Sergey Brin: The Facebook phenomenon is a problem (2007)

https://twitter.com/TechEmails/status/1508851516387385346

by mfiguiere • 4 years ago

197 185 4 years ago

Finally, we (or basically I) have not done a good enough job of high rewards for high performance.

15 years later, this is still a widespread problem everywhere. People don't capture the full value of their labor (which makes a sort of sense, given imperfect information and how risk is allocated), which leads to people not being incentivized to increase the value of their labor.

We've all heard stories about people being extra efficient and getting rewarded with raised expectations and maybe a paltry raise. If people were really incentivized to do their best work, I imagine we'd get a better world.

sytelus2• 4 years ago

This is the entire foundation of capitalism. The idea is that people who own capital only reward other people for their time who help add to their capital. If companies distributed all of the gains in terms of stock awards to employees, you will see very different asset distribution in our society.

gojomo3• 4 years ago

'Capitalism' is neither theoretically, nor in practice, limited to "only reward people for their time". Some industries where the labor is low-skilled trend that way.

qsort• 4 years ago

You would also see much fewer companies to begin with. Maybe there's a better way to reward highly skilled people than beating this extremely dead horse?

tonyedgecombe• 4 years ago

If companies distributed all of the gains in terms of stock awards to employees

Then there would be no incentive for investment.

tw6000402• 4 years ago

That would be fair if companies can also distribute losses if any and are able to get money back from employees

rmbyrro3• 4 years ago

Problem is the employees aren't willing to bear the risk that early investors were willing to.

If the entire society had a similar level of appetite for risk, we'd see a different asset distribution in society.

Since most people are terribly averse to losing anything, they also shut down the perspective of winning big.

mrh0057• 4 years ago

It’s suppose to be the value you added. The investors get payment for the risk they take by investing in or loaning money to the company. If a company has monopoly power and/or gets bailed out by the government consistently there is no risk to investors. What ends up happening is rent seeking a behavior by theses companies and they will also take unnecessary risks since they are incentivized to.

buzzdenver• 4 years ago

People don't capture the full value of their labor (which makes a sort of sense, given imperfect information and how risk is allocated),

I think it is primarily due to de-risking. You agree with your employer that the biggest percentage of your income will be fixed and independent of how much value the company produced (be it profits or share appreciation or whatever). This makes sense because your life has high fixed costs, and your cash-flow cannot allow for years when you make zero (or even a negative amount), even if in the next one you would make 5 times your current salary.

which leads to people not being incentivized to increase the value of their labor.

Don't think this is necessarily true. I would love to walk into an apple orchard now and spend an hour picking if I could keep 25% of the apples.

vhiremath4• 4 years ago

which makes a sort of sense, given imperfect information and how risk is allocated

This doesn't just make a sort of sense to me, it makes perfect sense.

People trade their labor at a lower rate for higher stability (less risk). The people who start companies, find capital, and distribute that capital in ways that increase the value of the company have taken on more risk (how significant varies case-by-case and usually is a natural market cap ceiling to the total value the owners can extract ahead of employees).

If the company I work at gives me shares in that company, I want the company to pay less for my labor (and everyone's) if my belief is that collectively all employees output will accelerate my own wealth creation when I sell my shares in the company. The share becomes a transitive store of value I believe my own labor alone will never be able to keep up with, and I want to make sure the value it's accumulating is not diminished because the company is paying out the full capital value of everyone's labor. Then there would be very little incentive for me to take the shares in the first place, and, honestly, very little incentive for anyone to start a company (why take on that risk if there's no payout in excess of just joining another company?).

myroon5• 4 years ago

Feels like many are stuck in this dichotomy between choosing stable rates or venturing out on your own where more middle ground should probably exist. Employee incentives should probably align more

kqr3• 4 years ago

It makes sense qualitatively, but the numbers no longer add up: https://cdn.statcdn.com/Infographic/images/normal/23410.jpeg

Even considering the risk-neutral compensation, this is not how much employment ought to be discounted. Especially not in the U.S. where many states have at-will laws.

specialist• 4 years ago

What about fairness?

Bezos' risk of spending other people's money rewarded him with billions.

Warehouse workers risk of personal injury are rewarded with starvation wages.

bushbaba• 4 years ago

If people were really incentivized to do their best work, I imagine we'd get a better world.

Assuming wages are a function of the free market. And the less mobile people are, the less job-applicants exist, and the higher wages need to be to poach. Incentivizing for good work might have diminishing returns after a certain point.

