Facebook stock chart for the 5 days ending Feb. 4, 2022.
Ouch! Down almost 20% on the week, and over 25% if you compare to yesterday’s close. A lot of people at Facebook are suddenly realizing that those amazing pay packages aren’t worth what they thought they were.

Today’s action in Facebook and in tech stocks in general are a reminder of the pitfalls of taking substantial salary in the form of stock, and of the fact that there are massive information asymmetries between the management who are offering you the stock and the public information you have access to about the health of the company and the prospects for that stock going forward. A lot of people at Facebook are hurting today. Many of them are people who left other roles to cash in on offers that in retrospect were too good to be true.

It’s not just Facebook. In the past two years, tech salaries have skyrocketed. I left AWS for Stripe and took home an insane 68% increase in target compensation.

Worth reminding everybody who isn’t familiar with stock-based tech salaries that “target” is a fluid thing. In fact, my compensation at AWS last year was well above “target” because I had a bunch of unvested Amazon stock that was granted to me when I joined in January 2019. Also, my “target” at my current employer depends somewhat on company and personal performance that jointly define a modest but significant cash bonus, and the long-term performance of the stock I was granted when I joined. Since the company is not public, it’s impossible to judge whether the stock will actually be worth what it was claimed to be, or when it’ll be possible for me to sell. I look at that piece of my compensation as somewhat uncertain long-term savings that I don’t expect to touch for a while.

Even with all this, and even discounting the valuation of the stock by 50%, it was a positive move and underscored what I had heard at the time about AWS pay being below market (the person cited in the linked twitter thread is me, it was an offer I received last April that I chose not to take because of timing and other concerns).

But salaries have continued up from there. I’ve refused any contact from Facebook for personal reasons, as best outlined by my friend Robert (I use his letter as my standard response). However, it’s also been clear to many of us that Facebook has been driving the insane frothiness of salaries. Apple has gone so far as to offer major bonuses and increases to keep staff from defecting to Facebook.

Today Facebook blew up. The stock is down about 25% from yesterday’s close. Everybody who’s taken one of those offers in the past year is feeling the pain. The massive salaries, paid substantially in stock, have turned out to be ephemeral.

My cynical view is that the reason Facebook was so willing to pay “above market” salaries recently is they knew this was coming. It’s not credible to presume that the company hasn’t known for a while that it’s user-base was no longer growing, and that its “investments” in the metaverse were both huge and unlikely to be profitable for some time to come, if ever. It’s not credible to believe that they didn’t know that their cryptocurrency efforts were turning into a disaster. It’s not credible to believe that they hadn’t noticed that Facebook has not been able to ever create new products internally or that the previously successful strategy of “buy growing businesses” would eventually be stopped by anti-trust concerns.

So they had to know, and they had to know that when the news eventually got out, the stock would tank. It’s easy to offer lots of money in a currency (company stock) that you know to be overvalued. Experience with Facebook and their management style makes it easy for me to see their psychopathic management setting out to screw people in exactly that way. Reminder that a company is not obliged to tell you anything about their views of the future when offering to pay you in stock. You have to figure that out yourself. (In a high-flying or private stock, I recommend cutting their number roughly in half.)

I don’t feel bad for people at Facebook. As many people around me have noted in the past year, we’re beyond the point of knowing exactly what Facebook is. That ended by January 2021. If you chose to work there, I am fine with judging you for your choices. Nobody who can get hired at Facebook would not have been able to get hired somewhere else. Nobody is there for lack of alternatives or because they wouldn’t make ridiculous amounts of money elsewhere. (Merely, perhaps, less ridiculous amounts.)

We still don’t know whether the crash in Facebook and overall decline in tech stocks recently will kill the rise in tech salaries. My answer for now is a qualified “no.” Qualified because we don’t know where the stock market will go, and we don’t know if Facebook is typical or an anomaly. Also qualified because while it’s been apparent that Facebook has been driving ridiculous frothiness at the top of the market, there had been growth even before Facebook started on its latest binge. And finally unknown because it’s unclear how this will change Facebook’s hiring and firing, or how it will impact people’s decisions to stay.

I believe that Facebook has been responsible for a lot of the crazy frothiness, but what I’d expect would be a pullback from the most extreme insanity, not a crash to the levels of 3-4 years ago. For those who are at Facebook, or whose current pay is predicated on the need to match Facebook, this will not feel good in the short term. For most of us though, 2022 will still feel a lot better than 2020.

I also come down on the side of “no” because structural issues in the tech labor market, that predate the recent insanity, have not changed and I don’t see much chance of them changing. The biggest issues I see for US (and to a lesser degree other Western) companies are mostly related to demographics and immigration.

  • As Bloomberg noted this morning “What has been eagerly dubbed the Great Resignation has hastened a demographic squeeze that was the inevitable consequence of the retirement of the baby boomers and the decline in the birthrate.” That’s not changing anytime soon. I’m at the top end of the age range in most tech companies, and I still have 10 years to go, at least. Lots of people have just been able to retire and aren’t looking back, or if they are, they’re looking for something lower-stress than you’ll get in a typical tech job.
  • As Bloomberg further notes and I pointed out not long ago, “The institutions, practices and mind-set that enabled the U.S. to create a workforce capable of powering the world’s biggest and most dynamic economy are threatened by decay, disarray and disruption.” Our educational system sucks by most standards, and has been resistant to change. We are still educating people to be compliant cogs in a machine (“get up, dress up, show up and never give up”). That doesn’t work in tech.
  • The number of US college students is declining, as is the college-aged population. Supply is going to be constrained. For those of us in the “older but not ready to retire” demographic, this is good news going forward.
  • While travel restrictions are waning and now appear likely to disappear everywhere except China by the end of the year, the past two years have radically changed the considerations for many of my non-American colleagues. They are now acutely aware that in addition to the normal reality of having to fly halfway around the world to renew a visa, the ability to do that, and then fly back could change at any time. Some of them are just saying it’s no longer worth it.
  • Some of them can remain employed by moving to other locations either in their home country or in a third-party country like Canada. Amazon’s presence in Vancouver has exploded as a result. But this is an option mostly available to larger companies with physical/tax/payroll presence around the world. Some of the issues will likely get ironed out over the coming years, but for a smaller company that doesn’t have a global footprint, deciding “I can’t hire people in the US, so I’ll just set up shop in Vancouver” is not yet an easy option. The salary differential for new employees in many former lower-salary countries has either disappeared or eroded, so the benefit to employers is increasingly related to whether you can hire the people you need in that location.
  • Immigration restrictions imposed during the Trump years have not been relaxed and I don’t see any major desire to relax them coming from either party. The supply of willing workers from outside the US will continue to be restricted.
  • China is the 8000 pound gorilla in the room. In my last year at AWS a significant portion of our new engineers were Chinese nationals who had studied and then remained in the U.S. That supply has been choked off, initially by Trump initiatives, and more recently by the Chinese government’s clampdown on travel and emigration. Even if the U.S. changes course, I don’t see China doing the same. China is no longer willing to have its best and brightest go overseas and never come back. They’ve already made progress. 25% of the Chinese who went abroad to study before 2007 went home, in 2017 80% did. I wouldn’t be shocked if over the next few years they start pressuring their citizens who already are here to go home. Expect India to follow.

Still, even though I’m giving a qualified “no” as my response, I wouldn’t be shocked if we take a breather here. Not so much because of Facebook (though that helps) but because it’s been an insane 2 years in tech salaries, the stock market is still in a funk, there is still significant uncertainty in the economy in general, and we may just get a war or two when the world needs it least.

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