1. They give cash that is generally 20% higher than average market price.
2. If you convert your cash into options, you don't pay the income tax for the forfeited cash. It's your choice on how much cash you'd like to convert. And of course, if you joined company by 2015 or so, and consistently converts, say 40% (or whatever percentage other FAANG companies use) of your cash, you should be have enough money to to retire and focus on angel investing.
3. They give you a discount of the options. It used to be 5X. That is, if you forfeit $1 of income and the strike price of options is $1, you get to have 5 options instead of 1. That is, if the stock price increases by 25% compared to the strike price, you'll make even, roughly speaking.
4. They options expire in 10 years! I mean, 10 years!
5. Options vest every month. The strike price is the the price of stock of that month (not sure if it's average of the month or at the time of vest). Combining this and #4, employees will make money as long as Netflix stock has volatility. The only scenarios that employees will lose money is that the stock price keeps going down for 10 years or there is not enough volatility.
6. They don't give bonus. If you perform really well, you will become more important to the company, and you get a hefty raise. The raise stays.
If this is not fair, I don't know what is.
I personally view this as a strength of Netflix. They have such a wonderful culture that empowers its engineers to focus on building and being autonomous. They don't need people to drive company wide initiatives most of the time.
It was on the day of vesting (1st business day of the month) at the close that day. So we used to root for a huge single day drop on the first trading day of the month (mostly jokingly).
Does this example need another prerequisite "and the current price of NFLX is $1"? Because if the example runs with NFLX at, say $10, then each option already have an intrinsic value of $9.
And combined with #5, those options look like at-the-money call options that expire in 10 years. But in this case it won't make any sense to set the option price (the amount of income to forfeit for each option) according to either strike price or stock price -- shouldn't it be set according to the difference between the two?
Correct.
> But in this case it won't make any sense to set the option price (the amount of income to forfeit for each option) according to either strike price or stock price -- shouldn't it be set according to the difference between the two?
The difference is always $0. The option strike is the same as the current price. The option price is 40% of the current stock price/strike price.
Let's say you make $180K. You opt to put 50% into stock. So each month you will buy $7500 worth of options. On month one, the stock price is $750. The option discount is 60%, so you get your options at $300 each. You buy 25 options at a $750 strike.
So now you're down $7500. But if the stock goes up 40% to $1050, you've broken even. If you exercise your option you buy the shares at $750, sell it at $1050, and make $300 a share.
But the real advantage comes if the stock goes up say 50%. Now you can make a profit of $375 a share, so you just made a 25% gain on your initial investment. It takes a while to break even, but once you do, you have extreme leverage.
People who went stock heavy usually made more from the options than salary, at least in the 2010s.
It would probably be a lot cheaper to change their hiring practices to be less strict and reinvest some of that money in training.
Isn’t that what a boomerang promotion is?
- Bob works at Amazon as a SDE 2
- Bob finds getting promoted to SDE 3 is hard (despite being qualified) because the bar for promotion is too nitpicky/convoluted/whatever
- Bob quits and goes to work somewhere else
- Bob then applies for a job at Amazon again, but for a SDE 3 role. He lands the job, effectively getting a promotion in a really roundabout way.
The premise is that getting hired as a SDE 3 is presumably easier for someone who was already a successful SDE 2 than it is to navigate promotion committee politics internally for that same SDE 3 title.
This "trick" isn't limited to any specific company or role level; rather it's mostly a hypothetical scenario that is used as an insider joke when there's a perception of an overly obtuse promotion criteria.
In the context of this thread, I'm guessing they're saying that lowering the hiring bar would effectively open the floodgates for ex-amazon people to join back at higher paying roles since they were already able to pass the previously harder interviews.
Plus most shops will filter you out a resume screening level itself.
I had a few friends who went 100% stock (which meant that they technically qualified for food stamps and medicare since it was pretax dollars) and some went 70%.
A company so large as to literally run out of humans.
Happened with their warehouse workers too.
https://www.essence.com/news/amazon-burning-through-workers/
It's not the size, its the attrition that's the problem. Everything would be fine if they retained employees, but stackranks for the stackrank god.
I won't read it that way. This is upper threshold, not some number a L5 SDE would hope to get.
Frugality is still frugality.
If they had too many candidates and not enough positions, it makes sense, but in the opposite scenario you just lose our on candidates that hate those tests.
As a recently posted article here said[0]: "My hunch with those companies was that it wouldn't have been a major issue if I was video-ing in from the State Penitentiary (due to murder charges) as long as I solved the algorithms correctly"
IMO it is an attempt at employee retention as well as attracting new talent.
Purely anecdotal on my part, but I've seen post after post on LinkedIn of senior/tenured Amazonians moving on to other roles after five, ten, and even fifteen years. The stock performance has been pretty flat for the last few years, so the TC growth is lagging behind the gains you could get from being a new hire.
Also a base salary cap of $160,000 is really low. Not everyone joining Amazon wants a large portion of potential comp to fluctuate with the whims of the market. This increases the choices for TC configuration. If you wanna have lots of base and a minimal RSU grant, you now have the option.
When I went through the process, it was pretty confusing to understand but the gist is that they try to hit a total compensation of whatever your target is. And when they quote the total compensation of your salary 3 or 4 years in, they assume that the stock has appreciated by 15% per year. So 15% of your potential gains (compounding per year) of getting RSUs and exposure to Amazon stock is removed.
