Programmers Should Plan For Lower Pay

I had a similar realization many years ago but I have a very different (and lonely) perspective. Nobody seems to get it, maybe someone here will.

I realized this (unfair income) in 2011 as a junior in university, right after I got an internship at Facebook. They paid me $6000 / month and I had only been coding for one year (literally). Previously I dabbled in multiple other majors and my internship offer was higher than the full time salary of my peers in other majors (whom I respected deeply).

I saw this as an opportunity. During my internship and my senior year, I taught my highschool friend how to code while he completed his major in econ. I figured if it only took me one year to get into facebook, he could do it in two. A year after I got a job at a startup, he got a job (105k base).

My girlfriend at the time graduated with a stats degree and was doing customer support. I thought maybe I could get her into coding too, and I did. A year later she got a job (115k base).

Then I had an idea.... could I teach anybody coding? I reached out to a kid I knew back in high school who had a 2.0 GPA. I figured his life sucked and it did (he was a uber driver). Things didn't turn out so well, I got impatient and I used my power as a senior engineer to get him onto my team at (105k base). Today, he is a much better software engineer making 190k base with alot of RSUs.

During my time at Google I decided to revisit my original question, could I teach anybody coding, no matter their background? So while I was working I reached out to my local community to see if people wanted to learn coding. 12 students showed up and I could no longer focus on my work so I left Google to teach full time.

Then things got interesting. Students wanted to quit because they needed to support their families. So I started paying them, 2000 / month. 7 students were paid, the remaining I made sure to tell them that I can help if they needed money. Thankfully, they did not need my money.

Within a year (2017-2018) I went bankrupt. I needed to answer the question, "could anybody learn coding, no matter their background?", so I painfully cleared out my 401k. Thankfully, my wife got a job as a software engineer (135k base) so I was able to find a job myself.

Eventually, all the students got a job. Every single one, from one who is 40 years old without coding background to another without a college degree. The lowest offer was around 115k.

My RSUs are coming up in 4 months (90k). In addition to my salary, I'm going to use it to accomplish my goal in 2020: to create a coding bootcamp at public libraries so that anybody regardless of race and background could have a safe place to learn how to code and build cool things together as a community.

After I finish I will write about the experience, but not now. I just wanted to share my journey so far because I think it is important to know that you don't have to spend what you earn. You can help the people you care about, only if its one person at a time.

Things are pretty good now, and seem to have gotten even better since Dan's 2015 post, but something could change. Given how poorly we understand this, and the wide range of ways the future might be different, I think we should treat collapse as a real possibility:

Poor understanding is in the map, not the territory. I started to write a comment arguing that this is incorrect, that the factors which cause programmers to be well paid are straightforward and aren't going to go away. But instead of that, how about a bet.

Here's the US Bureau of Labor Statistics series for 2nd quartile nominal weekly earnings of software developers (applications and systems software): https://fred.stlouisfed.org/series/LEU0254530600A. They didn't seem to have mean, median, or other quartiles. There are other series for different subsets of programmers, like web developers; I chose this one arbitrarily. The series is not inflation adjusted.

I will bet up to $1k at 4:1 odds that the 2030 value in this series will be greater than or equal to the 2018 value, which was 1864. So $1k of my dollars against $250 of other peoples' dollars.

(I'll accept bets in order of their comment timestamps, up to a maximum of $1k of my dollars. Bet is only confirmed if I reply to accept it. Winner must remember to email to claim bet winnings. Bet is cancelled if the US Bureau of Labor Statistics discontinues the series or doesn't publish a 2030 number for any reason. Non-anonymous counterparties only.)

We don't understand why programmers are paid so well

It might be pretty straightforward.

GDP is 2x higher than in 2000Real GDP per capita is up 25% since 2000, so some category of workers must have gotten at least 2x more productive in that timeframe, so their real income should be 2x higher. That seems like a plausible story for the software engineering career.

