It’s balanced by the CoL adjustment. In short, SV engineers are not better off, and haven’t been for the past decade. This is apparent by the observed exodus in the light of Covid forcing a shift to primarily remote work. Engineers are trying to reclaim their wage advantage by moving to cheaper locations, and companies are fighting back by reducing compensation accordingly.
I want the greatest share of the returns of my own labor I can get. If that results in very high salary, great, it’s earned. If I take a risk at a place where that translates to much lower salary, that’s fine too - as long as it’s very objectively meritocratic.
If I am making $200k per year as a top, top performer, while my employer is paying far more mediocre performers $175k (perhaps based of geolocation), or where both of us are bringing in ~ millions of revenue, that’s super unacceptable.
As time goes on, the surplus of my labor productivity that a big corporate employer can capture beyond my total compensation should be decreasing heavily - and expert software labor is one class that has the negotiation power to actually push that issue.
So I’d flip your question on its head. Why do we pretend that rent-seeking executives deserve the surplus revenue generated by rare talented engineers? Why (with complete sincerity) aren’t many, many, many more software engineers paid on the order of what Hollywood actors are making, while executive salaries simply have to come way, way down in these lines of business?
In other words, for small cap companies, yes, the ROI of athletes to their franchises is relatively higher than engineers to their companies. But for most of the SP500 this is not true, and there are lots of software-heavy companies with much higher market cap to the extent that even with 10k or 100k employees, I doubt an athlete’s ROI for a small sports franchise is proportional to the ROI of employees in the large company.
For example, virtually any engineer at a FAANG company should be making top pro athlete money (not considering endorsements). There are literally thousands of engineers at Amazon and hundreds at Netflix that have this ROI on the soaring revenues of these megacorps, to a much greater degree than athletes have on their teams.
Some actual numbers:
In 2019, Google's gross revenue was ~$162b. ~$76b went to "costs of revenue", ~$26b went to R&D, and ~$11b to stock-based compensation. It's unclear what % of costs of revenue is attributable to "salaries of software engineers", though. Let's approach it another way. Google employs 30k+ SWEs, the vast majority of which are in the US. The median outlay probably falls somewhere in the L4 - L5 range, though there's a fat tail at the top. If we want to be conservative, we can just ignore the tail and say ~300k/dev. $300k * 30k = $9b (this is probably low).
Google's net income in 2019 was $34b. So you could multiply SWE comp at Google by not-quite-5 and zero out Google's net income.
What do top pro athletes make? Wikipedia says the top pro athletes earn mid-high eight-figures/year.
There's some headroom to pay engineers more, but it's definitely not "top pro athlete" more. Engineers can and do make that kind of money by founding & growing successful startups, not by working for FAANG (possibly with a very small # of exceptions at the top).