Unveiling the Truth: Why FAANG Engineers Work Less and Earn More

REST & VESTERS:

That was a Twitter tech lead admitting that he and most of his colleagues only work 4 hours every week. Despite this terrible performance, this guy was likely paid around $341,000 every single year. Put another way, he was basically getting paid over $1,600 per hour. Clearly, Elon put an end to this at Twitter but this is still very much a reality within most tech companies. Now, I don’t want to throw all engineers under the bus as a substantial portion of them are the exact opposite, working 60 to 80 hours every week. But with that being said, there is a signifcant number of engineers just like this. In fact, this “community” is so large that there’s a name for people like this “rest and vesters”. They just rest and vest their insanely high compensation packages. You would think that managers hate these type of people and that they’re constantly looking to expose and fire these freeloaders but that’s not actually the case. 

In fact, a lot of managers do this themselves and they sometimes even encourage their team to do it as well. This one high level engineer at Facebook for example was making a million per year and leading about 36 people. While the pay and prestige was great, she was getting pretty burnt out with her job, so she did the respectable thing and told her boss who was likely a senior director that she was going to leave in about 6 months. She was willing to finish up all the projects that she had already taken on but didn’t want anymore. To this, her boss told her to not come to work the next day. In any other industry or even a legacy tech company, this means: You’re fired, don’t bother showing up tomorrow. At Facebook though this meant “Just don’t come to work. You’re burned out and need a break. Just don’t talk about it and everyone will assume you’re on someone else’s team.” Clearly, this is a not a group of rebels that are pushing the boundaries. This is a systematic trend at these companies. Many companies are cracking down on this with layoffs more recently, but for the most part, they just turn a blind eye to the entire situation. So, here’s why FAANG engineers are allowed to work so little while getting paid so much.

FRIENDLY ECONOMICS:

One of the biggest factors that makes resting and vesting possible is simply the economics of these companies. Unlike a factory or a bottling plant, these tech companies have insanely high gross margins. Apple 43%. Google 55%. Nvidia 56%. And Facebook 78%. So, really, their only major expense is human labor as their cost of goods sold is virtually zero. In fact, at Visa, the gross margin is straight up 100%. As for the tech companies that don’t have high gross margins yet, well they usually just have infinite VC funding so they end up in the same boat. With that being said, the top priority for leaders of these companies is to simply reach as many people as possible as quickly as possible, to maximize growth.

Efficiency is not something that they have ever really prioritized until recently and it’s no wonder why. Focusing on growth is simply way more beneficial. Here’s the thing, these companies are usually able grow 30 to 50% per year for multiple decades straight. Amazon for example hasn’t even had a single quarter of negative revenue growth since the beginning of this chart. So, it makes no sense to focus on the 20 or 30% of employees that are leeches or worse get the people who are working hard to waste time weeding out these freeloaders when leaders can just focus on growing the entire company by 50%. But all of that is just half the puzzle. The other half is that the employees also enjoy super friendly economics. If an engineer is living paycheck to paycheck and struggling to make rent, you can bet that they’re gonna work hard to keep their job. But, this is rarely the case with engineers. If anything, they’re struggling to keep up with their upscaled silicon valley life with their $2 million mortgage and tesla model s plaid.

Realistically though, these engineers have absolutely no problem paying for a base standard of living especially with remote work becoming more popular. In other words, they’re not exactly dependent on their jobs so they’re not exactly scared of getting fired. In fact, they often don’t even care for their job. They’re not looking for a promotion or to climb to ladder or to do something impactful. The only reason they’re still working at the company is to cash in on the stock compensation that unlocks in 12 or 24 months and then hopefully score another large package right after that. If they don’t get the package they’re looking for, they’ll just jump ship to another company who will pay them what they want.

Now, you might be saying, who would hire such a bum. Well, the number one factor that gets you a job at these companies is how well you interview and how well you can solve coding problems. And guess what, these guys are stars at this. That’s how they got their original job itself. They know what to do, they just choose not to do it. So, unless their previous manager gives them just an absolutely awful referral, if they’re even asked for a referral, these people are able to just jump from job to job and coast as needed. So, if you wanna fire them, go ahead, they’ll just turn around and find better paying jobs anyway.

NO NEED:

Aside from the financials working out, the  reality is that there’s often just not much to do at many of these jobs to begin with. When someone hears that you work at Google, they instantly assume that you must be working on something super cool or at least something familiar. Maybe you’re working on the YouTube algorithm or Google ads or even Google Bard but only the elite of the elite get to be on these teams. Everyone else is just tasked with the monotonous work of maintaining and upgrading their existing systems. In other words, the average Googler isn’t strategizing how Bard can overtake ChatGPT. Rather, they’re probably working on the 423rd iteration of a Google places API that will likely never see the light of day along with 5 other engineers.

