It wasn't for lack of business, father was a master tailor trained in Italy and capable of elite bespoke craftsmanship. They had as much business as they could handle. The problem was that they were charging what they thought the work was worth rather than what their customers were willing to pay.
At some point, during the Reagan years, my mother had an epiphany and jacked up the prices massively, far beyond what my father thought was remotely reasonable. The result? Even more business, more pressure, more return customers. That put me and my brother through an expensive college.
There's something about high rates that makes customers feel more important, it's a status-thing and it also propels them to take you more seriously even if they have you do low-value stuff.
>> Frew, who apprenticed with a Savile Row tailor, can — all by himself, and almost all by hand — create a pattern, cut fabric and expertly construct a suit that, for about $4,000, perfectly molds to its owner’s body. In a city filled with very rich people, he quickly had all the orders he could handle.
> You don't have to be Wall Street to figure out the bleedingly obvious solution to being a starving artist who has so much work they have to turn work away. Raise the prices. Then raise the prices. Then when you're done with that, raise the prices.
> At some point you'll be too expensive for the typical businessman, which will make you absolutely crack for a certain type of person common in New York, thus defeating all efforts at being less busy. So it goes. I guess you will have to raise prices.
Nobody will follow that up with "but what does it taste like", they'll say "oh that's very interesting I'll take it", despite the fact that the whole point is the taste.
By the way, there's nothing wrong with this. Experience is HUGE in how you perceive something. Consider your favorite wine from your honeymoon.
Let's say you're at a restaurant on the beach in Greece, the sun is setting and the weather is perfect. There's a light breeze, and you can hear the waves gently breaking on the shore. You take a sip of the wine and it's wonderful, so you buy a bottle and take it home. You rave to your friends and when you finally crack it open, they're not nearly as impressed as you were. It's not an uncommon story, and it's because half of the enjoyment was the perfect day, the perfect weather, the perfect setting.
It is question of marketing.
People will definitely buy stuff JUST because it's expensive.
> Nordstrom is selling “mud-stained” jeans to the tune of $425. They’re called the “Barracuda Straight Leg Jeans” and come with some sort of fake mud substance caked all over them. (It’s not clear what that substance is.) The knees, pockets and crotch of the jeans appear bear most of the faux brown muck.
The other day I saw Nike started selling dirty looking ones new. There truly is something for everyone!
Long story short, a jeweler was trying to move some turquoise and told an assistant to sell them at half price while she was gone. The assistant accidentally doubled the price, but the stones still sold immediately.
Turns out there's a phenomenon where humans automatically associate price to quality. So getting charged more means we think we're getting better quality, regardless of the actual quality
"Veblen goods are types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand, resulting in an upward-sloping demand curve. Some goods become more desirable because of their high prices."
The suits are expensive, so they must be good. It's also a status signal to others that you can afford such goods. (Edit minor typo).
The author describes how they had to drive 50 miles every day, use the corporate laptop (or install shady software on their own one), not get a response for many days. Basically, their rate (and the total cost) covers not just the work they do, but all the frustration that comes with the work.
Now, if you treat your staff better than that — remove all the hurdles, answer their emails promptly etc. — then there will be many talented people who'd prefer it over a meaningless-but-highly-paid alternative.
Non-profits get free labor and the devs get real world experience.
I guess you are frustrated because your company doesn't make much money on technology. If the company has a positive ROI on tech, then you wouldn't be frustrated, because more you invest, more you get out. Most companies doesn't need made-to-measure technology solutions.
There's no easy solution, in market terms at least. Maybe you get lucky and catch someone who doesn't need the money and thinks your cause is good enough to put effort towards, but that's not reliable. I wish I had a better answer. Upskilling someone else is potentially viable, depending on what exactly you need. The problem is that things such as static sites and basic sysadmin stuff that are (relatively) easy to skill up in, are also quite cheap in the marketplace for that exact reason. So I'm guessing that's not exactly what you're talking about.
There's quite a bit of effort these days towards upskilling people into more web app developer roles. Lots of bootcamp graduates and a few self taughts floating around. And in my last hiring exercise I found there's quite a large pool (in my area, ymmv) of devs looking for their first real FE/BE job. There's probably some real good value there but the trick is in sifting through the mud. The quality varies wildly, and some of it is shocking. You could get lucky though. I think the go is university graduates, but I hear a lot about grads in the US going straight into high-ish paying jobs so that may be area-specific advice. I was on $45k my first job out, which I thought was fair at the time. But now that I understand the market better and can see just how sub-par a lot of the work out there is, it's obvious that that was a bargain.
The other problem with that is that you're at a big disadvantage when building a team from scratch. A lot of the new devs coming in that will accept lower wages will turn out to be great coders and deliver great value, but a much smaller subset is going to be able to do that on their own with no guidance. That's part of the reason I suggest looking for graduates. I know it's an unpopular opinion here but I think a strong theoretical understanding of software development will help a self-starter more than the equivalent practical knowledge, since without a lot of mentorship they're going to get much more of the practical side from working for you. My first job was straight in the deep end, full responsibility for everything and very little help (one back-end dev who was in the same position with only a tiny bit more experience). I'm super greatful for it, and I think it made me a far better dev than I would have been if I went with a different (bigger) company. Maybe that could be a selling point?
tl;dr if you can't compete with the market then you need an edge that gives you more value than you'd otherwise get. That means people that aren't in it for the money (needle in a haystack, as I'm sure you know, given your position), and people that will rapidly (and successfully) upskill above what the market expects.
When I price out eg contractors, I know roughly what a senior SE should cost. Where I live, that's $150/hour.
