Hacker News Reader

Comment by huevosabio | Hacker News Reader

yup,in theory you keep hiring until the value of the marginal engineer is equal to its cost.

This certainly isn’t any type of business theory. In theory you should spend as much money as you possibly can on the things that provide the most return. You shouldn’t be hiring any engineers if hiring a salesman has a greater return, or running a marketing campaign, or buying new hardware…

Hiring an engineer has a significant opportunity cost.

Note that they didn't give a time constraint.

You're right that in the short term you aim to hire where the return is highest, but in the long term that means they're right that you'd want to keep hiring as long as you get a positive return.

No it doesn’t. It means you want to keep _spending money_.

You want to spend it on whatever has the highest return, which will frequently be on an expense other than hiring, and when it is on hiring, it will frequently be on hiring roles other than engineers.

In the long term, as long as each thing you spend additional money on increases your return, eventually hiring more people will be the highest returning means of increasing your return.

Until recently money was very cheap, so it wasn’t a choice between hiring an engineer OR a salesperson, just hire both.

I really hope this isn’t a serious comment. No matter what your payroll budget is, the opportunity cost will still exist. You will still have to choose which roles to spend it on (and which to not).

Facebook and the like throw off billions upon billions in profit and the market encouraged companies to spend for growth.

There isn't really an opportunity cost to hiring more people when money is no object. More likely to be the opposite.

Why do you think they increased their headcount so much in the last few years? Simply because they could.

If you go a read a FAANG annual report, you’ll find the headcounts are in fact finite, meaning they do in fact devote a finite budget to those resources. Just because the headcount or the budget seems so large that you can’t easily conceptualize it, doesn’t mean they are unlimited. Regardless of their motives for increasing headcounts, doing so has an opportunity cost, and so does the way in which they choose to do it.

What is the opportunity cost then? What are they trading off by hiring more people?

The fact there is finite budget and headcount doesn't necessarily mean anything. If you're limited by the number of quality employees you can recruit and onboard, budget and headcount are effectively meaningless because they're not limited by money.

How many useless projects does Google already waste money on? Google has already shown a complete ineptitude at coming out with new profit generating products. Throwing more people at problem with a broken culture won’t do any good.

That is an argument that they've reached a point where the cost of increasing engineering headcount is as high or higher than the return, not that you don't want to keep increasing headcount until you get there.

Just for context, it is a business theory - https://www.uc.edu/content/dam/uc/aess/docs/LACResources/Mat.... It can be applied to anything within a company's control that has marginal costs and associated marginal revenues.

How to apply it wisely is a different, much wider topic.

Optimising the marginal cost of producing goods is very different from “keep hiring engineers until $1 of engineering payroll = $1 in return”. Which is specifically the claim made in the comment I replied to.

It is not very different, the same principle can be applied because of the MC-MR association. See here - https://en.wikipedia.org/wiki/Marginal_product_of_labor#MPL,....

Reply on news.ycombinator.com