My parents had been running their own tailor shop in the 80's, barely making ends meet, pulling in less than $20K a year.
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.
I'd modify this statement to "you're selling the customer a story", but you're right. When trying to sell a customer an expensive wine, you don't say "This is a cherry-chocolate red wine with earthy undertones", you say "This is a 1787 Chateau Margaux, grown on the left bank of the Garonne estuary in the Médoc region, in the département of Gironde."
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.
Remember the "I'm Rich" app on the iPhone years ago? It was just a picture of a spinning diamond. I think it was like $1000 per download? The dude who made it had a bunch of sales before Apple took it down.
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.
This is much like the relic electric guitar market. Fender Custom Shop sells guitars for a premium that look like they've been dragged behind a truck (distressed nitrocellulose finishes, scratches, dings, hardware patina, sanded necks, &c.)
There were mentioned studies in the book "Influence: The Psychology of Persuasion" that mirrored what your parents experienced.
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
Beauty depends entirely on the cut. (If you haven't seen diamonds with "old european" cuts - late 19th century, essentially - you should. They are so much more beautiful than the sterile modern cut ones)
"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).
As the Director of Technology at a non-profit organization, how am I supposed to staff software engineering resources when these pricing practices like these are commonplace in the for-profit world? How am I supposed to make an argument to the board that a single technology staff member, let alone a working team, is 5x-10x more valuable than the rest of the workforce? I'm going to admit it - it's hard to see stuff like this and not be extremely frustrated. Tech is already one of the largest cost centers in an enterprise, and it's proving to be nearly impossible to find any tech staff willing to work for, admittedly, crumbs.
Don't compete on the price then. Compete on something else, like the working conditions.
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.
> it's hard to see stuff like this and not be extremely frustrated.
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.
As a freelance dev I've worked with a ngo where they paid me to get their junior to create an application. Then another. Then later just to help him with some new concept.
I'm not freelance any more (yet) but if you just wanna chat about it, I'd be happy to relay my experience.
My sister works for a non-profit, and we've discussed tech projects there a few times. I think the issue from a business perspective is on the demand side of things. The problem is that the market rate is set by the companies that are in a position to pay it. Everyone else has no say, they're just shut out. You're competing for staff with startups and enterprises that are capturing enormous value.
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.
University is definitely a prestige good. Most people don’t go into the profession they trained in. Lots of people studied something there are either no jobs in or they never even intended to practice professionally. Most people forget most of every university class they ever took. People care enormously about the prestige of university attended even though what’s covered in an engineering or literature degree at Harvard and Directional State U will have huge overlap. Finally, look at credentialism; people need Master's to get jobs that used to require a. Bachelor’s and a Bachelor’s for ones that used to require a Master’s. The Case Against Education, Bryan Caplan, has much more but education is absolutely a positional good. People don’t just want it. They want to have more than other people do so that in a legible ranking they’re superior.
Conspicuous consumption and its ilk have a very poor status in sociology. Thus far, wealth inequality and displays of it are the only things actually shown, when all societies are considered, to always increase violent crime. Even poverty has no effect except in situations where it is juxtaposed with wealth. There, it irresistibly tends to violence. (Source: 'Nine Crazy Ideas in Science', chapter 1, which was actually about gun ownership rates and violent crime levels but which mentioned the finding about wealth inequality after dealing with the original issue)
I've a friend who has run his own small IT business for a bit over a decade. When I talk to him and he mentions how much he charges, I always tell him it is far too low. He sees it as being easy for him, so he doesn't think he should charge much. I've tried to explain to him that when the plumber comes over, you're not loading that guy down with quantum physics work... he knows how to unclog your drain or run a new water line. That's easy for him. He charges a high amount because his services are valuable. And I, for one, am happy to pay that plumber the high amount. It saves me having to invest far larger amounts in learning and tooling up to do it myself.
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.
I'm not sure this is totally applicable to say a tailor shop, but I do wish more craftspeople would try charging more money for quality work.
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?
But also, charge accordingly, if you don't have to post your prices (as your parents probably did). A lawyer is likely willing to pay a lot more for the same website than a tailor shop, and I'll gladly take both of their money.
Yes, "charge accordingly" means different things to different customers.
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 muchlater 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!
> 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 mean that if a webpage just says "contact us for a consultation", I'll first try to find a company that shows their prices publicly - and if I find such, I'll stick to them. I hate "contact us for a consultation".
As for dynamic pricing on-line, AFAIK only airlines do that to significant extent so far. Once other people start, I might start opening in different browsers or not keeping cookies or whatever.
> every customer got charged what my mother felt they could pay
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!