If you come in at $75, I don't assume you're a bargain. I assume there's something wrong with you. Either you're not good, or are just starting out, or whatever the case may be.
In this case, just like I bet the tailor, the point isn't paying more for status. The point is that a service should cost X, so someone going way under cost worries the buyer.
Conspicuous consumption is undeniable when looking at some goods and services, but what about the ordinary, say university?
I've worked alongside him a few times on projects that his clients had which required coding work alongside the hardware and sysadmin stuff, and each time I've had to badger him into charging double or more than what he wanted to charge. And of course the customers paid for it, because it was still a good deal and I could show them a conservative estimate that said the system would pay for itself in savings in under 2 years. When freelancing, those are my favorite contracts. Where you can show to the customer up-front that you will be saving them money in the long run. It's always much easier to sell them at that point, and I think the amount its going to save is a pretty good proxy for the value of the work.
If his prices are that low he could likely increase by 25% or more and not lose any clients - and even if he did lose some odds are good that they'd be his cheapest and worst ones.
If you double your rates and lose half your customers, congratulations! Now you have the same revenue plus available time to go find more customers fine with the higher rate.
For example say I want some shelves built. If my shelf-builder charges $X that's fine, but what if I would happily pay $2X?
On the one hand, I might be personally miffed to know I'm paying 2X instead of the X someone else is paying. On the other hand, I'd probably be the more satisfied customer if I don't know (or have the discipline to ignore) the price gap, because the shelf-builder is probably going to give extra effort in hope of getting more jobs from the 2X clientele.
It would be interesting to explore what would make your 2X client feel good even if they know they are paying double. And would that scale to 4X or 40X clients?
The $300h one looked like a piece of art. The $20h looked like sea gull crap landing randomly around the piece.
My parents never advertised their tailor shop, it was all "word-of-mouth" business. After the pricing jack-up, every customer got charged what my mother felt they could pay (with a very loose regard for consistency and some allowance for negotiation).
I used to think that was sketchy. It wasn't until much later that I realized that B2B enterprise sales people do that stuff ALL THE TIME even with their onerous kpi's, forecasting and fiscal quarter expectations!
Depending on how it's done, it still is, and enterprise salesmen doing it doesn't make it less so. As a customer, I don't necessarily seek absolute minimum price, but I want it to be a fair price that I can agree on voluntarily - that means, I don't want to be subject of a bunch of manipulative sales techniques during pricing negotiations. Moreover, individual pricing used at scale makes it impossible to compare prices, or even develop a sense of what price is fair price. I actively prefer buying from vendors who list prices publicly, so by going the individual price route, you might be losing business of me and people like me.
> I don't want to be subject of a bunch of manipulative sales techniques...
There's a reason why sales people in enterprise sales can pull in MM's per year, it's a different level than, say, retail or car sales.
I see it like advertising - one part of the chain of value, and ensuring that a responsible and fair transaction occurs
Production: control of how something exists
Project management: control of when something
Advertising: control of how you become aware of something
Pricing: control of how you take ownership of something
I suspect with advertising profiles and amazon purchase histories (and possibly amazon visa card applications requiring household income)... this wonderful "service" previously only available to the rich will be democratized for everyone!
Offering coupons through the mail, online ad codes etc. You are reaching out to different demos using different marketing techniques and offering or not offering discounts accordingly.
It's a pretty stable increase, and adjusting for inflation it's actually a fairly low increase for a product that has improved over time.
I can understand when it comes to physical goods.
Welcome to marketing!
Most of the time the problems I had to solve where easy ones. Install printer, update software, remove toolbars, email settings, etc. All 5 minute work jobs, seldom totalling to more than an hour or 2 an evening. Not even worth asking money for in my opinion, because it was so easy en quick for me to do. But my neighbour always insisted I accept his money. Because for him, having to solve these issues himself would cost him multiple evenings. So the money he was giving me, which felt like too much to me, was stil a bargain for him.
Also in his words it was easy for me because I had spend years in training to acquire this knowledge, or as others might call it: wasting your time behind that computer playing video games.
Probably my most wealthy client, with an oversized SUV in the driveway, had a home computer rendered unusable by malware--something I had fixed before. But she ended up asking me to leave. She decided she wanted "real professionals" working on her computer. She told me I didn't know what I was doing, saying 'are you really going to fix it for this much or do you actually need to just start searching the web for what you are doing? (she saw that I had performed a google search...).'
It took me way, way too long in life to learn most of it is just perception and learning how to manage dealing with less-than-ideal people.
I got scolded by my parents but at the end of the day: worth it.
"You're not paying me to search Google, you're paying me to know what to search for and how the results apply or don't to your particular situation."
Picasso is sitting in a Paris cafe when a fan approaches the artist and asks that he make a quick sketch on a paper napkin. Picasso acquiesces, draws his dove and promptly hands it back to his admirer along with an ask for a rather large sum of money. The fan is flummoxed. “How can you ask for so much? It took you only a minute to draw this.” To which Picasso replies, "No, it took me 40 years."
translation: I expected to pay $5 for this napkin drawing, and later sell it for $10,000. Then you asked me $1000 for the drawing. That means you just tried to steal $995 from me. Outrageous! You are a thief, Mr. Picasso!
> "Oh, two days! The labour of two days, then, is that for which you ask two hundred guineas!"
> "No;-I ask it for the knowledge of a lifetime."
"knowing where to tap":
Still, it's a quick way to get a reputation for running up the clock.
Sometimes it might be worth it - maybe the plug would have been pulled sooner if he had invoiced regularly. But it's still a risk.
