In theory, if you had a competitive and fungible marketplace where a specific employee would boost profits by $100k, and you offered her a salary of $80k, someone else would outbid you with $90k, and someone else would outbid them at $95k etc. Even if the "margins" are low, no one is going to pass up on free money.
In practice, the labor marketplace isn't nearly competitive or fungible enough to expect the above. However, there is still a very different problem. Even if the average salary is "fair", people get rewarded a tiny fraction of the value they generate. Imagine if I'm working at Google and I find a way to save Google $10M/year via improved hardware efficiency. Despite the fact that this isn't part of my job description. How much of that $10M would I get in the form of a salary increase or bonus? A pretty darn tiny amount. 1% if I'm lucky. Is it worth it? Probably not. I might as well just do what my manager asks me to do, and spend my extra time learning Haskell and going to happy hours. This is pretty much what GP was alluding to. If companies started giving people a significant fraction of the value they generate, corporate life would change dramatically.
The sole reason while your research generates millions of dollars of year of saving is because it would be applied at Google scale. So your work times google scale = $10M/year.
As stated above, you deserve to be compensated for a part of your work. But pretending that your compensation should also include the "Google scale" factor - which you did not contribute to in any meaningful way - is not right.
If you want your compensation to be based on the outcome of your work on the company as a whole, you need to work for equity and not for salary, and accept the associated risks - which might include getting nothing for a lot of efforts. Of course, your compensation will then also include the work made by others, which you might like or dislike.
If you want to be able to precisely measure your own contribution, exclude any other factors, and capture almost all of it, you probably are better of creating your own solo-founder type of company and stay solo. When 1+1=3, it's hard to precisely pinpoint which "1" generated the extra value.
Google probably runs at 25% profit margin, so $10M/y savings equate to $40M/y additional revenue. A Google cloud sales rep probably makes at least 5% sales commission, so they'd net at least $2M for equivalent sales (which they would only able to achieve because of Google scale, but if you make that argument with them, good luck keeping them employed). Conversely, a SWE delivering $10M/y savings would probably only see a small bump on their refreshers and bonus.
"Google scale" wouldn't exist without the workers that make it possible. Seems to me like they can get more of that value they enable than they currently do.
If I can make $1 on my own, and you can make $1 on your own, but together we can make $4, we each deserve $2. I don't deserve $3, even though I turned your lone $1 into $4. But I also don't deserve just $1, because I did contribute to the scale factor. In todays world, it seems like we'd each get $1.
How do we divide the extra $100k. Are you pretending that you should get $50k (50 thousands times what you were doing alone) and we should get $50k (1.005 times what we were doing without you) as well ? That does not seem very fair to me at all.
This isn't a good model. Boosting your company's profit by 100k doesn't mean they can boost any company's profit by 100k. If they could, they'd capture a lot more of the 100k.
That's what the model predicts, but it's unfortunately not how companies beyond a certain size work in practice. Hiring decisions are not made by the business owner to increase profit, but middle-ranking members of the hierarchy who have their own parallel goals.
Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people.
There are people who take on big, flashy projects that generate a lot of measurable value, and there are people who do the boring stuff that needs to be done too. Without one, you don’t get the other.
I think at this point it's unfair if we were to say the specific people are the issue. A big business has a lot of required components in order to keep running, and some of them are not directly revenue generating, but you still need most of them. That's a value of small companies, being so lean you can be hyper-focused and efficient. Bigger companies can perform at scales smaller ones can't, but that comes at the cost of inefficiencies of orchestrating the bigger operation. Just getting all the people aligned to do the things the business needs them to do is a huge and messy cost that smaller companies don't have, but it's required else your conglomerate would fall apart.
There was no HR, no management class, no purchasing agents or head of IT, maybe one hour of meetings a month and everything worked ridiculously, buttery smoothly.
We built the products that needed building, everyone pitched in and morale was generally high.
I could name one person who I'd consider had a "bullshit job", and another who's job was semi-bullshit. This is out of maybe 100 people I met across multiple departments.
I agree that a lot of businesses can cut down on bullshit process and bullshit jobs and keep running fine, but there's a lot of "cost centre" style jobs that are non-negotiable, especially when it comes to compliance and government reporting. Compliance and reporting is a business requirement that the software industry very rarely has but I'm expecting to see that change over the next decade. Accounting kind of falls in that category actually.
An aside, Blackmagic sounds great to work at. I avoid big companies specifically to avoid the bullshit process and people, so that sounds like a dream.
There was an accounting team, of course, as well as support and the most competent IT department on planet Earth (consisting of two guys for the whole company), but they were nimble and didn't overreach in terms of their authority.
Legal was outsourced, AFAIK.
>An aside, Blackmagic sounds great to work at.
It really was. The culture was amazing.
In a company with no HR, whose role is it to deal with employment contracts, ensure the company's compliance with labour laws and deal with personnel issues (which, at 500+ employees, probably arise more frequently than either of us would think)?
Interviews were handled by the team that the new hire would be joining, and most personnel issues were handled locally too. Very rarely they'd be kicked up the chain to the department head, but honestly these issues were very rare.
Seriously, without an "HR police" to complain to, most people would just deal with interpersonal issues like adults and move on.
Who handles health insurance and 401k match?
The Federal Government.
>Who handles the sexual harassment complaints and the illegal hiring discrimination?
Team leads, or lawyers if it gets far enough. You don't need a team of people on full-time for an event that happens twice a year.
Or the company has a near monopoly over certain lucrative markets.
Why would you expect people to capture the full value of their labor?
Imagine you operate a business. You do the math and determine that hiring a new employee will cost you $100K/year, but it will bring in $100K/year of revenue. In other words, the employee would capture the full value that they create (assuming nothing goes wrong).
Do you hire that employee? Of course not. It doesn't make any business sense. It's more work for you, more risk for the company, and most importantly it provide $0 financial value to the company. It's an easy no.
Now if you can hire someone for $100K and their addition will bring in $150K, that's a different story.
You can't expect to capture the full value of your labor as an employee. However, you're also free from capturing the full value of the losses you might create. If you fail to ship your objectives or you accidentally drop the main DB and cost the company $100K, you don't receive a bill for the negative value you created. You get to keep your paychecks.
> which leads to people not being incentivized to increase the value of their labor.
This doesn't make sense at all. People increase the value of their labor all the time because it leads to more and better opportunities and gives more leverage in future negotiations.
You don't have to capture the "full value" of your labor to have an incentive to improve.