The following is a commentary on a Business Insider article about programmers who get paid $500K per year at Google. This question was originally asked on Quora . The following answer has been viewed and shared by more than a million people and was re-published by Forbes .
Disclosure: I'm an ex-Googler. This answer does not represent the company.
The premise of the question is somewhat misguided in that there are no $500K guaranteed "earnings" out there for engineers. As the article mentions, this is a combination of salary and restricted stock units (RSU).
To explain what you'd need to do to get there, let me offer an analogy:
If you're a worker in a village who supplies said village with water, you are valuable to its people. There are two types of workers:
Type 1 worker: Grabs an empty bucket or two, goes to the sweet water lake, fills them up, comes back and makes twenty people happy. He gets to drink some of that water along the way, and once he gets back, takes some of the water home.
Type 2 worker: Disregards how much of a "fair share" of water he's getting. Instead of grabbing a bucket, grabs a shovel and a little cup, and disappears for a while. He's digging a stream from the lake towards the village. Often he disappoints people for having returned from weeks of work with an empty cup. But the elders in the village for some reason believe in him and want to keep him (and throw him a bone so that he doesn't starve for a little while). Some day, suddenly he shows up with a constantly flowing stream of water behind his back. He puts the Type 1 workers out of water delivery business. They'll have to go find a different activity and "team" to work with. Type 2 worker, depending on how much control they retained on that stream, get to own a good chunk of it. Because the village wants to acquire and integrate that stream, they compensate the ownership of Type 2 worker in that stream with on par ownership in the village itself, typically land or such.
News media observes the Type 2 worker and his unwillingness to part with his accumulated wealth in return for his added value for the village (often vesting on a schedule, also known as golden handcuffs); and spins it such that it looks as if another village tried to woo that worker but was met with unexpected resistance.
The resulting media impression, in the mind of Type 1 workers, feels like pay inequity (see the video at the bottom). This is because Type 1 workers expect equal rewards for equal time spent being loyal to the same village.
Let me now tell you a real story:
I was in Monterey Bay for new years this year. I stood there with my wife, watching a young guy start to dig a hole. My wife was enjoying the general vibe of the beach, where everyone was busy ignoring the guy. I pointed to him from the top of the observation spot and told my wife "Watch. In 30 minutes, all these people will be digging for this guy."
Thirty minutes later, he had managed to dig a tiny stream from his castle / moat to the ocean. The water had to come uphill from the ocean to fill his moat, so he was busy changing the slope of the stream to favor the moat. 5 minutes later, observing children started digging with him. 10 minutes later, a few grown-ups started digging. 15 minutes later, the timid foreigners with cameras in hand started digging. In 60 minutes, one Type 2 worker had managed to inspire 15 Type 1 workers to complete a flowing stream of water.
Here's the photo I took of the completed project, to forever commemorate my bet on the power of an individual. The guy with the purple bucket is the founder of that stream, though you wouldn't know it just by looking at the picture:
The overlooked detail is that not all sweat creates equal value. Type 2 worker was willing to break some rules, becoming an outcast and going hungry for an indeterminate period of time to create an automated stream of wealth for the village. Worker 1 expects to "get paid" this value by performing "skills" or "tasks". The basis of this line of reasoning doesn't yield the desired results. The key difference is risk taking with no guarantees.
Arguably almost all of the pioneers of the village itself (in this case Google) were Type 2 workers who held their thirst for years before establishing the stream of billions of dollars. The folks making big RSUs are, either:
- From the early days, responsible for having created a major core value
- Created new value accidentally as a side project that turned out to be valuable
- Acquired as a value-creating startup
- Somehow (unlikely) have monopolistic knowledge about a value stream
The other types getting these deals are usually the children of our imagination, and sell a lot of "Business Insider" papers.
Every heart sings a song, incomplete, until another heart whispers back.
Thank you for the tremendous support for this writing. 120,000+ views, Quora is incredible !
A number of commenters have indicated that they have a hard time putting this parable in the frame of their reality. Some have questioned the negotiation tactic between the employee and the company to secure the level of equity that would be needed to support such an income. Others have even accused the parable of not answering the actual question. Most of these comments are looking at the world from the Type 1 frame of mind, still striving to "get paid".
So let me tell you another story, just a week after writing the above. Perhaps this will be a little more concrete:
In May 2009, a career Type 1 worker applied for a job at Twitter. He was turned down. In Aug 2009 he applied for a job at Facebook. He was turned down again. He decided to set out on an "adventure" and picked up Type 2 work, digging a stream of revenue from the lake of humanity's communication needs to the village of incorporated chatterboxes manifested in the very two companies that had rejected his Type 1 services.
Along the way when he and another friend were digging the stream, their inspired group grew to 55 individuals, and the elders of other villages threw them a few bones, $250K at first, then $8MM and eventually $50MM by Sequoia Capital once the stream was going to obviously be successful.
Three hours before this very moment that I'm writing this, CNN announced that this Type 2 worker's stream "is purchased by Facebook for $19 Billion" (That's Billion with a "B").
Facebook just purchased WhatsApp. And Brian Acton, after five years of "digging a revenue stream" for Facebook's business, is now a capital owner in Facebook; a place where he originally applied for a job and got denied.
His timestamped tweets from 2009 before he started "digging":
Do you think his 55 employees will need to negotiate for $500K salaries at Facebook? Or do you think Facebook will force larger salaries and vesting capital upon them lest they decide to get the heck out of the village as soon as their checks clear?
The Type 2 worker does not compare or negotiate salary, because he is not selling a service to the village (corporation). He is selling overlooked wealth. The village essentially has no choice but to compensate him in accordance with the value of the wealth he brings to the table. The wealth in his hand can be traded to make both sides of the deal better off. (Watch the uptick in Facebook's shares)
The question is not whether there will be a deal. It's whether this particular village is sitting at the other side of the table, when that deal happens. And when it's water for the village, the extra zeroes in front of the dollar sign are considered a negligible necessity.