This is, why you leave a paper/email trail.
1 year contract.
6 months have gone by and they've done ... nothing. Their boss keeps saying "Don't worry we'll get to you, we're just swamped right now, you're good."
They're already talking about extending the contract.
-A team might have use-it-or-lose-it budget, so they have to spend it on something, and a contractor might be the lucky recipient!
-Spending a lot on a contractor gives them someone to "fire" when they need to explain why something wasn't getting done or something went poorly!
The list goes on!
All that being said, as a consultant myself, I consider those types of projects windfall, as they tend to be the ones that end abruptly. It's kind of a scary feeling getting paid without actual work to do. I have found I 100% prefer the projects where there are clear tasks, goals, and results to report, if for nothing else than my own sanity.
In my current role, there is no real roadmap or trajectory for what I should be doing or how I should report on it, etc. I have felt at times that I was just collecting a check, and that felt really scary. I expected I would love to have a job where I could kind of just do whatever I wanted on my own time table. But I have learned it's actually very stressful, and at best very boring. Luckily I got a roadmap created and prioritized, so I feel better. But it is an odd experience.
Corporate monstrosities can get away with being inefficient insofar as they can stay out of the red overall. Governments can get away with being inefficient insofar as we are forced to continue funding them via taxation. Note: giant, unaccountable, inefficient corporations usually became so large through monopolies created through government force (i.e. regulation).
If Whole Foods wastes their money and goes out of business, I don’t care. I’m not being forced to pay them to make up for it.
There are many reasons that Google and Amazon didn't exist a thousand years ago, and it isn't solely due to the lack of computing technology.
And so it is entirely sensible that everyone should contribute towards keeping the highly developed society functioning as best as it can.
Google wasting money is no different than my neighbor wasting money. The government wasting money is upsetting because it was taken from me supposedly to help the country.
Your perspective might be different if you pay very little in taxes.
I don't know what the fix is for that except to take a chance and trust folks but ... it doesn't seem to be a thing and instead they come up with easy systems to just make arbitrary decisions and there ya go.
It boggles my mind sometimes that "Like if you don't trust that guy to make decisions... why is he a director here?"
Sadly it filters down, I've been places where it was clear the director of my department couldn't do much at all... at that point why should I be there, it doesn't matter if he and I talk, agree, or anything then ....
Steve Jobs said something about it making no sense to hire people in decision making roles and not let them make decisions. Granted, Steve was also able to hire some fine people.
After all we were the ones taking in the dollars. Of course at an organizational level it was understood they need to invest in the next big thing even if it’s not making money right now.
Practice may not make perfect, but it sure damn helps. As long as we learn from our mistakes.
Another part is where if you get a hiring budget they expect you to use it because if you aren't spending it on personnel then it means you aren't hiring the best available people at that time.
Non-profits usually spend out their budget.
Regulated utilities can charge a % + the cost of hiring you if it is a capitalized cost, i.e. hiring a contractor to implement a project.If a contractor works 100% on a capital project it's profits especially in a low inflation economy or when the profits are not going to be as good due to forecasting issues it can pump the books.
There are probably other reasons I can't think of.
What I'm asking is, if the above system encourages managers to waste money, why hasn't anyone come up with a better system?
I used to manage a grocery department at a well-regarded supermarket chain. In retail, one of the only inputs you can affect at the store level that impacts the bottom line is labor, so metrics are usually organized around labor optimization. Each week, you would be expected to exceed the previous year's Units Per Labor Hour (UPLH). This can only be accomplished two ways: increasing unit movement (which you really have no control over and is largely driven by consumer sentiment and population density) or cutting labor hours. In fact, even if volume is increasing, you can't even add hours even though labor needs scale with volume in a brick-and-mortar retail setting. To exacerbate things, the reductions in labor have already compounded yearly since the policy was put into place. They want you to squeeze water from a stone. "Well, So-and-So (who you've never met) was able to increase UPLH by 10% 5 years ago! Why can't you?"
I guess my point is that systems that discourage waste often lead to insane work environments rather than cleverness or innovation, whereas encouraging waste leads to bloat and inefficiency.
Budgets are a pretty powerful and widely used tool for managing organizations. And there are other checks and balances. It's not like a manager can necessarily just decide to have a team off-site in Hawaii because there's room left in the budget.
So the basic inefficiency is that you want to do top-down resource allocation, “I approve of this much budget going to that project.” We could call that bureaucracy, or The State, or whatever. There is a reason that every modern military in the world has this bureaucratic gene: you can track who is responsible for every dollar easily, which limits the scope of corruption. Corruption does not itself kill the other countries: it just places an upper bound on how much money, how many resources that military can effectively put to use. But the militaries who can inefficiently use unbelievable resources clobber the ones who efficiently use fewer, and you get a survival of the fittest thing.
So the basic problem is that bad actors exist within a sufficiently large organization, and the bureaucratic solution incurs the cost of making everybody into bad actors, but with the benefit of limiting the badness of their action by top-down accountability. It is also somewhat bounded in how much it wastes: non-bad-actors who really don’t need their big budgets do have a weak vested interest in allowing it to be cut, as it frees up resources for the organization as a whole and this can improve their job stability, year-end bonus, etc.; also business units that really are not pulling their weight can be reorganized over long time scales. That is bureaucracy in a nutshell, the natural top-down solution.