I was shopping for flights last Christmas and got price X on every site. I started checking out and the price became X+50. I got angry and left and came back later to find the price, on all sites, was X+80. Since I had no choice but to travel I paid X+80. Then for kicks and self torture I checked the price on my Android phone and it was still around X.
A valuable lesson I learned at a young age from one of my first 'customers' when doing computer repair jobs for friends and neighbours was is that you don't get paid for what you can or do but for the value you add or time (money) you save someone.
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.
That's lucky. When I sas 19, around the height of IE and 'every Windows box with malware,' I tried to start a similar business.
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.
This attitude to googling is poisonous. I once helped an elderly relative in my teens with his router and I got the same treatment after I googled the answer. Later we watched a court drama the entire family, with the same relative present, and there was a scene where the lawyers crack the books and review the legal paper work. Being the obnoxious teen I was I couldn't help myself from blurting out "Wow, what terrible lawyers, look at them doing research for their cases before they solve the problems. Wow, I figured they could recite every law and ruling ever by heart since they supposedly know what they're doing, now I question why the defendant doesn't just represent himself, I mean everyone can read a book, right? This movie is so unrealistic!"
I got scolded by my parents but at the end of the day: worth it.
Right, you should have charged her more. If you pick a rate that seems reasonable for the amount of work involved then she'll wonder why she couldn't just do it herself. You also need to price in all the learning and experience you needed up to that point, otherwise the client will think you're doing a cheap/half-assed job.
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."
> “How can you ask for so much? It took you only a minute to draw this.”
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!
Entertaining story - although as advice to anyone reading it, running up the clock without proactively notifying people that you're going way beyond your original estimate is a very good way to make getting paid incredibly difficult.
Specifically telling them that they had kept him over his initial estimate (and so his estimate was increasing) when he neared or passed that point. He didn't sound terribly proactive about bringing this up while talking to people, either. Lunches with the manager where they didn't talk any business, etc.
I thought no that's the reason why right answer. He could be as much in the right as possible, and but he still took significant risk that they might argue, delay and force him to go to court or negotiate to get them to pay.
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.
Precisely the oposite. People are usually willing to pay far more, if they are to blame for you beeing slow. If they only get the slightest hint of a feeling that you might be kicking the can down the road, they will blame it on you entirely.
It sounds like he gave them an hourly rate, not a project rate, and emailed every day to let them know how many hours he'd worked and what he still needed, both before and after the estimated time frame was blown. It doesn't sound like he did anything irresponsible.
Yeah. Maybe it's just an omission in the story, but once the original scope was exceeded, an "I wanted to let you know that we've reached the number of hours I estimated for the task; let me know if I should continue on this project on an hourly/daily basis of $x" email was probably warranted.
It won't always work out like it did for OP, so it really depends on how much risk you're willing to take. $18k probably isn't enough to be worth a lengthy lawsuit over, so a more aggressive client might've cost OP significant unpaid time. For some, that's an acceptable risk. For others, not.
Big companies (rather, people at big companies) WANT to spend money on this kind of stuff for all sorts of reasons.
-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.
I remember growing up and going to work with my Dad. There was like a 3 hour period where he had no work for me to do. He told me I'd only get half wages for the day (I was like 12) since the last few hours I did nothing. I felt betrayed. He empathized with me, saying 'It sometimes feels like more work to not have any work to do'. I completely agree.
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.
One of my bosses was the recipient of one of these during a corporate merger, and I think it did a lot of damage to him. He has been mostly was coasting off of his reputation from before he slacked off for 3+ years in that role. But it doesn't look like he's able to last for more than a year anywhere. I suspect that he was one of those competent-but-lazy types whose skills rusted out to to just lazy.
My experience working my way up from small companies didn't really bear this out. Budgets at my bigish company are strict and audited; having a contractor results in regular check-ins from managers to see if it can be cut off. The smallest companies I worked for were family slush funds.
Big corporations are inefficient and lack accountability. Governments are like big corporations in that manner, but also can't be held accountable by the market.
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).
Getting bigger any organization inevitably achieves a level of complexity where it becomes less, and less efficient by spending increasingly more resources on communication, and politics (in wider meaning of the word, not electoral). Do you think governments are small organizations?
UPD: Apperently, I'm not the only one here who came to the same thought :-)
The government isn't supposed to run a profit. Therefore it becomes very difficult to know which part of it is wasteful and which isn't. Companies simply fail if they don't make a profit or have an outside funding source.
a company is accountable for the dollars you pay to it, and has to provide a commensurate value, or you take your business elsewhere. dollars paid to the government keep coming in no matter how wasteful their practices
Those are some of the most regulated industries in existence. Those companies are "private" in the sense that private individuals reap profits, but their funding is secured by proxy through force (legislation/forceful-taxation).
