This is why I don’t work for a startup. However, I suspect the average candidate doesn’t understand the equity well enough to properly value it. Therefore it would be a waste to give away a bigger chunk of the cap table to those employees if it doesn’t save the company much cash on salaries or attract a lot more talent. Only for the subset of roles where you’re trying to hire people who understand how a company runs do you have to give a serious equity stake, because those are the people who know how to value it.
It's more like, employees have lost their negotiating power, so they don't bother to negotiate it anymore, so there's no reason for them to understand how it works.
If the labor pool shrinks a bit, their negotiating power will rise and this will solve itself.
I don’t think this fully explains the dynamics of the situation. Even if you can perform well enough in the interview process to get paid extremely well by big tech, you probably can’t get a comparable amount of equity from a startup. It’s not that the labor market doesn’t value your skills - startups just don’t pay market price.
I would like to challenge the notion of "market price."
I feel that it is safe to say that in different companies, a developer produces different value for the company. For someone working at a Big Tech company, a single developer - even a low level one - can produce substantial value for the company. On the other hand, working at a small company, the entire company may not have as much revenue as the low level developer produced at the Big Tech company.
Should a developer at a small company that is... say... optimizing routes for auto parts delivery for a handful of clients be compensated at the same "market price" as someone who is working on optimizing AWS?
My point is that not every company - even in the Bay Area - can afford to pay "market rate" for everyone.
Its not that the labor market doesn't value the skills, it's that the labor produced isn't worth the same. I believe that it is foolish for a software developer who to expect the wages of someone who is working in Big Tech at all other companies (and it would be foolish for the company to pay an employee more than the value that they're creating for the company).
If you're incredibly good, you might be able to negotiate 20-40% higher offer than the initial offer, but beyond that they'll just reject you and go with another candidate who might literally be worth millions of dollars less and be a ridiculously worse deal.
Engineering management is simply not operating according to standard economics textbook definitions of rationality. It feels more like cartel economics.
