Prestige of Engineers

BassDad
Mon, 21 Jan 2008 01:28:04 +0000

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.