I think the issue is management unwilling to trust other levels of management to make the call when they need money / a strong desire some folks have to filter / make decisions for others.
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.
Some organization have this issue where you get a budget for your group, and if you don't use it then upper management will think you don't need more resources next year and will budget less or even cut from your department. If you don't use it, they reallocate it to a department that needs it and you never get it back.
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.
There are systems that encourage the opposite behavior, but they tend to be damaging in other ways. It all comes down to the metrics that you are responsible for as a manager.
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.
In my experience, it's rarely about flagrantly wasting money for the sake of running up expenses to a budget level. Rather, it's usually more about pulling in expenses, doing something you had wanted to do anyway but didn't think you had enough money for, etc.
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.
There is, but it’s hard—like, theoretically murky hard.
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.
That nerve is a popular example of an optimization process that produced a local maximum which is highly sub-optimal.
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.
Wow, that’s a great explanation, and I hadn’t even thought of it that way, myself.
My take was a much simpler “just because there is a better way that exists doesn’t make it practically relevant, because entrenched tradition is usually more popular/widespread than efficiency”... but your boiling the frog idea shows even better how the mess comes about in the first place.
Unless you are getting taxed >100% I never understood why you'd want to throw away money for "tax reasons". Can someone please help me understand this, it always comes up and I feel dumb for not understanding.
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.
It should be a choice between spending pre tax dollars or spending post tax dollars. I doubt many would argue in favor of “burning” money just for the sake of not paying some fraction tax on it.
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
It’s a bit unrealistic because (1) labour should always be pre tax (2) there are rules about what goes where in an income statement and you can’t just decide to put stuff where you want but there is some flexibility.
In particular, the one easily controllable lever is how much interest you pay on debt (pre tax spending)
Think of it this way: the “cost” to realize a net profit of $450 is a tax expense of $450. What if you could reinvest that full $900 so that next year your revenue and income are higher? High-growth businesses will optimize for reinvesting because they expect the Return on investment to be higher than the return on realized profit going forward.
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.
What matters in your example is where that extra money is spent, you might try to invest it in the company by purchasing new machinery rather than just wasting it on a new luxury company car (or an overseas 'business meeting'). That way if you are making a 10% return on your company/investment each year it continues to grow.
In limited cicrumstances it can make sense. If you're investing in a multi-year project you may as well maximize your investment in one year and take the loss against other taxable income that year. Then, when the project is finished, you pay taxes on the income that year. Only you can take those funds and invest them into a new multi-year project...
Some companies get tax breaks for hiring X number of workers in certain locations. Which is why sometimes you get companies hiring a bunch of people at a data center who don't do anything related to the data center, but mostly exist as a way to get a tax break and good press.
I was tempted to ask if you have any tips for finding such jobs ;) but actually the times when I’ve been most unfulfilled in my career have been when I’ve been bored at work. I’d much rather be working like crazy (within certain parameters), keeps things interesting!
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!
Happens all the time. We can hire only at certain times when budgets open, so you go ahead and hire but you have no time to deal with the person. It’s better to have the person sit around until you have time because the alternative is losing the contractor and not being able to hire when you really need someone.
Stupid but very real. I always find it funny that wasting 100k this way is perfectly fine but a 5k raise is almost impossible.
> 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.
When I was out of the vendor side of the business doing consulting for a number of years, I always had to shake my head a bit when clients wouldn't use paid-for time with us or would apparently never make use of some materials like a whitepaper we did at their request.
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.
Yes, billed at $120/hr for a recent college grad programmer, with per-diems and weekend travel allowances to go back home (fly cross-country). I should note that this was pre dot-com bust... late 1990s, so $120/hr was pretty good then.
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.
I've seen the same thing, off and on, for over 20 years.
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.
i worked for lockheed martin 10 years ago (give or take) on a client site. I was W2 (although I wish i was 1099). Anyways, when the government changed from W -> Obama a lot of the DOD contracts were changing because everyone anticipated the Obama was going to cut defense spending (which he did). The project found out that the DOD was not going to be able to re-fund the project, but we had to continue to the end. I ended up forced to "work from home" for about six months until the contract ran out. I legally couldnt get another job, but I went on vacation for a month or two. So I calculate I got paid 1/2 my salary at the time + benefits for doing exactly nothing.
I worked for another large defense contractor auditing government IT systems. To do this, you needed a clearance and auditing certification designed by the gov. Well, they would just go ahead and hire people WHILE the clearance process went through (which can take months) and only schedule certain technology certification classes every few months. There were people sitting at home for 4-6 months getting paid in full while they waited for either a class or their clearance to go through. I sadly already had a clearance and "only" had to wait a month for my class.
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).
