UNUSUAL VALUE

What do software engineers who earn $500,000 a year do?

This question originally appeared on Quora: What kind of jobs do software engineers who earn $500k per year do? Answer by Amin Ariana, Innovation Growth Engineer.

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 $500,000 guaranteed “earnings” out there for engineers. Unusual pay is often 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 one 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 two worker

Disregards how much of a “fair share” of water he’s getting. Instead of grabbing a bucket, he 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, he suddenly shows up with a constantly flowing stream of water behind his back. He puts the type one workers out of the water delivery business. They’ll have to go find a different activity and “team” to work with. The type two worker, depending on how much control they retained on that stream, gets to own a good chunk of it. Because the village wants to acquire and integrate that stream, they trade the ownership of that stream for equal-value ownership in the village itself, typically in the form of land or such to the type two worker.

Let me now tell you a real story:

I was in Monterey Bay for New Year’s 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 sandcastle/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. Five minutes later, observing children started digging with him. Ten minutes later, a few grown-ups started digging. Fifteen minutes later, the timid foreigners with cameras in hand started digging. In 60 minutes, one type two worker had managed to inspire 15 type one workers to complete a flowing stream of water.

At the top of this post is a 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. Here it is again:

It‘s all about the guy with the purple bucket.
It‘s all about the guy with the purple bucket. (Amin Ariana)

The overlooked detail is that not all sweat creates equal value. The type two 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 one 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 two workers who held their thirst for years before establishing the stream of billions of dollars. The folks making big RSUs either:

  1. From the early days, were responsible for having created a major core value.
  2. Created new value accidentally as a side project that turned out to be valuable.
  3. Left the village to start another one
  4. Somehow (unlikely) have monopolistic knowledge about a value stream.

Nothing ventured, nothing gained.

A number of people have indicated that they have a hard time putting this parable in the frame of their reality. Some question the negotiation tactics needed by the employee to secure the level of equity that would be appropriate to compensate for their contribution to a company. A recent concrete story sheds more light:

In May 2009, a career type one 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 two 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 one 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, $250,000 at first, then $8 million, and eventually $50 million by Sequoia Capital once the stream was going to obviously be successful.

Three hours before the very moment that I’m writing this, CNN announced that this type two worker’s stream was “purchased by Facebook for $19 billion”—that’s billion with a “B.” (Editor’s Note: Facebook purchased WhatsApp in February 2014.)

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 $500,000 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 two 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 following the dollar sign are considered a negligible necessity.

You can follow Quora on Twitter, Facebook, and Google+.

More from Quora:

What unique benefits do start-ups offer their new employees?

What are the characteristics of a bad software engineer?

Is gender pay gap a myth?

home our picks popular latest obsessions search