SQueeeeeL• 4 years ago

I love it, we need everyone to have poverty wages and be insecure in case the poor multinational corporations might have difficulty underpaying people

PragmaticPulp• 4 years ago

People don't capture the full value of their labor

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.

AussieWog935• 4 years ago

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.

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.

whack• 4 years ago

There's a theoretical response and a practical response.

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.

dan-robertson3• 4 years ago

Is it actually a problem everywhere? I wouldn’t be surprised if it’s not written about much on HN, but my guess is that at least some of the big tech companies will sometimes do large off-cycle performance bonuses. It may depend a lot on the work though, e.g. doing the thing the company actually cares about vs what they say they want or needing to fight one’s case a lot, or needing to have product focused improvements rather than some equivalent savings from efficiency.

throwaway54976• 4 years ago

People don't capture the full value of their labor

If it does it's no longer capitalism.

paxys5• 4 years ago

What this email doesn't say is that Google's solution for fixing retention problems was to reach out to Apple and many other large tech employers and sign illegal agreements to not hire each other's employees.

The subject of this email (Facebook) famously declined to participate however.

gnachman• 4 years ago

If you got an offer from Facebook they would beat it. I did this in 2012 and instantly had 10x the RSUs. Some Googlers thought it was immoral to do this. It was at this time that comp for engineers radically changed.

paxys5• 4 years ago

I signed a job offer in late 2011 and was due to start a couple months later. Two weeks before the start date, the hiring manager emailed out of the blue to say that they were bumping up my starting salary by 10%. It was a wild time to be in tech (although the situation today isn't all that different).

pavlov• 4 years ago

Zuckerberg is widely despised on HN, but he should get some credit for standing up to the Silicon Valley wage cartel. As your example shows, it put potentially life-changing compensation within the reach of a much larger group of software engineers.

Previously you pretty much had to get lucky as an early engineer through IPO, but in the past decade it's been possible to save millions by working at FAANGs. And those millions trickle down into the ecosystem: people can afford to start their own companies, do angel investments, etc.

ditonal2• 4 years ago

Then for years Google denied wrongdoing but said they couldn't address it because it was in active litigation.

Finally, the whole thing got settled (slap on the wrist but something at least), so Google employees could finally get an answer in the weekly all-hands (TGIF).

Laszlo Bock was their head of people at the time, and claimed that Google still did nothing wrong, and that they only settled because they were caught up in the whole thing with other companies like Adobe who did do something wrong. He said they did nothing wrong because they only stopped outbound recruiting towards employees at those companies, which had no effect, and still accepted inbound applications.

This raises the obvious question - if outbound recruiting had no effect, why was Google so eager to put at end to it? And how could Google act like they were caught up it the crossfire when it was specifically emails by Sergey Brin that provided the strongest evidence of illegal collusions?

It blew my mind how Google insists they hire "the world's smartest people" but then can have executives on stage spin narratives with ridiculous holes in it and expect those smart people to believe it rather than have their intelligence insulted.

But sadly, most Google employees did seem to buy it. There's a strong cult of indoctrination, starting with calling yourself a Googler and wearing the stupid hat, that Google execs just had a halo effect. I think between 2010 and now that halo effect has massively worn off, especially with all the dirty details about misbehavior from Sergey Brin, Vic Gundtora, and Andy Rubin.

Nonetheless, it served as strong evidence as to how even really smart people can get caught up in cult-like communities. The "founder worship", the indoctrination into company culture, all of that is super common in Silicon Valley tech companies and for an obvious reason - it works.

MegaButts3• 4 years ago

Nonetheless, it served as strong evidence as to how even really smart people can get caught up in cult-like communities.

I see it differently. It seems like strong evidence as to how smart the average googler really is. If you start with the assumption these people are smart then you can reach your conclusion, but if you discard that assumption you just have a group of gullible employees.

holografix• 4 years ago

No one believes it. It’s called plausible deniability

onlyrealcuzzo2• 4 years ago

Not everyone who works at a company loves the company. A lot of people might think things their company does is pretty despicable.

If it's the best place to extract maximum benefits (money, experience, recognition, etc) - then you take the good with the bad.

qiskit• 4 years ago

It blew my mind how Google insists they hire "the world's smartest people" but then can have executives on stage spin narratives with ridiculous holes in it and expect those smart people to believe it rather than have their intelligence insulted.