Yeah this happens more than you’d expect! Never had it myself but I’ve worked st places where it’s happened to colleagues (usually assigned unimportant BAU work than actually doing nothing but I do know of people who’ve basically had nothing to do!)
In 5-ish years of consulting I only had this happen once. BigCo hired LittleCo to produce one piece of a very, very large system with many parts. I was consulting for LittleCo. Our part was on schedule, but no other parts were. They couldn't let us go because they needed support for initial roll out, but they didn't have anything for us to do.
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.
I had a friend working on contract for the local city government. The contract was I believe for 2 years. A year in the project got cancelled but since his contract has already been signed they just kept paying him with no work for him to do. He just went in (because of course he still had to show up for some reason), and played games all day. Now I partially understand why so many government projects go over budget.
I know a couple of friends who worked at the major banks. They all started out as contractors. I remember one guy told me during their first year that all they did was browsing Reddit at work. He was a close friend and didn't want me to join their team because he knew I would display the level of work ethic that would make him look bad.
If that happens then you're definetly charging too little. In a lot of places you can't actually just work for just one client for an extended time as a consultant or freelancer as you then might just as well be an employee.
You should try working in an investment bank as a contractor. You need to find the right team, but a lot of them are massive collections of people doing virtually nothing but getting paid great daily rates. The trick is to look busy and wrap your team/yourself in a perceived sense of enigma and complexity. If you play your cards right, you can end up in a situation where no one will ask questions as long as you fire off an email now and again. You can keep getting paid for doing almost nothing for years.
The George Costanza way of doing business. The more I grow less young (I’m close to 40 now) the more I realize that the Costanza character is one of the closest approximations of daily life in a society like ours. Dilbert or “The Office” TV series are also very good fits but George Costanza is in a world of his own.
I agree with you, but a lot of people are happy to take the money for doing nothing. Sometimes this is driven by lack of capability - if you're not good at much, not very driven but still want a great income and lifestyle, this sorta hits the sweet spot.
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).
The IT department in my company is full of “senior architects” and “principal architects” who are very pleasant talkers but don’t do anything from what I can tell. They have a ton of stories how they helped others but whenever I needed something from them nothing ever happened besides a lot of meetings.
This is precisely why corporations have so many meetings. Without them, there's whole divisions of people that would be doing nothing all day, every day. No code reviews, no specs, no code, no operational capacity, just taking the credit for other people's actual output.
I've got similar experiences working for corporate clients, but it was legal work, not tech stuff. It was a bit more complex than the equivalent of a static HTML, but something that anyone with an IQ of > 90 could learn in less than half a year.
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.
There was a time during the golden dotcom era when my manager scheduled a monthly management meeting across the Atlantic, which required me and 2 colleagues flying all the way over for a meeting that lasted about 4 hours.
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.
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.
Indeed. My story isn't entirely comparable as I didn't do it as an independent. This was indeed billed as an employee of a fin/legal company with offices in ~100 countries.
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.
This is how corporate works. They have budgets for things. The money doesn't come out of the pocket of the person who cuts the cheque. You send in an invoice and it gets paid. If it doesn't, the company is insolvent or they are at risk to lawsuits which will cost them more than your paltry $18000. But they don't even think about the lawsuit part. Bill comes in, cheque goes out.
At my company, AP matches every invoice against a PO, and project managers/department heads are also responsible for approving invoices to be paid, so there are two chances to catch fake invoices or wrong amounts, etc.
Can you give my boss the 101? He has me methodically checking invoices against tenders. I would actually argue the other way. As our consultants rely on our return business, they would quickly solve any problem with the invoice even if not to the letter correct. We have bargaining power and they don't want to bite the hand that feeds them.
Depends on how burned your boss has been. For a while finance departments just paid invoices without question. It was a lot cheaper than what we have now. Then someone in finance did an audit of a routine invoice (a random thing to show a junior how it could be done if requested) and discovered the "services rendered" on the invoice was just sending an invoice - no other work was being done. Now the company spends a lot of money to carefully verify every invoice is for real work done. It might cost more money in the long run but it doesn't feed fraud.
The above might be an urban legend, but it is still a good story.
I'm sure there was plenty of this sort of fraud occurring in the 1950s and such, but technology has enabled this sort of thing a lot lately. Not quite the same but closely related, the "email from the 'CEO' explaining why you need to wire money to this numeric account" is a huge and very profitable scam right now. That stunt may have been possible 50 years ago, but modern scale, tools like LinkedIn making it easy to target the employees that might have that authority, etc. make it all way easier. Oblivious companies get burned quickly nowadays.
In the late 80s or early 90s I was interviewing for a data entry job at General Motors, and was told that they were getting burned frequently by blindly paying incoming invoices for goods or services that were never provided. I was surprised a scam that simple would be so effective.
