The Agenda

Auren Hoffman on the Future of Wage Dispersion

Auren Hoffman writes:

Over the next generation, we are moving to a world where most (like 90%) software developers will earn a decent wage (say $50k/year) and a few (like 10%) amazing developers will earn over $500k. Yes, the income distribution for the same profession of people who went to the same university and had the same SAT scores could actually be that stark.  

I want to point out that I’m not advocating that this divergence in compensation happen.  I’m not.  It has the potential to fracture society. And it seems like it will massively reward people that have lucky breaks.  But I’m worried that regardless of how we feel about this growing division between the A-players and B-players, it will happen anyway.

This stark division is already happening at companies like Google. Most engineers there have similar backgrounds and all get paid well. But a few of the amazing engineers earn compensation over ten times the average.  Yes, 10x.  One day, every company will look like Google.

There are those who believe that wage dispersion is a reflection of the corruption of the American regime and those who believe that it reflects an ongoing learning process focused on how to create more good and useful stuff and services that people want to buy at prices they can afford. I am in the latter camp. 

When Auren points to Google (he could have referred to Apple or Microsoft or Amazon or any number of other firms that are locked in a “war for talent”), he is “watching the Alpha Geeks,” a term Tim O’Reilly coined some years ago:

So often, signs of the future are all around us, but it isn’t until much later that most of the world realizes their significance. Meanwhile, the innovators who are busy inventing that future live in a world of their own. They see and act on premises that are not yet apparent to others.

In the computer industry, these are the folks I affectionately call “the alpha geeks”, the hackers who have such mastery of their tools that they “roll their own” when existing products don’t give them what they need.

Watching the alpha geeks — people whom more traditional marketing analysts might call “lead users” — can give insights into the future directions of technology, gaps in existing products, and new market opportunities.

We could say that “watching the Alpha Geeks” leads us to the conclusion that rising wage dispersion isn’t just a blip or the byproduct of some nefarious process. Rather, it’s a natural reflection of certain facts about how digital organizations work. But O’Reilly, interestingly, is one of the most outspoken political liberals in the technology industry, and I strongly suspect he’d take exception to that view. I wouldn’t hold it against you if you embraced his view and not mine.