a 'feeding frenzy'? I don't know. All I know is that the country needs the best engineering minds to work on better solar technology, and that the price signal is a mechanism for the economy to shift resources accordingly.

sakky

And sometimes you'll never find it because there is no greater good to be found.

For example, I fail to see the greater good in, say, Microsoft engineers modifying software to specifically breaking compatibility with other products or deliberately inserting fake error messages so that other products appear to be incompatible.

Microsoft emails focus on DR-DOS threat | CNET News.com

Similarly, a lot of product development and engineering is performed for purely strategic reasons to, as economists would say, extract greater customer surplus. For example, the IBM Laser Printer Series E was a low-end version of the the regular IBM Laser Printer, for the Series E only printed at half the speed. What customers didn't realize is that the Series E didn't cost IBM less to manufacture than the regular printer. In fact, it actually cost more. IBM took the exact same regular printer and had the engineering team deliberately insert extra wait states into the controlling algorithm in order to slow down the printing. In other words, IBM engineers were assigned to deliberately make a product perform worse. That makes sense from a strategic standpoint (because IBM wanted to sell to 2 different customer bases with 2 different price points), but I'm not sure that any engineer would feel proud about taking a good printer and deliberately trying to make it perform worse just for strategic purposes. Similarly mathematics and statistical software applications companies have often times sold "Student" versions of their software which used the exact same code base as their "Professional" versions but with certain function calls deliberately disabled in order to make the Student version slower and less capable. How much professional pride would you feel if you were assigned a project to make a good product worse?

BassDad

I have been advocating job mobility at least as long as this thread has been running. There is a difference between that and the intentional dismantling of a useful enterprise for the personal profit of a relative handful of people, which is what I used the term "feeding frenzy" to describe.

It is highly encouraging that there are solar energy startups in a position to offer above-average salaries. Those folks are indeed lucky to be in that position. If you can get someone to pay you an above-average salary as well as offer you potentially valuable stock options, that indeed is the best of both worlds from the employee's point of view. As you point out by way of answering your own question once again, there are opportunities among startups at very high salaries to attract top talent, and that top talent is frequently following the money. Such offers do not come around very often because that is still a risky business strategy from the point of view of the employer. A few companies that are very easy to pinpoint in hindsight manage to make it work. Far more either do not have the funding to even try that approach, or do try it and fail because they could not continue to generate the needed cash flow long enough to get off the ground. Existing companies that have a lot to lose to a risky strategy are not going to be very anxious to try what you suggest.

I agree that you can no longer trust anyone other than yourself to look after your career. In fact, I have been saying that throughout this thread. To say that someone cares about nothing more than their own career goes far beyond the concept of career maintenance because there is far more to life than just a career. Personally, I don't think the world would be a better place if the best and brightest were to make decisions about what they want to do with their lives based solely on maximization of their personal net worth.

You can toss Google around all you like, but you are not going to convince very many HR departments to change their pay scales based on comparison with a single firm or even a couple dozen of the most highly successful startups out of tens or hundreds of thousands that failed. A lot of the failed startups hired very talented people on the basis of stock options and a lot of those very talented people are now living above their parents' garage while working at something steadier to pay off the accumulated college and credit card debt that they racked up. Contrast that with the financial management folks who filed for Chapter 7, leaving the employees and creditors holding the bag even as they are looking for the next set of venture capitalists and recent grads to dupe.

Autonomous work roles and measurement tools are easier to apply in some situations than others. It is usually pretty straightforward to measure the amount of sales that an individual has generated (and not at all unusual for employers to so obfuscate the rules concerning commissions that even the more successful salespeople get cheated.) A lot of engineering tasks are necessarily done as a team and even the parts that can be split up into separate areas of responsibility can have a big effect on one another. One person or one team can look very good at the expense of the rest of the project by shifting costs to other areas that have no hope of bearing those costs. The whole thing fails, but the people most responsible for the failure come out looking good. If you can come up with a measurement scheme that works well across a wide range of engineering projects, you could start the next Microsoft or Google yourself. It really is a difficult problem that cannot be dismissed by saying just find better measurement techniques. Part of the problem is that smart people get very good at subverting whatever measurement is being made to their own ends and we are talking about some very smart people indeed in this discussion.

I do not blame Apple for making the theft of intellectual property the basis of an entire industry, but they have to share some of the blame for capitalizing on it to a greater extent than anyone else. They have indeed come forth with a way to buy media legally and are probably making a profit at that as well (more power to them on that score) but the fact remains that a very large number of people buy their product with the intent to use it to commit theft. Apple knows this. The fact that a large number of people are doing it and getting away with it does not make it right.

BassDad

Indeed there is no greater good to be found in some jobs. I have and will continue to turn down such work, even if I am offered more money than I am currently making to do them. I realize that not everyone would make the same choice for a variety of reasons, some involving economic necessity.

Most engineering jobs are not that clear cut. It is easy to get caught up in a rut and not even bother to look for what greater good can be accomplished in the day-to-day job. Remembering to do so takes work and practice. Being able to seize the opportunity can be very rewarding in ways not entirely measured in dollars. For some, it is the main reason to get up in the morning.

BassDad

After reviewing my last couple of entries, I do not feel that I organized what I was trying to say very effectively. Allow me to try again:

From an employee's viewpoint, it would certainly be nice to get not only an above-average salary but potentially valuable stock options as well. This combination is sometimes offered by particularly well-funded startups and companies that recently were startups and are still in explosive growth mode. The more usual case is that startups can offer stock options that may or may not ever be worth much, but they usually cannot offer a great salary for very long. Somewhat more mature companies may offer much better than average salaries but cannot afford to continue to dilute their stock by handing out options to employees as though they were a startup. Companies that have been around for a while have no desire to start an arms race. They are usually content to make do without the very best talent because they can get most of what they need from talent at the next level down far cheaper and can bring in consultants for as long or short as needed when things really heat up. Because they have more to lose, established engineering companies do not wish to gamble by adopting strategies that they consider to have high risk (as demonstrated by the rate at which startups and consulting companies come and go) even though the potential rewards are also high. They take a more conservative approach to preserving stockholder value while generating a reasonable return on investment.

The notion of paying a premium price for premium productivity is based on the assumptions that it is possible to define what is meant by premium productivity and that it is possible to determine which individuals are producing it and which are not. In sales, this is done by setting quotas based on past history and then keeping track of each individual's sales relative to their quota. In engineering, the criteria for success is rarely as simple as comparing two readily-obtained scalar numbers. It is prohibitively expensive to monitor and evaluate all aspects of a complex product or project, yet some level of performance evaluation and quality control is needed. Because engineering projects differ greatly in scale and purpose, because creativity and innovation are highly prized but devilishly hard to boil down to a one-dimensional number, and because global optimization is much harder to achieve than local optimization, the tasks of defining and measuring productivity are rarely straightforward in an engineering setting. Opportunities abound for highly intelligent but unscrupulous individuals to subvert performance monitoring for their own good at others' expense. The consequences of implementing a strict pay-for-performance regime can be disastrous if the wrong people are rewarded and the wrong people are let go. One common corporate response to this problem is to reward success and failure at the team level, compress salary ranges and only fire the obviously incompetent. Again, a conservative approach that is willing to limit gains in order to prevent large losses. Startups that have little to lose and companies who are still in the midst of an unsustainable but nonetheless very enjoyable growth spurt play by a different set of rules.

I think the rest of what I was trying to say was reasonably clear from my prior posts, so I will turn in for the night.