This is actually a really big problem called invoice fraud. Many companies struggle in setting up some workable system to prevent it.
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.
Usually they use purchase orders initiated by the buyer/manager to solve this sort of problem.
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.
Great illustration of why hourly billing makes no sense, for either side.
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.
One of the first web systems I ever put into production (still in use other than modernization I went 5 years without a bug report which still astounds me) after I jumped from desktop to web I charged £1500 for (it was about 20 hours actual work the rest was spent learning the right way to do things), did the job over 6 weeks.
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".
As a European I wonder how much this whole discussion translates to Europe (and its countries more specifically). American professionals seem to be dealing in ridiculously, obscenely high payments, seen from my personal vantage point. But that's also because money has an enormous role in life there. If you have money you are someone. You are someone to the extent of how much money you have.
More generally I wonder how much my perception gets distorted by reading HN regularly.
Maybe it's because the most common stories of this type from the US are about corporate environments rather than small businesses. European corporations also spend obscene amounts of money on services and contractors, but few of us get anywhere near it, and large European companies tend to be more conservative in procurement and rely on big names or the "old boy's network" more.
I once did a job for a European client who ended up being a manager in some government department. He had a use-it or lose-it budget and needed an app prototype turned around in 48 hours to avoid losing the 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.
> Or as an ex-boss pithily put it "serious people charge serious money".
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.
I'm gonna disagree that hourly billing makes no sense for the contractor. He clearly just didn't charge enough per hour; $75/hour is way too low for contract work, and his $21k could have been $56k at $200/hour.
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?
Okay. Why not charge $X per 2 weeks? Or X per week? Or X per day? Or X per quarter?
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.
Hourly billing is how you protect yourself against a sloppy client like this, especially with unpredictability. I have seen fixed price blow up so much I would never ever do it personally - I would have to add so much it would be astonishing to be worth it.
I would never bid a fixed amount with a client like this. The only way to do a fixed-bid is if a) the requirements are 100% defined, b) appropriate controls are in place to account for scope changes and roadblocks, and c) the price of the overage risk were priced into the bid.
GK, I remember your presence on that thread. For those who were not there, it's under comment history. You spoke to the point of people needing your help (and not just anybody), which is kind of ridiculous in this case and the case from last week. You're opining value-driven fixed rate wisdom on a thread about a simple HTML page. If you dictate the pace of a specialty, of course you can charge whatever you want and call it "value-driven." For the other 99% of consultants out there, supply and demand bring pricing to an equilibrium. Retainers need not apply here nor in 90% of first-time client engagements.
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.
As I said somewhere in that thread, I only ever encounter arguments against value-based billing from other contractors/consultants, and not companies. There's probably a psychological topic there to explore but I won't go there. I have nothing to gain by convincing other contractors/consultants, except the feeling that I helped someone escape the hell that is hourly billing.
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%.
I don't find this to be beyond belief, but there are a few things the author should have done differently.
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.
I mean they were pretty clear they didn't care about the money. Emailing daily to check in on progress is good enough. I've been in a similar situation. The manager isn't really concerned about the money. They just need someone to justify their expenses.
> 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.
In my experience as a contractor, the client doesn't care about the money until they do. The contractors that I have seen thrive and the times that I have thrived as a contractor is when I showed that I was there to provide value and not just "coast". Most businesses don't have time to deal with coasters until they need to cut their burn rate. If you are providing more than what you're asked you can usually stay or be first in line to return when help is required.
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...
Yeah this doesn't seem like such a great deal when you consider that plenty of companies will pay that much, plus full benefits, for a full-time employee. And two months with only one small deliverable isn't that strange at a large company.
Sometimes I do kinda wish to get back into consulting because of situations like these. In almost all cases the work is never used, but instead of bailing the company out, it's really just bailing some situation out. It's all internal politics.
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.
Anyone else think $21k for this much time is too low? That's $156k a year assuming full-time hours which a contractor probably isn't going to get. Plus the guy lives in California. Plus health insurance.
What's a typical rate for this length of contracting work in California?
I used to live with this guy when we were studying. He got himself a job with the largest DIY retailer in the country.It was an office job with a relatively good salary. Eventually I moved out nad only saw him again after half a year or so. I asked how's the job to whoch he replied thst he quit after 3 month.I asked why..He said he used come to the office every day and ask around if he could help with anything.. Everyone was nice but kept saying no help is required.He got bored after 3 month of doing nothing and quit. He now runs his own business...
The early winners of the UK Apprentice were awarded £100k jobs as a prize, which didn't actually entail doing anything, because the only reason they had been created was as a prize for winning a TV competition. One of them sued for 'constructive dismissal' on the basis she felt that not creating any work for her was an attempt to force her to quit. She lost, presumably on the basis that most people given nothing to do on 3x average salary would either find something to do or consider themselves extremely lucky...
