SAN DIEGO, Calif. — Top algorithm engineers at Google are drawing down tens of millions in stock, pushing up engineering salaries across Silicon Valley, according to Marc Andreessen, a legendary web enterprenur turned venture capitalist at Andreessen Horowitz.
Andreessen gave his views on the economics of startups, the app market, wearables, ARM servers, and massive open online courses (MOOCs) during an hourlong fireside chat at Qualcomm's Uplinq here this week. Here are a few outtakes from his rapid-fire, passionate musings.
On engineering salaries in Silicon Valley:
Engineers are now starting to get paid for their true value, which arguably has not been case for a long time, but it is now, and Google is at heart of this. Google discovered an algorithm change can generate another $100 million in revenue. So now companies are more willing to have superstars, and there are engineers at Goggle making tens of millions of dollars.
The vast majority of engineers are not getting paid that way. [But] average compensation is also rising behind what I call this Kobe Bryant effect.
On advice to the entrepreneur and investor:
It's really easy in this industry to think too small. Yahoo was initially run on a server on the Stanford campus, and they had to start a company because Stanford kicked them off the server. It became a $200 million company.
It's easy to dismiss these crazy ideas out of the gate, even if you are right in the middle of it. You almost want to have a personality defect where you assume everything you see will be gigantic. So I'd say be even more open minded that the idea that looks crazy will be the next big thing.
I'm a believer education online will be overwhelmingly better than in the classroom. Some of it has to do with the technology, and some with the economics.
Suppose 1 million people will sign up for Math 101, and each pays $200. You have this giant $200 million production budget. You could hire Stephen Speilberg to produce university courses. Imagine the best 3D effects and the best teachers in the world -- and amazing trailers. When everyone has a high-def screen and broadband connection, at some point they want to learn through it.
Jon Fortt of CNBC interviewed Marc Andreessen at Uplinq.
The short answer is no! But I guess it's all relative. Most people who have stayed in their current job for more than a year have at least subconsciencely decided that they are getting enough compared to the effort required to get a different job.
It's funny that we read about engineering shortages when talking about immigration but if we look at the IEEE salary survey, salaries are down and not keeping up with inflation.
On MOOCS, why can't I have my toddler watch Disney movies instead of going to Day Care. Does he think that the best education is about lectures. It is the ecosystem in the university that matters more than what the professor teachers. We have had good textbooks. Yet people do go to college to be taught. We will see.
Engineers are now starting to get paid for their true value, which arguably has not been case for a long time, but it is now, and Google is at heart of this.
While I, too, get excited about people making lots of money, I am not a big fan of this whole culture of Valley's obsession with "your worth." I get that we need superstars. But what about rank and file engineers who work just as hard and make your next products sing?
The rank and file would work even harder to be superstars. Even though people know, deep inside, that only few of them will make it in the end, it would not stop them from trying because the potential rewards are very high.
Personally, I cannot think of a better way to attract more people into Engineering. We must beat showbiz and elite sport at their own game!
The salaries being so high has some downside too. People get used to these big bucks and their expenses match with that. Reasonable salaries ang job satisfacion is good to have. But that is never a realty. But yes if you have the knowledge and there is business need then you get really rocket high salary. And trust me the more you get the more you want.
There are those who will start assuming that they are forever entitled to big bucks and increase their spending accordingly (otherwise known as the NBA Syndrome) and there are those who will use it to save and invest. I am reminded of a story I read about a Nevada brothel that ran investment seminars for the working girls on the basis that they were making very good money for a limited time and needed to plan accordingly.
What I see is the possibility for corporate influence. If advanced technology is seen as a key business driver then engineers get invited to the planning meetings and have a chance to be heard. When the Internet was new and scary CxO's listened to their engineers about what they had to do. This is the first step to returning to that kind of influence.
I did not incoude in thre story Marc's comments about companies wanting to preserve a culture of compensating people on a more or less equitable way.
However, I would note CEOs have been way off the charts in compensation for years. I'd say either get CEOs on a similar scale as other employees (at least the same page!) or reward everyone according to revenue tied to their accomplishments.
In this cost and metric obsessed era, maybe Google is on to something?
With All due respect to Mr. Andreessen, I think he has for the most part missed the point of the MOOCs. The point is democratization of knowledge, not 3D effects and superstar directors, hence first 'O'. Idea is to make high quality courses available to as many people as possible, where customary costs of production would spread over large number of users to make them almost free. $200 per course he envisages is quite a bit of dough for the most parts of the world outside The Valley.
@Harfang: You are right. I suspect Marc was exaggerating for effect. In fact there was a lot of joing interplay between him and the interviewer on this point, like suggesting Brad Pitt be hired to act in it.
I think his point was MOOCs change the economics and the HD TV with broadband changes the delivery systems. Something very different could emerge, not necessarily with Hollywood's help....but maybe...
Thanks for clarification Rick, in that light it makes a bit more sense. What is emerging is truly a seismic shift shaking Ivory Towers everywhere, unprecedented since Plato's school in Academus' grove.
>> I think his point was MOOCs change the economics and the HD TV with broadband changes the delivery systems.
My friend has this nice app designed for a medical textbook. The problem is that the more you use it, the more you think to talk to a professor. The key challenge in MOOCs has to do with assumption. Education in a university is not about the courses. People connect and network and that seems to be the key driver to going to top schools. Why bother spending dollars to study History when there is wikipedia. You do because campus liberates minds!
@Rick: it looks like there is a typo: "By the end of the decade, 5 or 6 million people will have smartphones."I think he means Billion here, obviously!
That aside, I have long held the position that talented and productive engineers have been underpaid. A reasonable metric to address this would be to use the ratio of gross revenue per employee to that of employee salary and apply multipliers to this to individual employees matching their productivity.
Thanks for this wonderful article. I agree that education will continue to improve, but I do not believe that education online will be overwhelmingly better than in the classroom. This statement is absolutely unfounded and untrue. I have viewed many MOOC courses from around the country. The success of a face-to-face or online course depends on one thing: the quality of the instructor. Some MOOC courses are poorly designed and you can tell that the instructor just put something together. The MOOC course assignment instructions were not clear and no lecture videos were not available. On the other hand, there were some MOOC courses that I reviewed that was excellent. The instructor provided real-world examples that today's students (all ages) would have been able to relate to. With that being said, I still believe that some face-to-face courses are more effective for group projects and project-based learning . I think it would be wise to have educational options available for everyone to choose from and stop trying to compare which education option is best for everyone else. The key is to learn more about the topic. We are still in the early stages of MOOC and additional research is required.