They don't hire the smartest people, they hire the greediest people. The only thing people worship in silicon valley and tech in general is money. That's it. An if your salary, stock options, etc are dependent on believing and selling lies, that's what you do. When an industry or group gets "saint status" or proclaims to be the agents of good, your spidey senses should start tingling.

subsubzero• 4 years ago

It could be posited that the huge jump in salaries in tech that started happening in the mid-to-late 2010's came about due to the discovery and removal of this illegal collaboration(google,apple etc) to fight attrition and bring down wages. It would be very interesting to see if there is a direct correlation to that event. I know my salary and salaries of my peers(at fangish companies) started going to the moon around 2016 onwards.

the trial awards and verdict happened in 2014 - https://www.reuters.com/article/us-apple-google-lawsuit-excl...

asdfasgasdgasdg3• 4 years ago

But sadly, most Google employees did seem to buy it.

What makes you say that? Everyone I know is aware that Google was doing dirt, but salaries were going up so fast at the time it hardly mattered. Especially when the collusion ended we went through several years of absurd salary growth. Even during the period of collusion, Google was being pretty generous with compensation (e.g. this event -- https://www.businessinsider.com/google-options-repricing-bai...).

Every programmer who was there at that time and has stayed has either been spending profligately or is fairly wealthy at this point.

AnonymousC14212• 4 years ago

Google isn't nearly as nice of a place to work at as people make it out to be.

As an example they will finally increase vacation from 15days to 20days on April 1st this year.

The media reports this as "on top of already lavish perks Googlers are now getting 20 days of PTO a year!".

Gee whiz amazing. An increase from 15 days of PTO. If only we didn't much more than that in my much lower quality of life home country as a standard for tech workers.

And sorry if this sounds a bit spoilt. I should be grateful to work at a large megacorp in this economy right? It's just that Google isn't any better in terms of working conditions than any other big tech company. In fact in general it's a little bit worse yet there's propaganda movies (The Internship) about how great it is to work at Google.

It's a job. No one else seems to want to acknowledge it.

asdfasgasdgasdg3• 4 years ago

As an example they will finally increase vacation from 15days to 20days on April 1st this year.

That change is for junior employees. It's still overdue, but vacation bumps up to 25 days per year after you have some tenure, and has done for more than a decade. I'm not saying that 25 days is anything to write home about -- I've heard of places that give 30, or unlimited -- but 25 is not bad.

paxys5• 4 years ago

It isn't about being objectively good or bad but how it compares to everyone else.

sydthrowaway2• 4 years ago

Buddy, you're the 50,000th engineer to join Google. It's not a special place anymore.

aix12• 4 years ago

Gee whiz amazing. An increase from 15 days of PTO. If only we didn't much more than that in my much lower quality of life home country as a standard for tech workers.

I am not saying 15 days of PTO is high (it isn't) but you're comparing different countries. Local customs vary hugely from country to country: for example, when I was at Google UK, I got 30 days of paid annual leave.

jasode• 4 years ago

and many other large tech employers and sign illegal agreements to not hire each other's employees.

I don't remember reading about any formally signed agreements. Executives aren't going to create an incriminating paper trail like that. Instead, it was some complaints in emails and an implied understanding. E.g. Steve Jobs and Eric Schmidt emails: https://en.wikipedia.org/wiki/Eric_Schmidt#Role_in_illegal_n...

jonas21• 4 years ago

You have both the direction and timeline backwards. It was Apple who reached out to Google, and it happened in 2005, two years before this [1].

[1] https://www.engadget.com/2014-03-24-emails-reveal-that-steve...

devker• 4 years ago

What kind of legal action was apple able to take that would stop companies from hiring from them?

dekhn2• 4 years ago

After this Google started giving $1K in cash every christmas and one year gave everybody at the company a 10% bonus. Those times are gone.

jeffbee• 4 years ago

Wasn't the year of the surprise 10% only because the unlawful collusion between Google, Apple, and others was on the brink of becoming public?

joshuamorton• 4 years ago

And it wasn't a bonus but a raise, which is notably different.

emtel• 4 years ago

The $1K christmas bonus started no later than 2002.