To solve the corruption problem with a bottom-up approach requires connecting individual interests to organization interests, so that in a game-theoretic sense there are no bad actors (albeit there may be irrational ones who want to hurt themselves in order to hurt society). This is a really hard problem in accounting. The basic thing that you want to do is to make sure that everyone gets paid some baseline amount, plus some proportion of “what they make for the company.” In cases where this is really easy to determine, nobody does it any other way. Salespeople get commissions, and they get them fairly universally. This solves any corruption problem bottom-up. [It is also 100% transparent: “Why did she earn more than you? Because she sold more than you”—top-down budgets are frequently confidential wherever possible due to the risk of one subunit (could be larger than an employee) discovering that another subunit which “does less” in whatever sense gets more of the pie.]
The problem is, we occupy complicated systems and it is not easy to determine how much the organization’s bottom line will be impacted by the loss of a particular individual. What is the “commission” that I should be paying to a janitor? Am I supposed to pay developers money for completing “story points?” And how do I do that without creating a toxic atmosphere where everybody wants to overestimate the number of story points in a task—how do I objectively measure those story points in terms of the hard cashy business value they create? What about managers or recruiters; how do I reward you for the business value of the people you managed/recruited?
Without solving this sort of hard problem, you can’t guarantee that when someone uses nepotism to the organization’s great loss, that they don’t feel the full brunt of that loss and therefore have a selfish incentive to be fair in the first place.
There are ways that are arguably better, like bottom-up budgeting, but they take a lot more work, and are arguably more subjective.
Internal information systems can be so poor that the best prediction of next years budget is last years budget.
This comes to mind:
For various evolutionary reasons, a nerve routing that was direct and sensible when the aorta passed to, say, the gills of a fish, now makes a silly, circuitous route in modern mammals from the brain, down under the aorta near the heart, and back up into the neck...close to the brain. Natural selection has proven incapable of fixing this tangle.
Similarly, organizational budgets that departments need to spend any way they can or suffer cuts next year seem silly. But they stem from reasonable policies, gradually changing and improving over time.
Just like an organism can't sever its aorta and have a better routing of the nerve, organizations are incapable of getting from the current budget situation to a better one.
So the company hires a few contractors to help get them as close to $x as possible, but they don't really have any work for them to do.
My FSA card is pre-tax money to be used for healthcare expenses. Towards the end of the year, I ended up still having a balance that would go away if not used, so I bought things that I would not have otherwise purchased.
But if you, say, only lost 30% or 50% of the balance, it's not immediately obvious if you should spend the balance or not.
OT but this is such a weird aspect of FSAs. I can carry some amount over with my plan which makes things a lot easier.
Let's say the company has earned 1,000$ and the tax rate is 50%. Your expenses X are 100$.
So 1,000$ - 100$ = 900$. Of which 50% (450$) are tax and 50% (450$) are profit.
Now double X to 200$:
Then 1,000$ - 200$ = 800$. Of which 50% (400$) are tax and 50% (400$) are profit.
That means your profit is 50$ lower (400$ instead of 450$) then if you hadn't increased your spending?
Clearly my thinking is wrong somehow, but where?
I remember being mentioned that the whole reason General Electrics bought a division of Alstom was to not bring the money back to US and get taxed, let's say it was 1 billion dollars and 50% tax.
Instead of getting net 500 million back to US they can keep that money abroad and invest 1 billion in another company that can net more than 500 million in the long term.
Above is likely the way of thinking for those sort of occasions.
Imagine that you must access $100 of labour/whatever somehow.
$20000 - sales
($10000) - cost of sales
$10000 - gross profit
($100) - extra labour paid for with pre tax money
$4950 ending sum (pay dividends or do whatever you feel like with this)
$20000 - sales
$10000 - cost of sales
$10000 - gross profit
($5000) - tax
$5000 - after tax profit
($100) - extra labour, post tax money
$4900 - ending sum
In particular, the one easily controllable lever is how much interest you pay on debt (pre tax spending)
This is what Amazon has done for years - it generates a monstrous amount of cash (free cash flow) from retail and funnels it back into expanding current businesses and creating new ones such as AWS. AWS now generates its own surplus, so the cycle continues.
Edit to clarify: Amazon in the past has shown a relatively small net income vs large top line revenue because most cash is reinvested. It’s been a few years since I paid attention to their financials so things may be different now.
That said I do know people who’ve been paid to turn up at an office and just work on their side projects. Could probably handle that!
Stupid but very real. I always find it funny that wasting 100k this way is perfectly fine but a 5k raise is almost impossible.
This is too real.
At my current job they are incapable of even small raises to keep up with inflation or even investing money in making a better product. Although the company has no problem redecorating the office, sending management to a useless international fair where they spend their time in bars getting drunk, or spending exorbitant amounts of money for sending someone to CNN and getting $0 ROI from that.
But it's exactly like you say. People wouldn't get their act together sufficiently to have a team meet with us on some topic for a day or some marketing campaign would be canceled or changed so they no longer specifically needed what we had created for them. Easier to just forget about the whole thing and move on.
On the rare occasion that we were given a task, we would all descend upon one computer like vultures, group-solving the problem typically in 60minutes or less. Then it was back to doing nothing.
Diplomacy (the game) became our primary activity. It was fun, but such a terrible waste of time, talent, and money.
But the client company had more cash-flow than they could burn, so they didn't care. Unsurprisingly, they hit serious financial difficulties within a few years.
I quit at a company I was contracting at because they kept dangling the whole, "We're going to convert you to an FTE next." in the meantime, I was working less than 20 hours a week. If you didn't have a project to bill hours to, you didn't get paid, period. I was floating between teams, fixing bugs and doing minor stuff, not being able to bill much of anything. Once I quit I was offered another contract role. I basically told the recruiter, "Listen, if I'm in the office, I'm getting paid for my time, period." Recruiter got it cleared with HR and the hiring manager.
