Once someone really useful has been let go, you have the sudden realization that your situation isn't that different than theirs. If management can misunderstand Tim's value, they sure as hell can misunderstand yours. At which point everyone's productivity is compromised by existential dread, and the wheels just start coming off faster.
It's generally cheaper to poach engineers than to buy a company. Just food for thoughts.
A senior at FAANG is worth sometimes well north of 500K/yr. There are plenty of folks strewn about small software companies that do similar work to a senior or even staff/principal at a faang at wildly huge discounts.
It's hard to find numbers for the value of small software businesses (OP's quote), but this article [1] puts the number at $667k. If that's true, the engineer is SUBSTANTIALLY more expensive than the business (you're not just renting the business for a year).
[1] In the period between 2013 and 2016, the average sale was $667,000. While some sales were obviously much higher, and some were actually a bit lower, this must be an encouraging figure for a business owner to see.
Those discounts are why it's easier to poach the employees.
If a company has 10 engineers earning $200K/year, why would you buy the company for $667K per person and then pay the employees on top of that?
Just offer the employees $500K/year and they'll stream right over.
It’s really great for management types that they’ve managed to restrict the median compensation at fairly low levels; this is also the case for software outside of the well known tech hubs.
There is only one Google, but there are plenty of bright people who are capable of learning SWE.
If all the little tech companies were making $1m revenue per SWE too, then yes you'd probably see tech wages raise in line with that.
However those little tech companies haven't solved traction and growth yet (if they are aiming to at all), so they can't compete with SV and stay profitable. They don't have $100M in funding to throw into salaries.
Or from another angle - a individual SWE starting their own mini SaaS makes $2k a month. They are happy for this as a start, but on the other hand they are extremely underpaid!
An analogy - shouldn't Amazon warehouse workers be on double what they are paid, as without them Amazon can't ship anything!
At the extreme, workers getting the full value of what they are putting in would be something different to a corp, more like a co-op.
I do agree with the point that many of these firms are operating under monopoly conditions. However, for them to be continue to be monopolies requires them to either hire or acquire the best talent that’s possible. The monopoly cannot run itself, and that’s the leverage that software professionals aren’t utilizing fully yet.
A good team can be better at something than all it's seperate members.
Managers should err away from language about "the group", "the team" or "collective" and really drill down to the level of individuals as much as is practical. This is the correct resolution for most decision making. "The team" is just an abstraction that's useful to a small extent for a certain class of decision making, but not beyond that.