You say those times are gone, but have you seen what FAANG pays people now?

paxys5• 4 years ago

Yeah, back in the 2000s or even early 2010s a $1K+ employee holiday bonus would be a "holy shit!" event that would make the news. Doing so today, even after adjusting for inflation, would be met with "yeah, whatever" by everyone, including new grads.

ergocoder• 4 years ago

I remember. Didn't they hand out cash? And there was concern around having that much cash at HQ. What a time.

rrdharan• 4 years ago

Google gave out a $1600 cash bonus to all full-time employees at the end of 2021.

https://www.businessinsider.com/google-promises-employees-16...

lupire5• 4 years ago

That was pay, not literal "cash" like the $1000 was.

khazhoux2• 4 years ago

And in 2009 they gave everyone a phone (Nexus One or G1, I don't remember) for Christmas instead of a $1K cash bonus... and then that one guy complained loudly (on eng.misc?) that he didn't need a phone and didn't want this phone, and the phone would impact his taxes even though he never asked for it, and complained that the phone was a terrible gift and even worse than a gift, and people told him to just donate it to his damn family and he would yell "but I'm still responsible for the taxes on this thing!" even though it was clearly explained that he wasn't. Over ten years later, I'm still shaking my head at how a few extremely toxic people could so effectively poison the culture and good spirits of thousands of employees.

dekhn2• 4 years ago

the first time it was a G1, that would have been my first year so I think it was 2008. That wasn't the best phone (although I loved the keyboard). I ported a physics engine to it, and it ran, but the phone got very hot very quickly. The next year was the nexus one, the excitement was palpable. The nexus one was truly sexy at the time, definitely the first android phone that I loved.

As for that Googler- well, there were always a bunch of people there who had some or another circumstance that made them incompatible with the larger Google culture.

gedy• 4 years ago

I'm still shaking my head at how a few extremely toxic people could so effectively poison the culture and good spirits of thousands of employees.

But I'm assuming he did great at the whiteboard interview! Being sarcastic but I've always been surprised how some really terrible personalities are hired because they aced the tech quizzes.

dan-robertson3• 4 years ago

After this Google realised they would need to compete with Facebook on compensation and today employees at either company are paid a lot more than equivalent employees 15 years ago.

mrkramer3• 4 years ago

But Google at the time had huge revenue and profit compared to Facebook which was just getting started with monetization. Even today Meta/FB is not nearly close to Google looking at the revenue and profit. Google can always pay more if they want to.

lupire5• 4 years ago

That's when the cash bonus ended, not started.

Barrera• 4 years ago

That part about "a social networking bubble of imitations and tag alongs" is ironic, given Google's numerous failed attempts to tag along on the social networking bubble.

karaterobot• 4 years ago

What does "rainy weather and a few GPS misalignments" mean?

SnowHill9902• 4 years ago

I would understand that some employees are not following the exact path that they wish.

danielmarkbruce• 4 years ago

He could be implying google engineers are fickle. Ie they might leave if there is bad weather. Small exaggeration.

azundo• 4 years ago

I would posit rainy weather means some lower performance quarters in terms of stock price or performance in some way and GPS misalignments are strategic missteps with the overall direction of the company.

J_cst3• 4 years ago

I think this should not be over-read. I believe that that's a form of sarcasm / ironical phrase, meaning _few minor incidents plus some planned retirements_ . As of he's implying that the employees tend to get overworried/annoyed easily for any minor incident.

Sorry I don't speak English natively (and to make things worst, I'm Italian!!) and I'm not sure I was able to express my thoughts in a comprehensible way! Please feel free to rephrase if you can do it better then me! Thanks! ¯\_(ツ)_/¯

hluska• 4 years ago

You know friend, I’m a native English speaker (and to make things worse, I’m Canadian) and I’d be proud if I write such a good summary.

You did great. This comment was a pleasure to read!

simonebrunozzi• 4 years ago

and to make things worst, I'm Italian!!

it's correct to say: "to make things worse".

worse: one thing is worse than another.

worst: prepare for the worst - preparati al peggio.

umeshunni3• 4 years ago

a few GPS misalignments

I'm dating myself here, but back in the day, there used to be a weekly(?) strategy review that Google execs did, called a "GPS review" - I think it stood for Google Product Strategy review.

My guess is that a few 'misalignments' (exec speak for a review that went poorly) might make some key employees unhappy (e.g. their projects might get canceled) and that they might leave.

B1FF_PSUVM2• 4 years ago

Should have bought WhatsApp, and fitted it with Gmail search features.

bogota• 4 years ago

If they had done this no one would be using WhatsApp today. Google has shown they don’t understand and can’t get chat right.