My first day went like this:
Manager: "Ummm yeah, the two major projects we had you slated on, ummmm those got put on hold for the time being. Get your desk and PC setup and we'll have something for you soon."
I literally went 4 months and barely billed any real project work. My last two weeks I had 36 hours of non-billable time. I had two weeks where I actually billed a full weeks worth when a dev took off for his honeymoon and did exactly zero work he was assigned. The funny part is when I quit, the hiring manager told me he would hire me in a minute and to keep in contact.
In the meantime, I was able to learn AngularJS and some other stuff while I was sitting at my desk all day. In a sense, I was very productive when I was there.
Yeah that's what I would hope to do too. Lots of time, let's dig in to that stuff there's never time to learn!
Employee or contractor gets stuck somewhere with nothing much to do... speaks to manager about it repeatedly... gets the "just find something to do, we'll get to you" speech... fails (often despite good-faith effort) to find anything useful to do... and eventually gives up.
Worst case I personally witnessed was a quite talented dev going six months without any actual project, then another couple before quitting.
Another case was a guy who tried to use his abundant free time to learn other skills but mostly ended up playing Myst, which proves this phenomenon is as old as dirt. :-). (He ultimately gave up the Myst Gig and quit, I'm sure to the consternation of his manager who probably lost a head-count over it.)
No, I learned how to manage my work load (potential and actual) from clients for my physical/mental health.
The motivation is what determines the actions.
I know a guy who founded a software company and started contracting work overseas. He became too confident and over-committed to clients without managing expectations. For a couple of months he looked terrible. Thankfully, he found an escape path and closed the company. He's now employed full time in a dev role.
This path isn't for everyone.
"Hey I'm already up to speed on this so if you want to pick it up again quickly ...." proposal probabbly would seem like a good idea to the company for a while at least.
Anywhere where employee hours are getting charged out, a company can increase profits by increasing headcount.
It also seems to happen more indirectly. A contracting company is often motivated to increase red-tape (such as complex and unnecessary health-and-safety, because everyone agrees safety is good). That has a double win: less competition (side effect of complex requirements) and more hours charged (each hour charged increases profits with little risk).
I kinda want to be a contractor now.
We did some make-work projects, optimizations and stuff. We also picked a random technology stack per week and spent a day building "something" to learn those tools. Also, we played a lot of video games. This period lasted about 3-4 months.
So dangerous that a lot of events take place in Q2 and Q3 to emphasize networking over mindless bored trading.
Also a lot of these people lie to themselves about their own importance, in order to have a (false) sense of self worth (but they're okay with it).
I was gardening various projects on GitHub and increasing my StackOverflow reputation.
I wasn't enjoying it.
At some level there is a need for accomplishment.
Poor work ethics become a virus, difficult to concentrate at home later.
There were days when I'd charge clients $15k... for a day's work. This wouldn't have been possible if I worked on-site. But I was essentially completing $15k of contracted work in a single day, which was sold as a fixed-fee in return for a legal report. The type of work that should cost maybe $200 in total.
Corporations get kind of crazy, there's extreme focus on some areas (mainly, those with KPIs and KPI owners attached), and extreme nonchalance on others. They're so big that there's just lots of insane things like this that slip through.
Business class plane tickets, 2 nights in a nice hotel, rental car, dinner at very fancy restaurant.
Meanwhile, that same 100k+ employee company wasn't able to set up email fast enough for new employees, so some new hires had to use hotmail(!) for weeks before they were in the system.
This sounds like a SaaS waiting to happen.
If you have an extremely high-margin service, e.g. perform bill $10k of work for $100 of salary, there's absolutely no incentive to automate things on the seller's side. It essentially means hiring someone to build out a (software) solution to squeeze the $100 into a dollar of payments on a cloud provider. All you're doing is raising your margin from 99% to 99.99%, it's meaningless, your profits increases by 1%, assuming the Capex for development was zero. And given this is typically a low-volume kind of transaction, with considerable development costs to build a Saas solution, this assumption is way too generous.
It's exactly these kinds of services which are completely fine to have humans perform.
It's the type of legal work where you bill $200 for a simple contract review and have to pay a paralegal say $100 for the work, which would be great to automate to a $1 of AWS payments. Here you're increasing margins from 50% to 99%, doubling profits. Any development costs can be averaged out to approach zero, as document review is a high-volume task in any organisation.
For some background info for the person you're replying to... I can easily name a whole range of colleagues with whom I could easily complete $1m per person / annum of work (about $4k a day) in billable time.
The problem is you don't get the work without the company name.
Even having worked in this business, with clients trusting me on a personal level who'd love to grant me the work even if I worked as an independent contractor... my clients are other fortune 500 companies, sales goes through a process, which has all kinds of checks and balances in place. For example, if you have no certification for data security (i.e., audited on e.g. ISO2700-1/2), you don't stand a chance to say receive sensitive due diligence docs in order to perform legal work. Performing such an audit can easily cost hundreds of thousands a year, just to pay the auditor. Building an internal framework to comply with standards, regulations etc, costs way more. This makes it impossible for small firms or contractors to compete as they can't average out a $100k audit over $50m in revenues.
Not all work has these requirements of course. But in some fields, and some clients do. Building an internal software tool for a national seller of paint products, fine as an independent contractor. Trying to win a government tender for a tool that handles personal data, extremely likely you won't be considered without working for an organisation that has 10 certifications in place that cost >$1m a year to renew. In my line of work, it'd be very tricky to sell my work to clients as an independent.