To be fair it can hurt your long term prospects to have a do nothing job, especially if it's public knowledge it's a do nothing job. It's an understandable thing to be unhappy about if you were told otherwise.
Hurts your long term prospects a lot more if you sue your employer for not giving you the sort of work or access to the celebrity boss you wanted...
(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)
You probably saved the company 1h of work per week for some years. Finding another expert would have taken them half a day of searching. So it made economic sense from their part as well. Did you learn to seek such situations to profit?
Had a similar story was a subcontractor to a huge digital agency on an advertising related project for F50 company. Was a small webapp (40h of pure dev time) we were actually on a fixed price contract 15k. Had a bunch of meetings with up to 20 people on the call (copyrighter from digital agency present in every single meeting for an app that had a single button with a single word submit). Eventually we had a meeting with actual VP of the F50 who said he forgot to email that he no longer needed the project and to pay everyone. We got our 15k and digital agency got prob to the tune of 500K.
The adventures of enterprise/corporate payments. They can be annoying, slow, bureaucratic but boy when the time comes, invoice gets paid. One of our smaller business customers recently got acquired by a large corporate so the next $5000 "small enhancement" project had to go through their procurement who then apologized when we demanded the payment immediately. Why ? Because they thought they had not paid on time even though we literally had sent them the invoice a week ago (our smaller business clients will pay "due upon receipt"). This corporate client apologized profusely but when we finally realized it was not 30 days (they pay net 30), we backed off :). Still got a couple of apologies.
I'm in midst of a contract that was supposed to take 2-3 weeks - my mate asked for help, they desperately need good developers.
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.
If you've signed a contact for a fixed period, demand that they raise your rate at each renewal. Don't give them the entire benefit of your flexibility without some concession on their end. If they want you month-to-month, your rate changes month-to-month.
I love this article. I had a similar thing once. I worked for this deeply, deeply dysfunctional company (salary). My project ended. I asked my boss for something to do, and he said something to the effect--"we're kicking off a new project at the end of the week until then look into XYZ because we'll be using those technologies."
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.
Be on a project where you billed over a 100 hours for some aspect of it that they decide to cancel. It is amazing how group decisions can blow so much.
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.
I work for a Fortune 100 company. I've seen $5+ million spent on some software that was abandoned a year later, and nobody loses their job! It happens frequently enough that everyone is basically blase about it.
Ive heard $300 million was spent on a system at a comoany I worked at which didnt work at all. They bought it because a competitor did. The lower-level managers had to tell the higher-level ones that it was OK "despite some problems." They kept tying more things into it and recommending it to others. Media reports same thing.
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.
This is true of every BigCorp I've been at. An IT department will be carefully evaluating some extremely expensive class of enterprise software. A business department will randomly purchase one of those options at random, without consulting IT, just because a software vendor mentioned it in a passing.
During the early days of "intranets", I worked at a very large company akin to a government organization. I thought we could save paper by putting our reports on the intranet instead of printing it out. There was one particularly important report that had needed to be printed every week, and it seemed like a good candidate.
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 don't know how it is in big corporations in America. But working as a consultant in Western Europe, I have been more than once in a situation where I'm starting on a project and I have to wait more than 3-4 months for things like accounts, access/permissions, laptop. Its pretty pathetic at the dailies, to report every day that I'm still waiting for these things.
It sounds believable to me. I've had some interactions with big companies and you have to readjust what you think is a reasonable price for something.
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.
$18000 is the kind of petty cash that a lot of departments have lying around in their budgets at the end of a quarter. Especially if the budgeting process is of the use-it-or-lose-it variety, there can be a push to buy things that are unnecessary at the end of quarters or fiscal years.
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.
We did some agency work Ad agency / sub contract) in NYC. I said to the agency we will deliver HTML/CSS/JS and its $12,500 for the site / pages. They came back with NO our budget is $25k and we will pay that. Im like ok wire be the bread, here is my ACH ( They did) I delivered the HTML/CSS/JS. They came back with but who is gonna do the API work with our back end guy. Seems they could not make a distinction connecting the front end to the back end. I can only do HTML/CSS i can't do the API stuff and i told them in writing very clearly. they had a back end guy we delivered the work to. I got played too many times NOT to get my money upfront and send a bill when I use up the time. They said sorry for the confusion , ok so how much for the api and will cut you a check from accounting. Accounting has no clue what marketing is buying.
In my experience, where the Front End stops and the Back End starts is always a fuzzy line for non-technical clients (even if that have devs on staff). Especially when you're talking to the marketing department and devs work in IT or another similarly separated department. It pays to have the discussion and get it in writing up front (plus, if you CAN do API work, it may provide additional revenue that you didn't necessarily know was available).
