The better I get at programming the more I feel the so-called “tech bubble” has nothing to do with investment dollars and everything to do with developer’s salaries.
If and when the bubble bursts it will be because 22 year old “engineers” building simple CRUD applications are charging a lot more than they deserve.
In life we have many problems. From bad grades to failed relationships, money issues and [sometimes] software needs. For each of these problems we prescribe a fix. Want an A on the test? Study more and go to office hours. Want to win favor from a spouse? Apologize and be nicer to them.
It’s no different in programming. Need a unique identifier for a purchase confirmation? Wire up a UUID library and you’re all set.
For some reason we treat programming like a black box that only a chosen few can access. This is not only demoralizing, it’s completely false.
Business teams at tech companies are under pressure because it’s believed they don’t have as much “leverage” as their developer counterparts. That a sales guy might create, say, $200,000 in profit if he’s a high performer while his developer peer creates $2 million in profit building the apps he sells.
But here’s the truth. I’ve worked with 30+ venture-backed startups and I’ve never witnessed developers leading product management or sales strategy. Most developers I’ve worked with write stuff like “such sales talk goez here” on their home page. Most developers would rather rebuild their app in another framework or dream up features than fix critical bugs that are making customers leave. Most developers like to argue about HTML vs HAML when all the marketing guy wants is a landing page. It’s out of control.
At the risk of losing my startup club membership: most developers are sheep. They need to be led behind the barn and shed for all they’re worth. Their intrinsic value is little because they’re raw materials not yet processed.
While programmers use “code” to turn solutions into software, business people use “direction” to turn developers into profit centers.
We are all programmers really. We just use different languages to get the job done.
When you enter a large market, there will be incumbents. They may be manufacturers or authors, tech startups or institutions.
We read and write about how to compete with such forces. How new solutions must be 10x better than old ones.
But what about the journey to the solution? The means to a purported 10x end?
Compare Uber and Lyft:
They both do the same thing. They both have identical apps. They both compete on price with the same promotions and features (pool/line).
But they both do it in different ways.
Uber connotes a premium, black car vibe. “Everyone’s private driver.” Lyft says “Everyone can be a driver.” Lyft fist-bumps passengers. Lyft encourages passengers to sit in the front seat.
Yet fist-bumps and seating are a means to the end of traveling A –> B. They are not 10x improvements to the end.
Or are they?
A fist-bump doesn’t cost anything. Neither does a suggestion through a cracked window. And this is what great startups do. They make something out of nothing.
When you enter a market riddled with incumbents, you will probably not launch with a 10x better solution. But you can introduce 10x better means. And you should. It’s free.
Dolores Park is among the trashiest parks in San Francisco.1 It’s also a fun place to hang out on weekends.
SF Parks & Rec put signs near the bathrooms to address the issue, hashtag #lovedolores:
I made a different kind of sign and stuck it in the offending area:
Some tourists noticed our litter box was missing a bag:
Maybe San Franciscans will also notice, and stop throwing trash where it doesn’t belong.
Go corporate or work at a startup? A millennial’s dilemma.
Advocates of either could argue over lifestyle, culture, or “sense of purpose.”
But let’s be real — the most potent difference between startups and nine-to-fives is money. Corporations pay more, startups pay less. Corporations offer benefits, startups offer stock options. And so it goes.
Political and hierarchical, scaling employing satisfaction is expensive. Wages at corporations are paired with 100s of job titles and uniform mechanisms (performance evaluations) to manufacture promotions systematically.
Management is often horizontal, providing autonomy and project ownership to early employees. Unable to afford market rates, stock options (ability to buy equity at a discount) help compensate for smaller salaries and reward those who excel in their departments.
So all things being equal, a capable individual has two options:
Option 1 – Go Corporate
- 100% salaried compensation
- 0% equity upside
Option 2 – Go Startup
- 80% salary compensation
- 20% equity compensation
In a vacuum, these incentive structures are about the same. Nine-to-five employees extract value on-demand and lucky startup folks make their money later. So choose whichever risk profile fits your appetite, right?
Compensation is more complicated than future vs. net present values, because compensation predetermines future progress. So let’s talk about the 20% mystery [equity] compensation.
If you’ve ever volunteered for an econ experiment in college, it might have gone something like this:
- Computer screen in front of you says you have $10 in a private account
- You’re randomly paired with a group of 4 peers, and everyone is anonymous
- Anyone can commit some of their $10 to the group pot, which will then double and be split evenly
- Do you put all your money in, knowing everyone will double their money, or keep your $10 to be safe?
The phenomenon of this experiment is that most participants become less trusting throughout the sequence of deposits, ultimately limiting everyone’s earning potential in an attempt to preserve one’s own funds. The coined phrase for this is the Tragedy of The Commons.
Now apply this to the real world.
If you work for 100% salary, the future isn’t interesting. You extract value from now, thus doing the same things in the same way, is the recipe that yields the results you want.
But if you work for equity, that uncertain chunk of your well-being, you’re not only incentivized by the future, you depend on it. Either you create a better mousetrap or you’ll wish you went corporate.
This begs a simple equation:
Quality of our future = (incentive) * (n incentivized workers)
… and this is why startups are powerful.
It has nothing to do with ping-pong or beer or v-necks.
The truth is, startups are organizations that live for the future and don’t mind going through hell to get there. Startups are built by people who put their personal well-being on the line to make life better for everyone else.
So what’s the key to a better future?
Having a vested interest in making it so. There is simply no incentive otherwise.
Do you ever wake up as co-founder of two growing companies and think “I need more in my life?”
I did. So a couple weeks ago my friends and I launched 12 Loops.
12 Loops is a social good project with a simple objective: hang 100 basketball nets at courts across NYC.
So far we’ve installed five:
Now we’re looking for a couple bucks, tweets, or volunteers to help execute the plan before Summer ends.
Will you help us?