The above might be an urban legend, but it is still a good story.
The problem usually is that someone at the accounts payable department (sometimes in a different building or country) must pay all the hundreds or thousands of incoming invoices. Having a robust system in place for them to check if the product/service is actually delivered for the price agreed upon (or even delivered at all) is hard.
Hiring a freelancer? Issue a purchase order to the freelancer for the maximum amount you think you'll pay them. They then bill you for how many hours it actually took, after completing the job. Then accounting can process it if it's under the PO value.
No PO, invoice doesn't get paid.
In this case, as usual, the amount of hours "spent" on the project has little to do with actual value provided.
From the contractor's side, he's excited about getting 12x the original quote, instead of realizing he's been severely undercharging for his work and could've been earning 10x or more all this time. I wonder if the author will start charging appropriately for the value he's providing, or if he'll consider this a fluke and continue with $75/hour.
Phrased another way... How many times did you complete a project within the estimated time and get paid $1,500, when actually the company would have been glad to pay $18,000?
Last week there was a thread about consulting tips. I couldn't believe how many people were arguing for hourly billing. One person was even proud of billing by the minute! I hope those people see this story and realize what they're leaving on the table.
I have similar stories to this, where work got delayed due to issues on client's end. One time, I spent a month doing nothing while the client was dealing with something, which later turned out to be a big acquisition. If I billed by "hours worked" then I'd get nothing, but because I had a monthly retainer I still got paid.
Edit: I'm not advocating "fixed price." I'm advocating monthly retainers.
Client let slip they'd been quoted £11,000 for it and 3mths.
Next job they asked me to do was £5,000 and I said 3mths (it took less than a month and I was working full time).
I learnt that lesson fast, don't charge what it's worth to you, charge what its worth to them.
Or as an ex-boss pithily put it "serious people charge serious money".
After the initial prototype we did a few more rounds. That ended up being IIRC $30-$40k for what amounted to 5 days of work.
Client was super-happy. I guess the prototype was enough to convince his bosses to fund the project for real.
Leadership teams are buying validation as much as they are a product. That's why management consultants can charge so much damn money, they usually aren't telling the company anything new, they are there to back managers decisions.
When you look at it that way, you're not just getting paid to build something, you're getting paid to be the subject matter authority who walks in and tells leadership how smart and forward-thinking they are.
What if the project was billed at a fixed cost, he negotiated $21k, but the project took a year to complete because the company moved so slowly? That'd be a terrible salary. He'd have to quit and somehow bill even with no deliverables. How hairy would a contract covering that be to defend when you sue?
1. "I think I'm worth $75/hr"
2. "the job will take 40 hours"
3. "I'll charge $3000 for it"
but rather, like this:
1. "I think they would be willing to pay me 40k for this, and I think the project should take 40 hours"
3. "Therefore, I'll negotiate for a $1000/hr pay-hourly contract with a projected end-date of two weeks."
Simple: Charge $21k per month. If the company drags it for a year then you make $252k.
The granularity here is entirely arbitrary. Hourly billing is by far the industry standard. That's why we default to it. It's easy to justify in court, it's easy to reason about contracts which use it.
If you're billing hourly, and the client chooses not to use your time, you don't work any hours and you don't get paid. If you then billed them for 100 hours without working, you've committed fraud.
If you're billing monthly, you've set aside the month for the client. If they choose not to use your time, you still get paid, because in your agreement you specified "use my time it or lose it".
If he had tried to quote $21,000, he would have gotten thrown out the door.
Secondly, you can avoid most issues by charging for a weekly or monthly retainer. It's much easier to estimate number of months than number of hours.
Consultants who win the job will always leave money on the table. That's how you get the gig to begin with. Value is relative, and it takes at least two to tango come contract time until cost (what the client sees) and value (what you see) intersect.
Billing hourly brings pricing transparency clients want while protecting you from true under-utilization. If you're not being utilized because of red tape that was unassumed at contract time, a change order is the logical next step to account for scope remaining/additional scope.
Yes, it helps to be offering some unique value that can't just be found on Upwork (see excellent posts on this  and ), but you don't need to be in the 99th percentile to do value-based billing.
I don't know much about the author but they're probably in that 99% whose work you think is commoditized (or at an equilibrium). Clearly this is not true, since they were paid $21k for work that could've been done by a large portion of that 99%.
1) Notify when hours were exceeded
2) Get written notification that he was still required to come in to the office while waiting for assets or otherwise at a blocker
3) Ask questions to further cement the requirements
4) pick up a phone?
I think that ethically this was not a great move on this persons part, but we live and learn, and hopefully they did learn from the experience.
Large companies have budgets that usually are "use it or lose it", so the ROI doesnt really matter most of the time. Secondly, large companies are less likely have "gate keeper" folks ensuring that there are not wasting hours when the timescale is less than one month. As costs escalate and budgets get blown, that is when they thin out the contractors.
> We need your full undivided attention to complete this project. For the duration of the contract, you will work exclusively with us to deliver result in a timely manner. We plan to compensate you for the trouble.
Sounds like the author reluctantly learned the opposite lesson, that ethics are silly and big companies will happily overpay you. He mentions multiple times his qualms about the whole situation.
A lot of big companies aren't paying for output, they're paying for butts in seats. Why they do this has been discussed somewhat already in these comments.
There's also the case, which IMO is the standard case, that the company is trying to pay for output but it's a long and winding road from the butt in the seat to the output to the sale.
Within that, if you're say a dev manager, and it's really hard to get head count allocated, then it can be totally rational to keep an idle butt in a paid-for seat so you don't lose the seat.