The purpose of this iteration is to reduce request times from 0.75 of a second to 0.5 a second for Apple M1 devices. The team probably optimized the code within a matter of hours but now they’re waiting days for approval from upper management. In the meantime, they’re just writing some documentation and having useless meetings as they wait to go home everyday. That is unfortunately the scope of most engineers in big tech. Obviously not that exciting and not that different from traditional jobs. As these companies grew, so did their inefficiencies and bureaucracy and so many engineers are just simply stuck between the wheels. Now, an active employee might ask to be placed on more teams and take on more work. But, for a passive employee who’s willing to do what they’re asked but nothing more, there’s simply not much more to do than 20 hours of work per week which brings us into our next type of rest and vester which is the 10X engineer. 10X engineers aren’t exactly trying to work as little as possible and just coast. In fact, they may be actively going for a promotion. They just don’t need all that much time to kill it at their job.

When you think about it, this is really not that surprising. Given that these companies are looking to hire the best talent possible for whatever price, it’s only natural that they attract a substantial number of super stars. These people are simply able to achieve what’s expected or even go above and beyond within a matter of 20 hours a week. And given that most tech companies value results over hours worked, these people fit right in. Netflix for example offers unlimited paid time off. The reason being that they don’t care about you clocking in everyday. They care about what value you provide and these 10X engineers more than carry their weight. So, despite working a low number of hours, these engineers aren’t exactly resting. They’re simply super productive when they do work and they likely have several major commitments outside of their job like working on a startup or running a YouTube channel. The bottomline is that unless you’re aggressively trying to climb the corporate ladder, there’s simply no need to work any more whether you’re a passive engineer or a 10X engineer.

PART OF THE PLAN:

Much of what we discussed so far simply seems  to be circumstantial. Tech companies just happen to have great economics and inefficiencies and bureaucracy and all of that. But really, the only reason that rest and vesters exist is because these companies want them to exist. In fact, not only do they want them to exist, they were literally the ones who created them. You see, the history of the rest and vesters dates back to the origins of these companies. The first 50 engineers. The first 100 engineers. These guys were the OG rest and vesters. Hold on back up, how could these guys have been resting and vesting when the company was at it’s most critical state. Well, they weren’t atleast not for the first 5 or 10 years. Back then, they were actually busting their butts scaling Google or Facebook or whatever else.

But eventually, the company makes it to the other side. They become profitable, they hire large teams, all the groundwork has been laid. In the meantime, the original workforce has also become extraordinarily rich. Each of them probably only got like a 0.1% stake in the company but that itself is worth tens of millions if not hundreds of millions. So, where do these people go from here? Well, the most logical step would be to just retire but these guys aren’t usually the retiring type. They’re more likely to join another startup at an executive level position or found their own startup likely in an adjacent field. And see, this is where the problem arises.

Given that these guys have been around since the beginning, they’re well aware of all of the mistakes Google or Facebook made along the way and how to avoid these if they did it again. This makes these individuals a massive asset for startups but also a massive liability for Google and Facebook. For obvious reasons, these companies don’t want their early employees to help out or even create competitors. So, they go to these employees and tell them: Hey Jeff, we know how hard you’ve worked over the past 10 years and how instrumental you’ve been for this company. So, we’d like to give you a $100 million stock package and the title of senior VP. Only caveat is that you have to stick around for another 10 years to unlock the entire package by which point that’ll actually be worth a billion so you definitely wanna stick around.

In the meantime, of course do a good job as SVP but you don’t have to work to the bone or anything and that’s where it all begins. These companies are essentially bribing these employees to not leave. They don’t even care how effective they are as employees. As long as they don’t become effective employees for other companies, that’s a win. Originally, this strategy was only reserved for the most elite employees but it has since worked its way down the corporate ladder. A senior manager at Google for example could easily switch to being an extremely pivotal director or even VP at a startup. So, Google basically just hands them half a million a year and tells them to chill out. Likely the best evidence of this is Google’s hiring strategy.

Till recently, they didn’t even know what team their hires would end up in because they didn’t hire based on need. They would just post generic job listings like Software Engineer. It wasn’t until they test and verify your skills that they even tried to find a team for you. With every hire, they’re basically like: Oh shoot, this guys actually skilled. We can’t let him work somewhere else. Uh, let’s just find a team for him. And that’s why FAANG engineers work so little but earn so much. It’s because it’s all part of the bigger plan. ChatGPT has taken this to the next level with $900,000 salaries.