This is how your tax payer money is wasted in State & Federal Gov IT agencies. I spent an entire year doing nothing in a Gov agency and in the end I was so bored that I quit. Fannie & Freddie hires tons of non citizen constractors with usually no work. It’s a big carnival.
The larger your company is the more costly it is to do something even as simple as a static html page. That's because everything that goes out to the public has to be subject to a heavy review process. You're not being paid to write an html page you're being paid to shepherd new information to the public. That's why you can never just estimate cost only on how hard you think it would be to do the task you need to get enough information about the customer's process to understand how much work its going to take not just to complete the task but to shepherd it through their review process and the larger the company the more layers of review and process they are likely to have.
It's okay to be a value-based consultant or contractor. There is no ethical requirement that your work be priced by the hour. You've potentially spent thousands of hours (25k in my case) honing your skills, and those skills could help your client make a lot of money. If a static site can make a company millions (they can!) then it's not unreasonable, nor unwelcome from the client, to charge a couple hundred thousand dollars, regardless of the time spent!
Well, about half the comments are saying "Only 18k$ for 7 weeks, that is so little", I think it is nice to be reminded that some of the most important jobs are paid a misery compared to what we earn as programmers.
Oh, it was perhaps some cathartic snark that doesn't add much to the overall discussion, but considering that the majority of comments on articles like these tend to be made up of people glorifying such income, talking about why such income isn't enough, hoping to someday have such an income, or otherwise somehow on the hedonic treadmill that makes programmers some of the wealthiest workers that have ever existed on earth, yet always looking at the coder that got better stock options and/or explaining how capitalism is simultaneously the best socioeconomic system yet ha! of course every BigCorp doing little of value in the world has such money to waste...
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.
Salaries usually come out of a different budget, one that has visibility all the way up to the C-suites. The web page mentioned was probably paid for out of a marketing budget, which often doesn't get as much scrutiny because (1) it's handed out in a big chunk and it's up to the business unit to decide how to divvy that chunk up and (2) marketing spend is much easier to turn down in the event of a slowdown than salaries.
These are largely fixed costs that can be cut anytime. Salaries come with benefits and healthcare and potential lawsuits. Also, as said in other threads, this gives them someone to fire when things go bad without losing their good people.
Last year, Walmart gave US associates a bonus that were based on a sliding scale of tenure and capped out at $1,000. While not a particularly large amount of money for a bonus, it is in proportion to their associate salaries. And in proportion to the amount of associates they have: it equated to a $400mm one off cost. If they had adjusted wages by the same amount (i.e. less than $1,000 per employee), that'd be an additional half a billion dollars in net new recurring salary costs that would be hard to ever walk back for what is a fairly marginal increase in compensation. And you've just made your annual increases that much more expensive by raising the baseline. Even for Walmart that'd be a big chunk of change to absorb.
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 work for a Fortune 100 company, and I've been asking myself this exact question nearly every day for the past 18+ years. The amount of money that is wasted is astonishing. $18,000 for a static html page is so little that it's almost laughable. We think it's crazy, because we have a clue what it actually takes to build the web page. But, the people who pay the bills are not technical and have no clue, so they would happily pay $180,000!
Yeah, wouldn't surprise me if at the other side, some exec who budgeted $50k @ $1200/day for a new lead generating page is amazed it only took $21k and the contractor who did it was apparently diligent about coordinating with the design people himself and not wasting nearly as much management time as the agency that did the last one...
Aren't these just terrible business-people then? If I'm in charge of something I should know the field/cost. Most people have that expectation in their job and if everyone chalked up overpaying to rounding errors a lot of money would be wasted.
The moment you do the work on-site with the client, with their resources, their equipment, on their laptop that you first need to configure and install, with their environment and everything, dealing with their bureaucracy, work time goes way up.
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.
Back in the 90's, I got a buddy hired at my work, and typically all co-workers come through a contracting agency. Work hired him as a direct contractor without the agency BUT at agency rates. He did his 90 day contractor probation period and then hired directly.
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.
I had worked for a big bank doing financial modelling, reporting, random ad-hoc stuff for about 3.5 years before getting fairly bored. I quit and went to work for a small AI/ML* consulting firm whose biggest client turned out to be the same bank I used to work for.
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.
Pfft that's nothing. We just had a contractor charge us $50k to setup a simple HTTP proxy. I looked at the code; it's a .NET starter app with our endpoints in it that route to other endpoints. $50k and it probably took them 2 hours, which was probably mostly just packages downloading.