Even if the Mr Idlebutt is terrible at his job you have at least some possibility of replacing him later on, when you have a need for some work to be done and probably wouldn't easily get a new seat allocated for it.
Not only is it nearly impossible to establish a direct relationship between any particular butt-in-seat and your budget, in principle it's probably a good thing to operate with a little excess capacity.
Until the dream of the Fully Fungible Knowledge Worker is achieved, which it won't be, this is a lot more rational than the implied waste would lead you to believe. Of course this doesn't factor in morale impact...
Back when I was in my 20s during my walks from the light rail to the office I would have constant thoughts about how idiotic programming and office work is. The ONLY reason it all exists is because people can't trust each other. And that maybe trust isn't really necessary in a society that lessens personal ownership and has more of a share-all-but-do-your-part approach.
It's literally so unfair the way we've segmented people into knowledge zones. Bankers know how easy it is to double money without taking risk. Programmers know how to pretend something will take 3 weeks when it will only take 2 days.
Recently I've learned how easy it is to set up solar. I cry every time I hear someone get trapped in some solar contract when they sell their house. It's literally mind warping how fucked up every aspect of this economy is.
What's a typical rate for this length of contracting work in California?
Of course, he's probably charging too little in general. Everyone is.
You should definitely look for somewhere else that will pay you more money. If you'd like to discuss it offline, I'm happy to.
(nobody else said anything about the roles they'd been given being a non-job, although everybody else found something better to do elsewhere after a couple of years. Looking like a smart businessperson on TV is actually incredibly good for career prospects)
Funny that my hourly rate peaked at 17.
Turned out they had budgeted twice that amount for an external professional consultant to look into it, and just figured they'd let me have a whack at it first because why not.
Which is: "The behavior of any big company is largely inexplicable when viewed from the outside."
I think it's 6 months now ($60k++), while past 3 were "we are almost there now". It's all typical crap - trying to squish some crap into JIRA, molesting Slack in some weirdest ways, tester reporting bugs in less than 6 sentences... All I can think of is that I didn't ask for a high enough hourly rate and I want this over ASAP.
So for political reasons, this new project was delayed and delayed again. I asked my boss for a project, he said, he'd get back to me. This ends up going on for a year. I stopped asking for new projects because I've done my duty frankly by asking several times, and at this time, I'm just reminding him to fire me.
It might sound like fun to get paid to do nothing, but, it's pretty demoralizing. There's a certain amount of paranoia associated with it as well. Eventually, I started taking long lunch breaks and going to the gym.
This went on for a year, then one day... We started a big new project, and I had something to do again. Very weird year, though.
This should be read by everyone concerned about, how few people in a startup can beat big corporations
One division will be counting paperclips and another dropping $50k on a machine no one needs to do their job.
It entirely comes down to management in each place.
Now, I do not mean experiments and throwing the artifacts of that experimenting. That makes perfect sense. Its when they have a need for something that is part of their current business and they just don't execute properly to the point of cancellation.
Funny that the supplier's entire business model seems to be to charge so much for a BS solution that each company is forced to recommend it to others to avoid reporting the loss.
Why do you think this is limited to big corporations? Plenty of smaller shops are doing the exact same thing
I called the person who needed the report, but they said they didn't need it, and passed me to the person who requested it from them. I called the next person, and they passed me onto another person. I followed this about 5 people deep until I found one person who told me that they didn't need that report at all.
I left that company within 2 months of joining.
I work with hardware and you'd be amazed how much people will spend without batting an eyelid (eg tens of thousands on a single instrument). In some cases they'll even remark at how inexpensive what you've offered is.
For example, the thermal cameras I work with are now consumer available for $5k. A decade ago you'd easily spend an order of magnitude more for the same sort of performance. And companies would happily fork out for it.
Bear in mind this company just lost a developer. The overheads for that member of staff alone, for two months, probably exceed $20k in the US.
I've been involved in more than one project where a company bought a largish subscription license for a product, and never got anybody lined up to actually deploy it before the licensing ran out - I assume whoever was in charge of that initiative got laid off or took a new job and it fell through the cracks.
Now, how much will you pay me for the tack and saddle?
Spanish civil servant off work unnoticed for six years
It's completely believable though and not even that radical.
Had you done this from home on your own machine after they quickly mailed you the necessary resources, you'd have been done within those 20 hours, but frankly, large corporations don't really care. $18,000 is still pocket money for them, and they apparently prefer if you do everything their way instead of your own.
You didn't just deliver a static html page, you delivered a static html page as part of their process.
Let them pay. You earned it. They wasted your time, you didn't waste theirs. It's not the most fulfilling way of working, but it pays the bills.
I do almost entirely projects for large clients like that, and it's not unusual that just getting started takes a week. I used to get frustrated about that, but it's their choice, and now I just go along with it.
It does underscore how unbelievably inefficient large companies really are.
I advise all programmers to grab as much money as they can until it stops making them happy and then give a bunch away during an existential crisis...
Well, I think it's a measured dose of realism and maybe /every single article/ posted on HN about compensation, IPOs, exits, salary negotiations, etc should have a reminder that much of the world is doing far more important things for far less money than whatever ad-tech startup got some VC money from their fellow Stanford grads this week.
So since the salary is ongoing and a higher risk (for them), it's priced lower. A contractor the risk is less for them since the project has a fixed budget.