Maybe, just maybe they can try and get rid of their crazy PIP policies to try and retain talent .
Netflix gives you 100% of your total comp in whatever form you choose: all cash, all stock, or any combination in between. Also, Netflix's stock plan vests immediately-- they don't try to lock you in with 4-year vesting. They view stock compensation as something you've earned, so there are no strings attached.
It's well known that for top roles, Amazon's pay ranges are often well below their peer companies. You can see this on https://levels.fyi. So it makes sense that Amazon is trying to catch up.
So rather than address the problems that are giving rise to this extremely poor reputation and commensurate attrition rates -- the only "fix" that Amazon can think of is to offer people more cash so that the net experience becomes somewhat more palatable.
At the end of the day, it's a job. And jobs that pay the most usually recruits the best.
If they're looking at $350k base salary plus incentives, I may give them another look, especially if I can still do WFH.
Monetary compensation is certainly important and, if driven high enough, can account for extremely poor scores in other areas - but most people will tend to be pretty holistic about their job search. If I posted a job with a 700k compensation that was accompanied by constant 24/7 stress and existential dread you'd be surprised how many senior people would pass on that opportunity.
Amazon have launched more successful non-core businesses than any other big tech company. I suspect there's a belief throughout the company that qualities of the culture that lead to high attrition rates are the same qualities that breed revenue growth and success. In turn, that explains the reluctance to address those issues.
Microsoft, Google, Facebook, etc. Those have always been pure tech plays. Amazon started out competing with Barnes and Noble.
But yes, I get what you mean. Companies are very reluctant to change the secret sauce.
I can hardly imagine earning $350k a year. I've never earned a third of that anually. What I can imagine is a job that places such a demand on my time and attention that I don't have time for a life outside of it.
Most of the reason those big companies can pay software developers so we’ll is that they are worth it, and they can be worth it because they have more leverage: if you do something that causes a small company to be 1% better, and if that same thing would make a small part of a massive company 0.5% better, the latter can be worth a lot more just because the denominator is so much bigger. It feels harder to explain why they must pay so much. The first order argument is that there is lots of demand for software developers and that pushes up the price, but these companies are active in markets where developers are paid less well (e.g. Europe) and they could adjust hiring to favour candidates who are good but less competitive (e.g. because they are bad at a particular kind of interview) so I don’t understand why market forces haven’t lead to things being more balanced.
However in the case of Amazon this isn't based on "imagining" but extremely widespread reports across multiple sources.
If your children hate you or you lose the love of your life -- or you ruin your health -- then what's the point of all that money and free time?
Ultimately it's a decision that you'd have to make depending on what you care about. You could turn your question on it's head; what's the point of having children or a significant other if you are incapable or unwilling when you could be making money for the things you do care about in life?
That's a good point, actually.
Which I will bookmark as the perfect description of the kind of personality profile that is most suited to working at Amazon-- and perhaps the only personality type that can thrive there, actually.
I prefer a bit tougher job that means I'll be financially free in 10 years. It also means my wife doesn't have to work and can really focus on raising our children.
I've worked some long days, but not 16hrs. Plus I really dig the projects I'm on.
You can ruin all that on a 70K job.
There are several companies where the revenue they create per employee is so astronomical that reasonable work-life balance and high pay are on the table.
Especially so if you are single income family.
How on earth can you say that $350k is "not that much"?
Also, I'd be curious to know where you get your numbers from - simply because numbers for total comp (across all companies) seems hard to come by. One can't go by what's posted on levels.fyi of course, because that's skewed heavily towards people who have ... something to brag about.
Yeah it really still is. Living in the bay area as a single 20 something making that kind of money you are approaching 1% status. Rent is a little higher sure, but what really is the difference between $2k/month and $4k/month when you're bringing home $20k+/month? And everything else in California besides housing is the same as anywhere else really in terms of cost of living.
You don't bring 20k+ per months, more like 9k+ after tax/401k contribution. And stock grants are liquid assets, but they are not cash, and most people I know won't exercise them right away, so they are still numbers in certain DB table
That's the point these companies don't get, and never will get.
All of their mouthed pronouncements about "wellness" and "work-life balance" notwithstanding.
Speak for yourself, I guess.
I would strap myself into the torture machine from Clockwork Orange for 8 hours a day if you paid me $350k to do it.
The magic wears off fast and it doesn’t go as far as you imagine.
With this said, from reading the article, this move seems reminiscent of Netflix's pay structure, in the sense of offering a higher cash portion but lower equity. Some people here already mentioned that this was already sort of the case with a sign on bonus compensating for the backloaded vesting structure. From my experience interacting w/ professionals outside the FANG bubble, equity tends to be a bit confusing, so I wonder if a move towards bigger cash portions is a way to try to lure people who wouldn't otherwise be looking at big tech as a prospective career choice.
What's also curious to me is that bumping up cash comp is in direct opposition to the trends from some other tech giants, where they are frontloading equity vesting. My sample size might just be small, but it feels like cash comp seems to correlate somewhat with bearish stock feeling and that frontloaded equity tends to correlate w/ bullish stock feeling. Would love to hear whether I'm off the mark here or not.