It’s really gross how big companies operate. Our VP was more than happy to pay it! I would even go so far as to say that our entire solution was structured in favour the contractor. A smarter solution didn’t need their proxy at all, but this was the direction we “had” to go with.
Indeed! Consider a simple brochure-style marketing page, which is often a good use case for static HTML. Such a page should be centered around content, and that content (photography, illustration, copy, animation, etc.) may need to be specially built for the page and may be expensive to produce. Everything has to fit together flawlessly, telling a compelling story while staying on-brand. Performance needs to be great. And if the page is generating much revenue, it is easy to justify spending even more money in optimizations if they are likely to improve conversion rates.
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.
I worked for a large company who wanted their public website re done to be "mobile friendly" (in 2015).
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.
When I worked for a non-profit they paid like a quarter million dollars for a Drupal site with some slight modifications that never even got completed. I had to trudge through months of debugging and solving problems, and ultimately I couldn't be bothered with Drupal Core so we brought in some contractors to solve the biggest issues while I worked on rebuilding the whole stack. Drupal knowledge seems to pay well, they were able to charge us $150 an hour at their non-profit discount.
Years ago a company similarly contacted me for some "emergency" tasks. I flied all the way to Japan and realise they haven't got the tasks ready, more than half of the time I wasn't doing anything. I honestly (stupidly?) charged them with my actual working hours, they seems surprised. A lesson learnt and the next time it'll be a different story.
After the hours in the initial estimate were used, I would have renegotiated and charged a nonrefundable retainer in order to be on call to deliver the project as soon as the assets were ready. This retainer would be my normal rate, and the hours would not carry over to another billing period. I would not be driving to their office every day.
I read the title, expecting it to be kind of a 'scam', or at least that they overcharged and got away with it.
Turns out he did spent that time at the company where they hired him and it only seems fair to me. Even though they probably just wasted too much of his time - and their money.
Federal government is the only place I've worked that had a reasonable work/pay ratio. Every private company has either been eye-bleeding amounts of work and weekly hours for unsatisfying compensation or doing almost nothing and then getting a check that made me feel guilty.
I'm shocked at how much this person undercharged, for a contract like this to a large company $1K P/D AUD time and materials is not even particularly high. A consulting firm would be 2.5-3.5 so it's a bargain.
That's the problem with corporations; it's not the manager's own money, they don't know where it comes from, who the shareholders are, what the real goal of the company is, what high quality work looks like, etc... So if you're friends with the right people, you can get whatever amount you want and nobody cares.
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.
This sounds like an awful experience. You were brought in to write a single, trivial HTML page and thought the job would take you about 2 days, give or take (which, it would have). Then, it ended up taking 7 weeks because the company's communication was incredibly poor. The error here is so large, I'd be pretty upset. At least they paid you for your two months of service, though. How are companies this inefficient? They completely wasted about $20k for no reason.
Companies don't seem to realize that the bad practices they engage in are actively harmful to themselves financially. Maintaining that office that doesn't produce as much value as it destroys in expense. Not investing in IT infrastructure (whether real or virtual). Not actively working on making communication efficient and valuable. These things don't just get on peoples nerves, they cost money.
Look at Apple. People are buying their over priced products years now. If you compared them equally based on the actual hardware and leave their software out, you'll clearly see that market is offering you the same products at half price. If Apple release a laptop at 5K$ with a 4K screen and a (hypothetical) screen keyboard or something fancy, people will go crazy and start buying it.
At a company a few years ago, we paid about $25k for a website layout delivered in .psd, a coloursheet as a .pdf and a recommendation on a typeface. The boss was not happy and the defence was sort of "It was very hard work to select just the right colors and font, we have used many hours!" (Not exact words but something in that direction)
I like the story, as my experiences resonate with it, but I dislike the title. The pay was fair for the time spent -- especially since it was exclusive and included travel. He effectively became a full-time employee during that time span. No benefits, and his profits will be taxed by the IRS.
I charged $500 for a single static HTML page in the early 2010s. I figured out free hosting using Google App Engine. Also I was on a Skype call the whole time and it had to be done by the end of the day with the client . I don’t think the author did anything wrong .
I've had a couple experiences getting paid to do nothing for a couple months, one during a summer research project in undergrad and one at a big tech company. I found it far more stressful and less valuable than if I'd had actual work to do.
This isn’t that crazy of a story. The static page part is the hook but he was on site for a month. I’ve been on projects clearing 40k in 2 months for onsite work. Doesn’t matter if it’s static or api work.
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.
this kind of the reason i got out of contract software, or really software as a career. its gross like this. the rewards are so capricious and generally outsized. all i could think about was just "this is wrong". my own opinion of course.
He didn't charge 18K. He got lucky while he did not keep his promise of his quote.
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.