B1FF_PSUVM2• 4 years ago

Yeah, well, I was thinking of leaving the free-SMS-maybe-with-pics thing well enough alone and just letting you find "Chris aluminum siding" items ...

Might be worth a few cents for their advertising side-business, I dunno.

archontes• 4 years ago

I was enthused for wave. Too bad.

crossroadsguy• 4 years ago

Nope, WhatsApp works just on phone number, not an email. It would have given them perpetual anxiety.

So they would have made WhatsApp work only with “Gmail” addresses instead - with Google Login and in a Chrome Desktop app only (of course) - and they’d have then shut it down after few years. Or people might have stopped using it before the shutdown.

lupire5• 4 years ago

The G+ login nonsense all happened in response to Facebook and Messenger (and iMessage). Before that, Chat was open XMPP.

asd88• 4 years ago

Then just kill it after a few years

Apocryphon2• 4 years ago

It's amusing that one of the concerns is Google employees leaving or potential candidates not applying at all because they'd rather "get rich by having a popular fb app." Just what happened to Facebook as a platform, were they just completely superseded by smartphone apps?

Incidentally, the decline of their platform is one of the reasons why I believe it is unlikely there will ever be a serious Meta third party App Store competitor on iOS- Facebook isn't very good at managing a developer community.

alanlammiman• 4 years ago

They discovered it was more profitable and less hassle to focus on selling ads than trying to be a 'social OS'

Apocryphon2• 4 years ago

The highlights from the 2021 F8 conference look- riveting

https://about.fb.com/news/2021/06/f8-refresh-developer-confe...

ehnto4• 4 years ago

I think devs were more cognizant of the platform risk on FB, and the developer experience was absolutely pants. I dreaded every moment working within their platform, maybe it's different now. As well FB apps were necessarily less interesting, because they were so tightly integrated into FB it limited the potential experiences.

It just wasn't worth it when a developer could reach people on FB with ads instead, and point to their mobile app, where you can attempt to fully capture the value of the customer rather than just rent them from FB. Forgive me for the business speak there, I'm no longer in that space thank the stars.

arthurcolle• 4 years ago

Facebook pretty much gutted their API after privacy issues surfaced, predictable that people would stop building apps on their "platform"

SonOfLilit• 4 years ago

They decided to dodge the spammy app problem by limiting the capabilities of apps until all kinds of apps, spammy or not, stopped being profitable, and then people stopped writing them. Seems to have worked for them.

chupchap2• 4 years ago

Decline happened when FB started suppressing messages from apps on the feed and started prioritising news links and later images and videos. It also coincided with decline of flash, so a lot of apps like Farmville were re-built in HTML5 or as a native mobile app. These apps then used FB as an auth mechanism. The changes in FB APIs didn't help either.

bambataa• 4 years ago

started prioritising news links

It probably helped their short term metrics but it really seems like this decision was terrible in the long term.

I and a lot of people I know began to disengage when Facebook mostly became people I didn’t know so well posting political crap.

wodenokoto• 4 years ago

Twitter envy was the cause of a lot of bad business decisions for Facebook.

They were really jealous of twitter being the source of “trending” topics on news broadcasts and wanted that role, so they boosted links and news articles rather than updates from friends, they even experimented with making all posts public.

It’s like they don’t know that their strength was that you could connect with people you know and care about, but they wanted to be another “shouting in the wind” platform.

wanderingmind• 4 years ago

Before FB came into picture, Google, Apple and other big techs colluded to artificially keep the pay low [1]. Every dev with a massive TC needs to thank FB everyday for refusing to become part of the cabal.

[1] https://www.reuters.com/article/us-apple-google-settlement-i...

DeathArrow• 4 years ago

Yes, and, inspired by that, Alphabet tried to introduce its own problem: Google+.

benreesman• 4 years ago

When I joined in 2011 the core infrastructure staff was so heavily ex-Google that the build files were valid Blaze.

There are a lot of factors that went into FB’s meteoric rise in the 2006-2014 range, but I think more than anything it was Sheryl telling the wage cartel that they could get fucked.

High-end Google hackers could walk across the street and TCO 2-5x more with negligible increase in risk.

mrkramer3• 4 years ago

There are a lot of factors that went into FB’s meteoric rise in the 2006-2014 range

The main factor was MySpace being a mess, something like Twitter is today but nobody bothered to get it right except Zuckerberg.

Sergey Brin: The Facebook phenomenon is a problem (2007)

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