Adjustments to employee compensation can have a lot of second order effects. If you bring in a new employee above what you were bringing employees in at, that doesn't happen in a vacuum. If the employee was brought in at a lower level, you've potentially set a new baseline for where you need to bring talent in at. And also need to make adjustments to your other salary bands to compensate in order to ensure you don't have a flight of more senior or tenured talent when they catch wind of what the new people are being brought in at. It's also hard to "reset" pay tiers over time unless you have an incredible amount of turnover, since your tenured talent isn't exactly going to be happy with a pay decrease over time.
Consultants/Contractors are different. What you pay one consultant has little to no bearing on what you pay any other consultant, nor what you pay employees. The impact of that is insulated to that specific relationship, and ends when that relationship ends.
I currently work at an agency, and the client billing rates for my time varies wildly from levels I'm able to get for myself when I do moonlighting projects (and I'm terrible at sales/rate negotiations) to anxiety-inducing "how could someone ever fathom spending this much money on an hour of my time?!" that are only possible because of the particular pre-existing relationships we have with the client that anchor our value/cost at that point. We even have a few clients with multiple SOWs from different departments, where my rates for each department are on completely opposite sides of the spectrum. If you transfer an employee from one department to another for substantially the same work, you'll need to pay them substantially the same regardless of changes to their incremental value from one department to the other.
 They did in fact absorb such an increase though - at the same time as the one-off bonus occurred, they increased their minimum wage for US associates to $11/hour, which resulted in an immediate incremental increase of $300mm in annual employee compensation.
I've worked my entire career in startups and venture-backed companies. I cannot fathom the level of sloth, but I'm sure when I'm older I'll crave it.
Software particularly has stupidly big margins (and stupidly big overhead) when you’re talking companies the size of oracle and microsoft
After he left the company years later, he told us the story of the 175 hourly rate they gave him for 3 months, instead of 25 for a junior admin.
Before I left, I gave my boss an opportunity to beat the new salary that was offered to me. He said he couldn't.
My annual pay was ~170k at the bank, but now they pay $2500 a DAY for me to be there, and, as a consultant, I work FAR less hard and far fewer hours (albeit in a completely different division). I've been here for 10 months now and it seems like it will continue indefinitely...
This article has strongly reminded me to start doing my own thing and charge even more.
*In reality, all I do is data engineering/munging because their data models and systems are so poor.
Hell, considering probably he spent most of his time sitting around, bored out of his mind, and had to commute 50 miles each day, I would have passed on the contract.
I realize this has nothing to do with the ridiculous situation described in the article, but I do think it's worth pointing out that $18k is not at all an inherently ridiculous amount of money to charge for a static HTML page. In some cases, it may not be nearly enough.
It's Drupal, with a custom theme. Everything that was actually "tricky" was de-scoped, so it wound up being something my university buddies and I would have charged $5k for back in the day, probably would have charged $30k these days.
That project cost well over $1mil.
For a Drupal site with a custom "Mobile friendly" theme.
* I'm surprised he waited 7 weeks before submitting a bill (especially given the hurry up and wait circumstances).
The company is like a giant communal wallet. It sucks money out of lord-knows-where and dispenses it back to you. You just have to physically sit at your desk and waste time for 8 hours a day.
So yeah, they beat you :-)
> The designer had sent me some Adobe Illustrator files, and I couldn't open it on the MacBook.
Can't you just change the file extension to pdf to open an Adobe Illustrator file?
Now, how can I find such jobs/companies, minus the commute? :P
I was hired by a publishing company to take their 1990s web site into the modern age, a couple of years ago. I reported directly to the owner of this small but well known company in their industry. On day one, he sat with me for 10 minutes and outlined what he wanted done and then promptly left for a publishing conference for two weeks. He gave me nothing to access the web server or any of the source.
So, I spent two weeks putting together a few potential designs and showed them around to influential persons inside the company. They loved it! But when the CEO returned, he immediately pushed back against the hamburger icon for a menu selection among other things he thought his customers would find difficult to use.
I said I would work on that, made some changes I thought he would like, but when it came time to present them, he was gone again on another sales meeting out of town for a few days.
When he came back, he asked me to work with his graphic designer to create some animations for an iPad program they sold. I had never done that but quickly learned. He then went to France. He called me twice to ask about the progress and some additions he wanted but, when he returned, he was too busy to meet with me about that project.
I continued to ask for access to the server but never received a response.
Then, he presented me with an iPad app they had some company in India develop. He said it had some minor issues but he wanted me to work on it. It was written in ObjectiveC but I knew nothing about it and had never developed anything for Apple products before. He gave me access to his Lynda account but he needed the app fixed in two weeks. I told him it was impossible.
So, he hired a college kid who was fluent in all that. He gave the kid two months to solve the problem but he hit a road block and last I heard it past the three month mark trying to get that to work.
For me, since he didn't have time to work with me on the company web site, he said his mother had an event coming up for a charity she ran and she needed a web site right away. I knew nothing of the charity or the event. I had no pictures, no text, no idea what she would want beyond a general outline the CEO gave me but he wanted the whole thing up and running...in two weeks.
I said I can't do that. So he fired me.
I had accomplished absolute nothing. I asked him why he thought I could write iPad apps. He said it was because I said in the interview I once wrote an app for the iPhone. I said, no, I wrote a little test program--a "Hello World"--using Cordova but that was it.
He kept his mouth shut, even though he knew he needed to have a difficult talk about assets and time reserved etc.
Instead of that, he waited for weeks before he nervousy crafted an invoice full of mistakes because he was probably editting and re-editing because he knew he was doing something wrong, but had a conflicted mind because he felt entitled to get paid a daily rate instead of fixed price like he agreed. He then sent the email safely from home miles away.