This simplified model is consistent with my inside view. I can help sufficiently big companies save $millions/yr, or earn $millions/yr more, by writing software that streamlines some detail of their internal processes or external interactions. And my ability to do this is obviously much higher thanks to all the tools that exist today that didn’t exist in 2000: cloud computing, tons of third-party APIs, ubiquitous mobile phones with fast chips and internet connections, huge high-resolution monitors, Stack Overflow, etc.

The tech entrepreneur and investor Naval Ravikant talks a lot about how “leveraging yourself up” is the key to getting rich. E.g. these days Joe Rogan makes $1M for recording a 90-min podcast because he built a following. He has distribution as leverage.

Programming in the internet age is an unprecedentedly huge source of economic leverage on human capital. A doctor or lawyer sells an hour of their time with a limited impact multiplier - they benefit one patient or one party in one case. In contrast, it keeps getting more common throughout the economy for an hour of a programmer’s time to give value to thousands or millions of customers. Plus, the programmers are constantly getting better tools to get 10x more functionality built in that hour of time than was possible a few years ago. For example, building a basic form to accept a credit card payment has gone from taking days to minutes thanks to Stripe, a company that launched in 2010 and is now worth $30B. But they didn’t just make themselves rich, they added to the leverage that the rest of us have. It’s a real leveragefest.

It seems like software will continue to “eat the world” and add tons of economic value for a while. At the very least I’d confidently bet on another decade where supply increases much more slowly than demand, and the gap between career appeal of doctors/lawyers and software engineers will widen further in that time.

I used to work as a software engineer. As the company I work for has grown a lot, I now no longer write code, but do software design, and hire new team members in different positions, inluding PMs, visual design, usability design, backend programming, and frontend programming.

It is extremely difficult to find good programmers, especially frontend programmers.

I'm pretty sure that the reason here is not that it is difficult to become a good programmer, but that a lot of people choose not do, for a number of reasons.

Two reasons that I have personally encountered:

• I studied comp sci between 2000 and 2005. During my first year, we had about 20% women. At graduation, we had about 5% women. Reasons are probably varied, but a major reason, at least back then, was that professors were hostile towards women studying comp sci (one of them explicitly told a friend of mine who was studying with me that he thought women were not suited for comp sci). In effect, we're basically excluding half of the population from this job option.
• A lot of people just don't consider programming as a job option at all. Trying to encourage people to enter the field, people typically push back because they have been told that it is difficult, and/or that it is similar to maths, which many people don't enjoy.

For visual design positions, we get a large number of applications from many qualified people. Applicants are highly diverse in age, gender, interests, and so on. But hiring for software engineering positions, we get few qualified applications, and they're almost exclusively men below 35 years with often a very similar profile. If we search for people who have less common abilities (e.g. for full-stack developers), we basically don't get qualified applications.

This is in a city that has one of Europe's highest-rated technical university that produces a lot of comp sci graduates.

One intersting data point here is that game studios tend to pay developers much worse than other companies, and offer much worse benefits. The reason for this is likely that developers want to work at game studios, and that many more apply there.

Also, one other thing to consider is that software is eating the world. There are very few products that are not in some way dependent on software, directly or indirectly. Even things that ostensibly don't depend on software were probably created using specialized software, and were produced by companies that run on specialized software (e.g. process management software).

Consequently, when we find qualified applicants, they basically dicatete salaries. We are dependent on them, we can't grow without more people who write software. They are not dependent on us, and there's nothing we can offer that other software companies can't also offer.

I don't think the growth of our dependence on software will stop any time soon. Even if a lot more people started studying comp sci right now, that would only only lead to more growth, and thus increase demand further, at least for the foreseeable future.

An interesting analysis would be to find the relevant reference class. What other group is/was similarly overpaid, for how long and for what reason?

Being a good software developer is very very difficult. Only a few percent of the population have the wiring, the wattage and the inclination to do it for long enough to be very productive.

