How Moore's law stabbed us in the back

rudy rouhana
Tue, 1 Jan 2002 21:33:18 -0800 (PST)

> Either way, we're both talking about the same thing, prices will plummet.
> The days of profits over 3% and wages above the norm are gone. It will get
> far worse before it stabilizes. I missing something here?  Isn't this sort of the long term have efficiency to the point that we can buy goods at cost + 3%?  As
far as wages, my big question is, what's the norm?  When I started working full
time, post degree, in '97 I made 36k a year w/ an engineering degree and a
bunch of cisco, microsoft and esoteric security certs WAY before CompuUSA began
handing them out.  I was billed out around $35/hour, give or take depending on
the client.  It all seemed to make sense to me, I was basically paid w/
benefits half of what they made off of me.  Cool, no complaints.  Granted, this
was Midwest rates and Midwest living expenses.  However, even at that meager
salary, I had a new car, a 1,500sq ft. apartment, all the electronic gadgets I
wanted, etc.  If I really wanted some extra cash, I'd upsell our clients and
the account manager would throw some cash my way out of his cut.

Now, the Austin crowd that I eventually started my first company with flat out
told me that I'm wasting my time, and would go so far as to say that "You
shouldn't get out of bed for less than 60k a year".  I thought it was pretty
arrogant, but I'm not one to fight reality, so I moved down to do company #1. 
Even with Austin's alleged higher cost of living, I lived pretty much the same
way on the same salary.  We weren't VC backed so we actually decided to pay
ourselves "living" wages and were just happy to be getting to work on our idea.
 In contrast to major VC backed company #2 where the VC doubled the salaries
that we had assigned ourselves in the term sheet.  Spend, spend, spend they
said...and put in the management team that would since the "inexperienced"
founders were being tightwads.

Click below to see the results of "experienced" VC management skillz...

Long story short, during the whole spend spend spend cycle I knew the whole
situation was f'd up.  Just try and hire a programmer.  You had to kiss so much
ass and basically pay north of 100k to get anyone halfway decent.  I'm not
talking 20 years of experience...solid track record...etc.  No, we're talking
throw a dart at the board and hope you score some quality points with this
hire.  There was no way this was going to go on for long.  It's obvious that
eventually there would be a source of workers that would work for less but
still be happy.  That immedietly manifested itself with others like me who left
the Midwest, and would be thrilled with even a 10-20% bump over what we were
making.  Later, more organized outfits started to peddle eastern European and
Indian developers who worked for freaking vodka and rice.  Hey, it's an economy
without borders in more ways than one...

Summary, how is the current environment a shock to anyone?  Over time, the
supply of workers will adjust to the absurdly high demand.  And, when the
absurdly high demand that is created by a bunch of CNBC Market Watch types
pushing day trading like a Vegas Casino pushes slot machines finally finishes
sucking the players dry, you have big ass mess of too many workers and not
enough work for them to do.

The challenge here isn't for the economy to somehow create a bunch of 100k jobs
for all of them through false value creation and hype.  It's for the workers
who don't belong in tech to go back to whatever it is they're qualified to do. 
As for the qualified tech workers, well, it's reality check time on the salary
and the expectations at the work environment.  It's not going to be foosball
tables and free food anymore.

And yes, VCs suck.  They're still a bunch of lemmings that wait for someone to
jump off the cliff.  They even act like they just discovered the brilliant
concept of "bootstrapping" a business.  But, if you actually have a product
that a lot of companies are willing to write real checks now (not in 2005 when
Gartner predicts the market will exist) then you can get funded.

Ok, enough of this long post.  Off to VC funded company #3....


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