Compare coding with portrait painting or composition for orchestra or pro golf - anyone can learn the basics of them, but very few can become good enough to be paid for them.

Alternative hypothesis: for most of human history returns to analytic abilities were anomalously low due to the bottleneck of geography limiting returns to scale.

By "we don't understand", you mean "I don't understand". There is no great mystery; programmers are paid as well as they are because of the amazing efficiency improvements their employers get by automating work. If you think about how much money you make your employer (or even better, talk to your company CEO or someone close enough), you'll see that in fact, programmers could be paid a lot more if they were aware of their impact.

Whether it's "fair" or not is irrelevant - you can accomplish a lot with little effort, and that's it. If you think salary should depend on effort and not impact, your employers will be more than happy to let you believe that and pocket the difference. And I'm not writing this to change your mind, but to try to mitigate further spreading of this "we are paid more than we deserve" mindset/myth. Please go to daedtech.com and start reading; you may or may not agree with everything, but you definitely need to be exposed to these ideas, they will help guide your career.

Finally, of course you should be saving some money, but don't live like a monk if you don't have to. Just be ready to adjust if something happens.

Timescales matter. The modern internet's only a bit over 25 years old, and common developer compensation has been truly crazy only for maybe 15 years of it. Easy to predict a bubble, difficult to predict the size or when it ends. People were starting to notice in the 70s, and take it seriously in the 80s, that the idea of a career was changing. Nobody could expect to work for one company for many years anymore. In the 90s, that expanded to industries - most people don't (or shouldn't) expect to work in one TYPE of job for an entire career.

The advice seems pretty solid to me - it's worth examining what durable value you can provide, and preparing for leaner times by diversifying your time/energy/financial investments away from "future earnings in this job will take care of me" to "many sources of future income", some of which will likely continue. But that's not zero investment in a programming career. In the short- and medium-term, you can provide a lot of value and make a lot of money. Do that.

I think coding just generates a ridiculous and growing amount of value. Look at this list of companies with large earnings per employee. Note that they all specialize in some form of tech or finance. With a regular job, you're bottlenecked by how much work you can accomplish as an individual. With programming, the value you generate is proportional to how much value your code generates. A Lawyer might generate 100,000$ in value per year. The company that makes lawyers 5% more efficient generates 5,000$ / lawyer*year. The lawyer has to dedicate his life to doing that. The other does it once and moves on to something else that goes on to produce even more value. It might even be the case that they are worth even more, but companies are under paying them. This is before factoring in that developers get more and more powerful each year. Computers become more capable, the internet gains new users, and software development tools become more sophisticated but easier and more intuitive to use.

I think that automation can save a lot of money, for a company. As an individual, if you automate something for yourself, you probably spent more time analyzing the problem and writing the code, than the task took originally. But in a company, you can automate a repetitive task of hundreds of people. And those people made errors when they did it manually, so you also improved the quality. If you save 40 people 1 hour a week, you have already paid your salary. Actually, the company now got 1 extra hour from those 40 people forever, but they only paid you for the automation once.

Well, that would be the ideal case. Then, the programmers would be drowning in money.

But in reality, programmers often spend a lot of time adding features that don't really save costs, just because someone thought they would be nice to have (why read the numeric constant from a configuration file, if you can have a configuration dialog, preferably as a REST service?), or because the idea of having a program makes everyone suggest that it should also do this and that, things that would be completely crazy to do by hand, and become "not crazy, but not profitable either" when automated (the company used to calculate some value once per year, now it is calculated every 5 minutes every day, and you have an on-call duty during Christmas in case the server stops being responsive). Also, the people who make decisions don't really think it through, and then they keep changing their minds during development, so the programmers have to rewrite the code over and over again. (But the programmers need to do "sprints" and keep their tasks in JIRA to make sure they don't waste time doing unproductive things, such as studying new technologies.)

As a result of these two things, the programmer salaries become what they are.

There is also the problem that companies usualy can't distinguish between good and bad programmers, so the bad ones are overpaid, and the good ones underpaid, to make it work on average. Similarly, junior programmers are somewhat overpaid and senior programmers underpaid.

Also, good programmers keep learning all their life. But the company is usually not going to pay for any of that. ("Why would we pay anyone for learning X? If we ever need a person who knows X, we can simply hire someone who already knows.")

In my experience, companies are inflexible. When you read the online debates, the company owners typically complain "we need someone who knows X, Y, Z, and we keep looking for years and can't find anyone", and the audience asks "so how much do you offer?", and the boss says the number, and the audience goes "but that's below the market wage, you should add 50% and people will start coming to you", and the boss goes "no way", and the audience goes "so offer some other benefit, such as part-time work or remote work", and the boss goes "no way", and that's the end of the debate. (That's an equivalent of me precommitting to never buy bread for more than 10 cents, and then writing blogs about national bread crisis, while walking around shops that are full of bread. It's not about crisis, it's about my stubbornness about how much things should cost.)

A question I have is, what do you mean by "less"? Dan Luu is citing programmers making on the order of $250,000 to $300,000 total compensation, but as a programmers who has made his entire career outside of the Bay Area, I have never seen anywhere near compensation that high. What if the phenomenon is that salaries in the Bay Area are skewed upwards, perhaps due to the cost of housing? In that case, perhaps only programmers in the Bay Area need to worry, as tech firm expansion outside the Bay reduces salary growth, but programmers outside of the Bay will be relatively unaffected (and might even benefit, as demand in other markets increases).

One of my internship mentors at Google told me their average software engineer generates $1 million dollars of value for the company every year. So I don't think it's any mystery why they're paid so well.

From my other comment:

What kind of workers are producing more value? What are the characteristics of a job that enables more value creation? One where there's more leverage, i.e. an hour of work produces more economic value, without a corresponding increase in supply.

Another example of a sector that's seeing much higher economic leverage is white-collar work serving high-cost-of-living countries/cities from within lower-cost-of-living countries/cities. E.g. English-speaking workers from our neighbor Mexico where real income per capita is only 28% of the US's, can now create more value on their time by working from home and copy editing articles, or doing phone customer service, or graphic design, and even management-level work like marketing strategy and project management.

Unfortunately remote workers' leverage increase here is partly zero-sum because it decreases the economic leverage that local workers get from their location. But it's actually positive sum because poorer people tend to benefit from a wealth transfer more than richer people lose. It's also positive sum because some jobs are only worth paying below the local living wage. E.g. a San Francisco company might be able to afford paying $12/hr for a customer service representative, which is far below cost of living in the SF Bay Area, but not bad in Mississippi.

Remote work has also created higher leverage on the value of everyone's haven't-gotten-dressed time or currently-babysitting time, regardless of their previous baseline.

Also note that one type of remote white-collar work is programming. Companies hiring their in-house software engineers offshore to work remotely, or contracting with offshore software consultancies, is also an increasingly common practice which is helping other economies and raising US GDP while reducing US programmer salaries, but the US salary effect is small because the whole world's programmer supply is still not keeping pace with global demand growth.

Summary: we don't understand why programmers are paid so well.

Something I didn’t see addressed here or on Dan Luu’s blog post are productivity (as the main economic reason for wages) and scale ( as an amplifier for SWE productivity )

A SWE is made more productive by the tools available: fast cpus, internet, cloud, OSS, mobile

Cloud and mobile then amplify the value that the modern SWE brings to a business - but not to all of them

Businesses are not charity, they will pay less if they can

Can you talk more about retirement and earning to give? I see you max out your 401k, but am curious how much you have saved for retirement and how much you think you'll need. Retirement fears have been the only cause of trepidation when I think about earning to give.

I handle this uncertainty via diversification.

I've dumped portions of my income into purchasing and building rental properties.